ANTI - MONEY

LAUNDERING ACT


Presented by: BSA - 2A
 Money Laundering
is the illegal process of making large

amounts of money generated by a

criminal activity, such as drug

trafficking or terrorist funding, appear

to have come from a legitimate source.

Stages of

Money

Laundering
 Placement
Cash generated from criminal activities is

converted into money instrument such as money

orders, traveler's checks, or even the cash is

deposited into accounts of the financial

institutions and even banks. This is the initial

stage where the cash is getting place into the

legal financial system.

 Layering
The funds are transferred or

moved into other accounts or

other financial institutions to

further separate the money from

its criminal origin.

 Integration
the last stage of money laundering is

intergration wherein the funds are

reintroduced into the system or into the

economy. these funds are used to purchase

legitimate assets or to fund other criminal

activities which come under legitimate

business.
Example of

how money

laundering

works.
 ABC Organization, a criminal organization, owns

Restaurant A, a legitimate restaurant business.

Money obtained from illegal activities is gradually

deposited into a bank through the restaurant. The

restaurant reports daily cash sales much higher

than what it actually takes in.

 (EXPLANATION)

• Placement
Restaurant A takes in P20,000.00 in cash in one

day. An additional P20,000.00 – which is money

coming from illegal activities – will be added to that

amount, and the restaurant will falsely report that it

took in P40,000 in cash sales for the day. The

money has now been deposited in the restaurant’s

legitimate bank account and appears as an

ordinary deposit of restaurant business proceeds.

 (EXPLANATION)
• Layering
To deal with tax issues – that is, to avoid having the

restaurant incur too large a tax bill as a result of

recording more revenue than it generates – and to

further disguise the criminal source of the extra

deposited funds, Restaurant A invests the money into

another legitimate business, into a real estate. Here,

things are further obscured from the authorities by

using shell companies or holding companies (legal

business entities that exist only on paper and perform

no legitimate economic function).

 (EXPLANATION)
• Integration
Restaurant A’s laundered money is now placed into

legitimate business and investments. It may now be used to

purchase restaurant equipment, and even high-end luxury

goods too, such as jewelry or automobiles. It may even be used

to create yet another business entity through which future

amounts of illegal cash will be laundered.

o At this stage, the money has, ideally, been sufficiently
laundered so that the criminal or criminal enterprise can use it

freely without resorting to any criminal tactics. The money is

typically then either legitimately invested or exchanged for

expensive assets such as property.

Purpose of Anti - Money

Laundering Act
To protect the integrity and

confidentiality of bank accounts and to

ensure that the Philippines shall not be

used as money laundering site for the

proceeds of any unlawful activity.

MONETARY INSTRUMENT refers to:
Coins or currency of legal tender of the Philippines, or of any other

country;
Drafts, checks and notes;
Securities or negotiable instruments, bonds, commercial papers,

deposit certificates, trust certificates, custodial receipts or deposit

substitute instruments, trading orders, transactions tickets and

confirmations of sale or investments and money market instruments;

Contracts or policies of insurance, life or non-life, and contracts of

suretyship; and
Other similar instruments where title thereto passes to another by

endorsement, assignment or delivery.

Unlawful

Acts
1. Kidnapping for ransom.
2. Drug offenses (violation of the Comprehensive

Dangerous Drugs Act of 2002).

3. Graft and corrupt practices.
4. Plunder
5. Robbery and extortion.
6. Jueteng and masiao.
7. Piracy on the high seas.
8. Qualified theft.
9. Swindling.
10. Smuggling.
11. E-commerce violations.
12. Hijacking, destructive arson and murder,

including those perpetrated by terrorists against

non-combatants and similar (civilian) targets.

13. Securities fraud.
14. Similar offenses punishable under the penal laws

of foreign countries.
15. Frauds and Illegal Transactions under Articles

213-216 RPC.
16. Forgeries and Conterfeiting.
17. Forestry violations.
18. Fisheries 24. Child Porno.
violations 25. Malversation.
19. Firearms 26. Mining laws.
violations. 27. Migrant Workers
20. Fencing. and OFWs.
21. Caves protection 28. Terrorism.
Law. 29. Terrorism Financing.
22. Carnapping. 30. Wildlife Protection
23. Child Abuse.
31. Bribery and Corruption of Public Officers.
32. Human Trafficking.
33. Intellectual Property Law violations.
34. Voyeurism (Photo and Video).
 Example

Kidnap for Ransom:

Samantha a 12 years old girl that is a

daughter of a business owner was

kidnapped by Joseph. Joseph tell the

parents not to call the police and ask

them to pay 5,000,000.00 pesos to

release their daughter.

 Example
Qualified Thief
Gina applied as a domestic servant. She was recommended by a

friend to Sisa, the house owner. Sisa accepted Gina as a house

helper. Sisa has a well-off family. She took the pieces of jewelry

and cash on her drawers. One day, while Sisa and her family were

away, Gina, with intent to gain, took advantage of the situation.

She seized the pieces of jewelry and the remaining cash from the

drawers of Sisa and left the house. She was subsequently arrested.

In this case, Gina is liable for Qualified theft. She is a domestic

servant who took advantage of the trust and confidence reposed

in her by Sisa.
 Example
Robbery
Steff is eating at the table outside of the restaurant. While

she's eating she placed her purse beside her plate, when

she was about to stand up to go to the cashier and ask for

water, Simon runs up, pushes Steff out of the way and grab

her purse and start running away.

In this case, Simon has taken the purse from Steff presence

and he has used force to get the purse. Therefore, Simon

can be convicted of robbery.

Covered

Entities/

Covered

Persons
 1. Banks, offshore banking units, quasi-banks, trust entities,

non-stock savings and loan associations, pawnshops, and all

other institutions and their subsidiaries and affiliates supervised

and/or regulated by the BSP.

2. Other entities administering or otherwise dealing in currency,

commodities, or financial derivatives based thereon, valuable

objects, cash substitutes, and other similar monetary instruments

or property supervised and/or regulated by the SEC.

3. Insurance companies, insurance agents, insurance brokers,

professional reinsurers, reinsurance brokers, holding companies,

holding company systems, and all other persons and entities

supervised and/or regulation by the Insurance Commission.

 4. Securities dealers, brokers, salesmen, associated
persons of brokers or dealers, investment houses, investment
agents and consultants, trading advisors, and other entities
managing securities or rendering similar service.
5. Mutual funds or open-end investment companies or
issuer and other similar entities.
6. Jewelry dealers in precious metals/stones, who as, a
business, trade in precious metals/stones, for transactions in
excess of P1, 000, 000.
7. Land Registration Authority and all of its Register of
Deeds on all real estate transactions with price exceeding
P500, 000.

 8. Foreign Exchange corporations, money changers, money payment,

remittance, and transfer companies and other similar entities.

9. Casinos, including internet and ship-based casinos with respect to their

casino cash transactions related to their gaming operations. (as amended by R.

A no. 10927)
10. Company service providers to 3rd parties including CPAs and Lawyers
Acting as a formation agent of juridical persons;
Acting as (or arranging for another person to act as) a director or

corporate secretary of a company, a partners of a partnership, or a similar

position on relation to other juridical persons;

Providing a registered office; business address or accommodation,

correspondence or administrative address for a company; a partnership or

any other legal person or arrangement; and

Acting as (or arranging for another person to act as) a nominee

shareholder for another person.

 11. Person providing the following services including CPAs and lawyers
a. Managing of client money, securities or other assets
b. Management of bank, savings or securities accounts;
c. Organization of contributions for the creation, operation or management of

companies; and
d. Creation, operation or management of juridical persons or arrangements, and

buying and selling business entities.

Note:
• Report to the AMLC all covered and suspicious transactions within 5 working days from

occurrence thereof.
• Notwithstanding the foregoing, the term ‘covered persons’ shall exclude lawyers and

accountants acting as independent legal professionals in relation to information

concerning their clients or where disclosure of information would compromise client

confidences or the attorney-client relationship: Provided, that these lawyers and

accountants are authorized to practice in the Philippines and shall continue to be subject to

the provisions of their respective codes of conduct and/or professional responsibility or

any of its amendments.

 Safe Harbor Provision
No administrative, criminal or civil proceedings

shall lie against any person for having made a

covered transaction report in the regular

performance of his duties and good faith,

whether or not such reporting results in any

criminal prosecution under the AMLA or any

other Philippine law.

 Safe Harbor Provision
The Safe Harbor Provision shields financial

institutions, their officers, and employees from

civil liability for filing Suspicious Activity

Reports. It provides immunity to “any

financial institution that makes a voluntary

disclosure of any possible violation of law or

regulation to a government agency.

Example:
Roar Bank reports the account of Mr. Rollen Roque for

suspicious transactions. Where Mr. Roque who only has

P5,000.00 in his account suspiciously deposited an

amount of P1,000,000.00 last Monday, May 9, 2022.

Note: Roar Bank will not be held liable for reporting

the suspicious transactions of Mr. Roque even if the

latter may be proven guilty. Provided that Roar Bank

is in Good Faith and just doing its job.

 Obligations

of Covered

Institutions
 1. Customer Identification- covered institutions shall

establish and record the true identity of their clients

based on official documents.

a. Face-to-Face Contact- covered persons shall conduct

face-to-face contact at the commencement of the

relationship, or as reasonably practicable so as not to

interrupt the normal conduct of business.

b. Minimum Customer Information and Identification

Documents
i. Name of customer
ii. Date and place of birth
iii. Name of Beneficial owner, if applicable
iv. Name of the beneficiary (in case of insurance

contracts or remittance transactions)

v. Present address
vi. Permanent addresses
vii. Contact number or information
 viii. Nationality
ix. Specimen signatures or biometrics of customer
x. Nature of work and name of employer or nature

of self-employment, business if applicable xi.

Sources of funds or property

xii. Tax Identification Number (TIN), Social Security

System (SSS) number or Government Service

Insurance System (GSIS) number, if applicable

Prohibited Accounts:
a. Anonymous Accounts and Accounts under fictitious names- covered persons shall

maintain customers’ accounts only in the true and full name of the account owner or holder.

Anonymous accounts, accounts under fictitious names, and all other accounts shall be

absolutely prohibited.
b. Number Accounts- numbered accounts, except non-checking numbered accounts, shall

not be allowed. Covered and suspicious transaction reports involving non-checking numbered
accounts shall contain the true name of the account holder.
2. Record keeping- all records of all transactions of covered institutions shall be maintained

and safely stored for 5 years from the date of transactions.

3. Safe Harbor- no administrative, criminal, or civil proceedings, shall be against any person

for having made a transaction report in the regular performance of his duties and in good

faith, whether or not such results in any criminal prosecution under Philippine laws.
4. REPORTORIAL REQUIREMENTS:
a. Covered Transactions- covered institutions shall report to the AMLC all covered

transactions within 5 working days from occurrence thereof, unless the AMLC prescribes a

longer period not exceeding 15 working days. Conviction of the unlawful activity is not

necessary before a report is made.

COVERED

TRANSACTIONS
 Transaction, in cash or other equivalent monetary instrument, involving a

total amount in excess of P500,000 (threshold amount) within one

banking day.
For Casino: a single casino transaction involving an amount in excess of

Five Million Pesos (P5,000,000.00) or its equivalent in any other currency.

Example:
On June 3, 2022, Rose deposited P400,000.00 in his saving account in Red

Bank. -Because it does not exceed the amount of P500,000 this is not a

covered transaction of AMLA

On June 3, 2022, Jhanel deposited P800,000.00 in his saving account in

Pink Bank. -Because it exceeds the amount of P500,000 this a covered

transaction of AMLA. This must be reported by the covered institution to

theAMLC.
Suspicious Transaction
It refers to a transaction, regardless of amount,

where any of the suspicious circumstances is

determined, based on suspicion or, if available,

reasonable grounds, to be existing.

A transaction with a covered institution, regardless

of the amount involved, where any of the following

circumstances exists:
 1. No Underlying legal or trade obligation, purpose, or economic

justification.
2. Client is not properly Identified.
3.Amount involved not Commensurate with client's business or financial

capacity.
Example: A office stuff who have a salary of 30,000 php a month and

have a usual transaction no more than 30,000 every month. Suddenly

received 700,000 php in one transaction into his/her account. Which is

unusual for an office stuff to have 700,000 in one transaction.

4. taking into account all known circumstances, it may be perceived that

the client’s transaction is structured in order to avoid being subject of

reporting requirements under the AMLA

Example: Rollen who are involved in money laundering deposit

499,990 every day in the bank to avoid the 500,000 covered transaction.
 5. any circumstance relating to the transaction which is observed to

deviate from the profile of the client and/or the client's past transactions

with the covered person;

Example: In the month of Aug-December, Jhanel have a monthly

transaction amounting 10,000 to 15,000 php. In the month of January, she

deposits 300,000. In the following month she deposits 250,000 php. Based

on the past records she only deposits 10k to 15k. in January and February,

she suddenly deposits a big amount of money.

6. The transaction is in any way related to Money Laundering / Terrorism

Financing or related unlawful activity that is about to be committed, is

being or has been committed; or

7. Any transaction that is similar, analogous or identical to any of the

foregoing, such as the relevant transactions in related and materially-

linked accounts.
 RECORD KEEPING
All records of all transactions of covered institutions shall be

maintained and safely stored for five (5) years from the dates of

transactions. Said records and files shall contain the full and true

identity of the owners or holders of the accounts involved in the

covered transactions and all other customer identification documents.

If closed account - the records on customer identification, account

files and business correspondence, shall be preserved and safely

stored for at least five (5) years from the dates when they were

closed.
If a money laundering case was filed - file must be retained until it is

confirmed that the case has been finally resolved or terminated by

the court.
 REPORTING OF COVERED

TRANSACTIONS
Covered institutions shall report to the AMLC all

covered transactions within five (5) working days from

occurrence thereof, unless the Supervising Authority

concerned prescribes a longer period not exceeding

ten (10) working days.

REPORTING OF

COVERED

TRANSACTIONS
 Covered institutions shall maintain accounts only in the true and full

name of the account owner or holder. The provisions of existing laws

to the contrary notwithstanding, anonymous accounts, accounts

under fictitious names, and all other similar accounts shall be

absolutely prohibited.
No new accounts shall be opened and created without face-to-face

contact and full compliance with the minimum documentary

requirements for individual customers

Peso and foreign currency non-checking numbered accounts shall be

allowed: Provided, That the true identity of the customers of all peso

and foreign currency nonchecking numbered accounts are

satisfactorily established based on official and other reliable

documents and records, and that the information and documents

required under the provisions of these Rules are obtained and

recorded by the covered institution

Prohibited Accounts
1. Anonymous Accounts and Accounts under Fictitious Names
Covered persons shall maintain customers’ account only

in the true and full name of the account owner or holder

2. Numbered accounts
Numbered accounts, except non-checking numbered

accounts, shall mot be allowed. Covered and suspicious

transaction reports involving non-checking numbered

accounts shall contain the true name of the account

holder.
ANTI - MONEY

LAUNDERING

COUNCIL
 1) Inquire into deposits or

When? investments
upon order of any competent court based on an ex parte application in cases
of violations of this Act, when it has been established that there is probable
cause that the deposits or investments, including related accounts involved,
are related to an unlawful activity or a money laundering offense.
under the Anti-Terror Law:
a. Any property or funds that are in any way related to financing of penalized
under RA 10168. terrorism as defined and
b. Violation of Sections 4,6,7,10,11 or 12 of the Anti-Terrorism Law
c. Property or funds of any person or persons in relation to whom there is
probable cause to believe that such person or persons are committing or
attempting or conspiring to commit, or participating in or facilitating the financing
of terrorism
 1) Inquire into deposits or

investments
NO COURT ORDER SHALL BE REQUIRED IN:
1. Kidnapping for ransom.
2. Drug offenses (violation of specific provisions of the Comprehensive

Dangerous Drugs Act of 2002).

3. Hijacking, destructive arson and murder, including those perpetrated

by terrorists against non-combatants and similar (civilian) targets.

4. Similar foreign offenses.
5. AMLC's authority under the Anti-Terror Law
 2) Freeze Order
When?
Upon a verified ex parte petition by the AMLC and after

determination that probable cause exists that any

monetary instrument or property is in any way related

to an unlawful activity as defined in Section 3(1) hereof,

the Court of Appeals may issue a freeze order which

shall be effective immediately, for a period of 20 days.

 3) ASSET FORFEITURE
AMLC may institute civil forfeiture proceedings and all other

remedial proceedings through the Office of the Solicitor

General
When? When there is is a covered transaction or suspicious

transaction report made and the court has, in a petition filed

for the purpose, ordered the seizure of any monetary

instrument or property, in whole or in part, directly or indirectly,

related to said report
If the monetary instrument or property to be forfeited cannot

be located, the convicted may be ordered to pay the value of

the monetary instrument or property in lieu of forfeiture.

UPDATES ON

ANTI-MONEY

LAUNDERING

ACT
Republic Act 11521 which was signed into law on January 29, 2021,

introduces amendments to AMLA in a bid to prevent the country from

being included on the “gray list” or countries with weak policies against

dirty money by the Financial Action Task Force

Financial Action Task Force – they are based on Paris and the global

money laundering and terrorist financing watchdog. This inter-

governmental body sets international standards that aim to

prevent these legal activities and the harm they cause to society. As

a policy making body, the FATF works to generate the necessary

political will to bring about national legislative and regulatory

reforms in these areas.

Gray list – if included on gray list means higher interest rates and

processing fees as well as more layers of scrutiny from financial

institutions.
SALIENT

AMENDMENTS

TO AMLA
Included transactions in excess of P500,000.00 of all

Philippine Offshore Gaming Operators (POGOs) within the

scope of AMLA.
Included real estate brokers and developers as “covered

persons”, but only for single cash transactions involving

amounts in excess of P7,500,000.00, effectively narrowing

the burden reportorial requirements for high-risk

transactions.
Included tax crimes with a threshold in excess of

P25,000,000.00 and violations of the Trade Management

Act on the financing of the enlargement of weapons of

mass destruction.
Granted the Anti-Money Laundering Council (AMCL) the

following additional powers:

1. Authority to require, receive and analyze covered or
suspicious transaction reports from covered persons.
2. Issue subpoenas and conduct search and seizures of
suspicious accounts. No court shall issue a temporary
restraining order (TRO) against any provisional asset
preservation order or asset preservation order, except the
Court of Appeals or the Supreme Court.
3. To implement targeted financial sanctions in relation to
the enlargement of weapons of mass destruction and their
financing.
New provision on information security and confidentiality

proposals, Section 8-A provides that the AMLC and its

Secretariat shall “securely protect information received or

processed and shall not reveal, in any manner, any

information known to them by reason of their office. This

prohibition shall apply even after their separation from

the AMLC.” A breach of information security and

confidentiality is met with a punishment of “imprisonment

ranging from three (3) to eight (8) years and a fine of not

less than Five hundred thousand Philippine pesos

(P500,000.00) but not more than One million Philippine

pesos (P1,000,000.00).
 END OF
DISCUSSION.


Presented by: BSA - 2A
 Bank
Secrecy
Law
 What is Bank Secrecy?
On 09 September 1955, Republic Act No. 1405, otherwise known
as An Act Prohibiting Disclosure of or Inquiry into, Deposits with any
Banking Institution (“Bank Secrecy Law”), was approved. This law was
enacted to encourage individuals to deposit their money in banks instead
of hoarding them.

The Bank Secrecy Law protects all deposits of whatever nature

in banks or banking institutions in the Philippines as well as investments
in government bond. This law prohibits any person, subject to the
exceptions below, from disclosing to any person any information, relative
to the funds or properties belonging to the depositors in the custody of
the bank. Simply put, no one can just go to your bank and ask for your
bank balance.
What is Bank Secrecy Law?
 Example
Suppose that you only have P1,000 in your bank
account. Surely, you do not want any person (such

Your
as your friend, employer or any stranger) to find that
out. Either you do not want others to know that you
do not have sufficient money or you simply do not
feel comfortable in people prying in your financial

Logo
affairs. On the other hand, if you have
P100,000,000.00 in your bank account, you also do
not want others to find that out for fear that you might
be kidnapped, or relatives might borrow from you, or
simply, it’s your personal affair. In all these cases,
one’s financial status is a private matter.
Transactions happening in your bank account are not
just empty figures. There are stories affixed to such
transactions. Thus, these financial transactions are
akin to your personal activities which should not be
easily accessible to anyone.
 Why is there a bank secrecy law?
• To protect the savers and investors from any lurking harm by treating all
deposits in the country as confidential and may not be examined or looked
into by any person, government official, bureau or office.

• To discourage private hoarding

• Encourage people to deposit their money in banking institution so that it may

utilized by way of authorized loans and thereby assist in economic
development.
Prohibited
Act
Prohibited Act

It shall be UNLAWFUL for any

The prohibition is not
●

official or employee of a
●

absolute. The rule allows

banking institution TO
several exceptions, carved out
DISCLOSE TO ANY PERSON
by special laws and
ANY INFORMATION jurisprudence.
concerning bank deposits.
Example
Kia borrowed P 10,000 to Eli. Kia gave her bank
account number and told Eli to auto-debit the P
10, 000. But she forgot to disclose her full name.
After several days, Eli cannot find Kia. Eli decided
to go to the bank and ask the bank teller to tell
him the full name of Kia. Does the bank teller
allowed to disclose Kia's full name?
 Answer
No, it is a prohibited act. Because
according to Section 3 of RA NO.
1405 It shall be UNLAWFUL for any
official or employee of a banking
institution TO DISCLOSE TO ANY
PERSON ANY INFORMATION
concerning bank deposits. The bank
teller should not disclose to Eli the
full name of Kia.
What Covers the
Peso Deposits
That is Protected
By the Act
(RA 1405)
Deposits Covered
1. All deposits of whatever nature with banks or
banking institutions in the Philippines,
including trust accounts.
DEPOSITS – refer to money or funds placed with
a bank that can be withdrawn on the depositor’s
order or demand, such as deposit accounts in the
form of savings, current and time deposits. It is
also characterized as being in the nature of a
simple loan.
 Deposits Covered
2. Investments in bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities.

• Government bonds are debt securities which are unconditional obligations of

the State, and backed by its full taxing power.

Example of Government Bonds:

❖ Treasure bills
❖ Treasury notes
❖ Retail treasury bonds
❖ Dollar linked peso notes
❖ Other risk-free bonds
 Instances When
Confidentiality
of Bank Deposit
is Not Absolute
Bank deposits and investments in government bonds may be examined, inquired, or looked into
under limited exceptions in Republic Act No. 1405 and in other laws.
 (i) Exception under the law in Bank Secrecy of Bank Deposits.
Sections of R.A. No. 1405 provides the following instances...

a. Upon Written Permission or
consent in writing by the depositor.
Example: Ms. O gives her a written waiver
to the bank to examine her account.
Because, before you can examine the
account of the depositor you need
his/her written permission.
b. In cases of Impeachment.
-Someone in the higher position such as the
President, Vice President, and the members of
the Supreme Court can be impeach being
involved in violation in the Constitution,
treason, bribery, graft and corruption or other
high crimes of betrayal of the public trust to
disclose to the public his/her account.
Example: Mr. M, a president, involved in graft and
corruption impeached him to disclose his
account to the public in order to examine and
to know if he's involved or not. Note: In cases of
impeachment, it only covered the local
currency deposit.
(i) Exception under the law in Bank Secrecy of Bank Deposits.
Sections of R.A. No. 1405 provides the following instances...

c. Upon Order of Competent Court.
In cases of bribery or dereliction of duty of
public officials.
Example: Ms. D reported that she accepted a
bribe from a drug lord to continue their
operations in her locality amounted to
P10,000,000 that entered to her bank
account, so the competent court has the
right to give his order to examine the
account of Ms. D and disclosed it to the
public.
d. The money deposited or invested is the subject
matter of litigation.
-It only means that the controversies/problem in the
case is the bank account itself.
Example: Ms. C has a bank account with BDO, she
asked the BDO to facilitate the transfer of
P10,000 to Mr. A. BDO, however, inadvertently
transferred P1,000,000 to the account of Ms. A.
The BDO filed a case with Ms. A to return the
P990,000. Therefore, Ms. A cannot object to it,
since the very subject of the cases is the money
deposited in her account and it constitutes an
exception to the Secrecy of Bank Deposits.
 (ii) Exception under other laws
Any deposits or bank transactions made can be examined in the following cases:

A. The Ombudsman may order for the deposit

information of a government official, Example:
provided that: Mrs. Cruz, a senator is under trial due to
accusations of accepting bribes directly
1. There must be a pending case against the said deposited to her account in China Bank
official. pasay branch.
2. The account of the said official must be clearly
identified.
3. The inspection on the account is limited to the In this example, the ombudsman may
subject relevant to the case. subpoena for Mrs. Cruz deposit
4. Bank personnel and anyone who holds the information only limited on her account
account must be notified to be present during at china bank pasay branch.
inspection.
 (ii) Exception under other laws
Any deposits or bank transactions made can be examined in the following cases:
B. Deposit transactions of the spouse or the
unmarried children of a public official may be
inspected in accordance with the R.A 3019 or Anti-
Graft and Corrupt Practices Act.
Example:
Same scenario as Example A but further testimonies
and records showed that the husband of Senator
Cruz might be directly involved in the rice cartel.
The deposit information of Senator Cruz's Husband may
be examined under Anti-Graft and corruption
practices act.
C. All members and related interest of an
institution who contracted a loan with their
bank or any related banks must provide a
written waiver of secrecy of deposit
Example:
Perez, A director of C.C cooperative applied for a loan at C.C
Bank a subsidiary bank of C.C cooperative, Perez
executed a waiver to finalized the loan.
If evidences are presented that Perez is using the
cooperative bank to do something illegal then her bank
transactions may be examined without repercussions
from the Bank Secrecy Law since the secrecy of her
transaction has already been waived.
 (ii) Exception under other laws
Any deposits or bank transactions made can be examined in the following cases:

D. The commissioner of BIR may inquire into bank
deposits related to:
1. Application for compromise of tax liability or
determining a decedent’s gross estate.
2. A request for tax information made by a foreign
tax authority on a specific individual
Example:
The IRS requested for the tax records of Renz Bank, an
international bank, in the Philippines, said bank
was involved in a huge scam abroad.
BIR, pursuant to Exchange of Information on Tax
Matters Act of 2009 may disclose the tax
information of Renz banks.
 (ii) Exception under other laws
Any deposits or bank transactions made can be examined in the following cases:
E. Anti-Money Laundering Council may examine
bank deposits or investments if:
1. There is a court order, and the deposits are
related to unlawful activity or a money
laundering offense.
2. A probable cause exist that the deposit made is
related to certain predicate crimes, like
kidnapping for ransom or drug related crimes
(such situations doesn’t need any court order)
Example:
Jayrus, a drug trafficker, bought a coffee shop to disguise
his drugs profits with the legitimate profit of the
coffee shop. The profits on drugs are "laundered" to
the coffee shop to make the income look like it is
legally earned.
The council of Anti-Money Laundering may examine his
investment without repercussion with Bank secrecy
Law.
 (ii) Exception under other laws
Any deposits or bank transactions made can be examined in the following cases:

F. Bangko Sentral may:

Example:
The account named Santos has been involved in money
1. Examine bank deposit or investments during
laundering scheme, with probable cause the secrecy
periodic or special examination in accordance of this account may be waived and bangko sentral
with the Anti-Money Laundering Law. may examine all of its transactions upon the order
2. Conduct annual testing to verify the identity of of a competent court.
the owners of specific accounts
 (ii) Exception under other laws
Any deposits or bank transactions made can be examined in the following cases:

G. PDIC and Bangko Sentral may examine the bank
deposits if evidence on unsafe and unsound
banking practices arises.
Examples:
G. Pearl Bank is said to be involved in an improper
loan application procedures. If evidences are
presented that Pearl Bank is really involve in this
unsafe and unsound practice, PDIC and Bangko
Sentral may examine all the involve transactions of
the bank.
H. Court of Appeal may order law enforcement to
gather and examine all deposit in any
financial institution related to anti-
terrorism case.
Examples:
JUST LOVE is a charitable institution in the
Philippines. Without the knowledge of the
others, the financial support they receive is
used to buy illegal items for terrorism. In this
scenario, the Court of Appeal may order law
enforcement to gather and examine all
deposits that has been made in JUST LOVE
institution.
 (ii) Exception under other laws
Any deposits or bank transactions made can be examined in the following cases:

I. Commission on Audit may examine and audit J. The Presidential Commission on Good
government deposits pertaining to all Government may issue summons for the
financial transactions, including government attendance and testimony of witnesses
owned and controlled corporation. and/or any financial documents related to
Example:. the investigations to recover the ill-gotten
During the pandemic Philhealth wealth of former President Marcos, his
managed over 67 Billion worth of funds to address immediate family, relatives and any related
the said problem however upon further examination individuals.
the dealing made by the Philheath officials may not
have been up to the set standards. upon the initial
audit on of covid funds said transaction "deprived
the government of the most (advantageous) prices
and cast doubt on the regularity in the payment of
transactions" according to COA.
 (iii) Juriprudence Intepreting Exceptions
A. Plunder is analogous to bribery. The exception in the law that is
applicable in bribery also applies to plunder. The overt or criminal acts
as described in Section 1 (d) of Republic Act. No. 7080 would make the
similarity between plunder and bribery even more pronounced since
bribery is essentially included among these criminal acts. (Ejercito v.
Sandiganbayan, 509 S.C.R.A. 190 [2006])

B. Cases of unexplained wealth are similar to cases of bribery or

dereliction of duty and no reason is seen why these two classes of
cases cannot be excepted from the rule making bank deposits
confidential. (Phil. National Bank v. Gancayco, 122 Phil. 503 [1965])
 ILLUSTRATION:
“IN SUM, the Court finds that the Sandiganbayan did not commit grave abuse of discretion in issuing
the challenged subpoenas for documents pertaining to petitioner’s Trust Account No. 858 and
Savings Account No. 0116-17345-9 for the following reasons:

1. These accounts are no longer protected by the Secrecy of Bank Deposits Law, there being two
exceptions to the said law applicable in this case, namely: (1) the examination of bank accounts is
upon order of a competent court in cases of bribery or dereliction of duty of public officials, and (2)
the money deposited or invested is the subject matter of the litigation. Exception (1) applies since
the plunder case pending against former President Estrada is analogous to bribery or dereliction of
duty, while exception (2) applies because the money deposited in petitioner’s bank accounts is said
to form part of the subject matter of the same plunder case.” (Ejercito v. Sandiganbayan, G.R. Nos.
157294-95. [November 30, 2006])
 AUTHORIZED DISCLOSURE
Disclosure by authorized and responsible bank officials are allowed in the following instances:
I. Reporting of III. Submission of report, and turn-over
to, the court officer or executing
unclaimed balances
sheriff of garnished amounts as a
to the Treasurer of result of a writ issued in satisfaction
the Philippines of a judgment (Sec. 9[c], Rule 39, Rules
of Court; See China Banking
(Secs. 1 and 2, Act.
Corporation v. Ortega, 49 SCRA 355
No. 3936) [1973])

II. Turning over to the IV. Disclosure made by a

Commissioner of bank officer or employee
Internal Revenue in in response to a court
order to satisfy the order in connection with
a deposit in a closed bank
court's order of
which was used to
garnishment issued to commit fraud. (Soriano v.
collect unpaid taxes. Manuzon, C.A. G.R. S.P. No.
(Secs. 205 and 208, 87634¹⁵)
Republic Act No. 8424)
PENALTIES
Violation of the Republic Act No. 1405 will
subject the offender, upon conviction,
to the following penalties:

● Imprisonment of not more

than five years

Fine of not more than Php

20,000; or

Both imprisonment and

fine
What Covers the
Foreign Deposits
That is Protected
By the Act
RA 6426
 CONFIDENTIALITY OF FOREIGN CURRENCY DEPOSITS

All foreign currency deposits are of an absolute confidential nature and,

except upon the written permission of the depositor, in no instance shall
foreign currency deposits examined, inquired or looked into by any person,
government, official, bureau or office whether judicial or administrative or
legislative, or any other entity whether public or private.
Instances When
Confidentiality
of Bank Deposit
is Not Absolute
 EXCEPTION TO CONFIDENTIALITY OF FCD
1. Written PERMISSION of depositor

2. Authority of the AMLC to inquire into any particular deposits or investment

with any banking institution upon order of CA based on an ex parte
application upon probable cause that such deposit/investment is related to
an unlawful activity or to money laundering pursuant to sec 11 of the Anti-
Money Laundering act.
a. Reporting of covered or suspicious transaction pursuant to S9(c) of
the AMLA
b. The BSP may in the course of periodic if special examination, check
the compliance of a covered institution with the requirements of the
AMLA and its implementing rules and regulations (S11 AMLA).
3. PDIC,BSP, PCGG, and COA may inquire into bank deposits if there is
finding of unsound or unsafe banking practice.
Example of unsafe or unsound banking practices:
- Failure to keep accurate books and records.
- Very high interest rates compared to market rates.
4. Authority of the Commissioner of Internal Revenue to inquire into the bank deposits
of a decedent for estate tax purposes in case of tax compromise. Authorized to
inquire into bank deposits of the following:
a. A decedent to determine his estate; and
b. Any taxpayer who has filed for an application for compromise of his tax
liability
c. A specific taxpayer upon request for tax information from a foreign tax
authority pursuant to an international convention or agreement on tax
matters to which the Philippines is a party (NIRC, Sec. 6[f]).
5. Where the funds deposited in a joint foreign currency savings account
belonged exclusively to one of the depositors and were held in trust for him
by the other depositor and the other depositor unilaterally closed the joint
account and transferred the funds to his personal account, the latter cannot
invoke the exemption from processes under RA 6426 because he is not the
owner of the deposit in the account. Consequently, the depositor who owned
the funds can have his enjoined from making withdrawals from his personal
account (Van Twest v. Court of Appeals, G.R. NO. 106235, February 10,
1994).
EXCEPTION TO CONFIDENTIALITY OF FCD

6. A father who sued his daughter for illegally withdrawing funds from his
foreign currency deposit and transferring to another bank in the name of
her sister, inquire into the deposit of the sister, because the money
deposited belongs to him (China Banking Corp. v. CA, G.R. NO.
140687, December 18, 2006).
7. AMLC Can investigate (a) any property of funds related to financing
terrorism: (b) property or funds of any person if there is probable cause
to believe he is committing or attempting or conspiring to commit
terrorism (RA 10168, Sec. 10).
 Exemption from
Process of
Foreign Currency
Deposits
Exemption from Process of Foreign Currency Deposits
❖ Foreign currency deposits (FCD) shall be exempt from
attachment, garnishment, or any other order or process of any
court, legislative body, government agency, or any
administrative body whatsoever.
Note: FCD is governed by the Foreign Currency Deposits Act (RA
6426) not the Secrecy in Bank Deposits (RA 1405) which is why it
is exempted.

❖ The process exemption should be distinguished from the

confidentiality clause.
Confidentiality Clause- is a legal contract to protect the owner’s
sensitive information and data from disclosure by others
Exemption from Process of Foreign Currency Deposits
❖ Exemption from confidentiality does not necessarily translate to
the exemption from the process.
❖ In other words, FCD is exempt from a court order or
administrative process.
Explanation:
This doesn’t mean that if FCD was exempt from the process
it will also be exempt from the confidentiality clause. In short,
exemption from process and exemption to confidentiality clause
are two different exemptions of FCD.
So, deposits under Foreign Currency cannot be subject to a court
order and cannot be processed by the court for garnishment or
any other order.
 You lent P500,000 to Kang Tae-Moo, a Korean
EXAMPLE national residing and working in the Philippines.
When the loan fell due, he didn't pay. You found
out that Kang Tae-Moo has a peso account
deposit with Seoul Union Bank and a foreign
currency deposit with South Korean Bank.
Despite demands, Kang Tae-Moo refuses to pay
because he said that the remaining money he has
is already allocated for his vacation on Jeju
Island with his girlfriend, Shin Ha-Ri.
So you now went to court, filed a case against
Kang Tae-Moo for collection of sum of money
and won the case. In order to satisfy your claim
against him, you applied for a Writ of
garnishment with the court for the bank
deposits of Kang Tae-Moo. Will the
court issue the writ?
 ANSWER
YES, he can issue a garnishment
for the peso deposit account but

Your NO, for foreign currency deposits

because they are exempt from
garnishment.
Logo The reason why there is a better
exemption in FCD than in peso deposit
accounts:
➢ to encourage FCD in order to
increase our international reserves
which was needed by our country’s
economy.
Other instances that the FDC
may be collected, forfeited,
or freezing the accounts by
the court order or by AMLC
‘

(EXCEPTIONS TO THE EXEMPTIONS)

 Exceptions To The Exemptions
❖ Since the FCD is exempted from the activity in which the
court or banks cannot do any activity like collecting money
(garnishment) or preventing the depositor from his/her
foreign deposit accounts.

These are the certain cases or exceptions to the exemptions:

1. The Supreme Court allowed the garnishment (collecting
money on behalf of the defendant/the person being accused)
of Foreign Currency Deposit (FCD) of a foreign national who
raped a minor and escaped.
 EXAMPLE
A Foreign national who raped a minor and escaped is
dealing with the damages.

➢ In that case, even though the general rule is that

there is no going through the foreign national’s deposit,
the supreme court allowed garnishment or to use his
foreign deposits because there are no other possible
properties to compensate for the damages to the family
of the minor (Salvacion vs. Central Bank)
 Exceptions To The Exemptions
These are the certain cases or exceptions to the exemptions:
2. Civil Forfeiture Suit brought by Anti-Money Laundering
Council (AMLC)
➢ If there are cases involved Anti- Money Laundering in
which the money of foreign deposits can be able to be
forfeited or losing a right because he/she is associated
with the money laundering.
Money Laundering- is a crime whereby the proceeds of an
unlawful activity are transacted, thereby making them appear
to have originated from legitimate sources.
 EXAMPLE
B robbed a bank and put the money in a foreign deposit
account which appears as if the source of money is
legitimate.
➢ In this case, since there has been a present Money
Laundering case in which the Anti Money Laundering
Council provides the complaints to undergo a civil
forfeiture or taking up the rights to the robbed money
because of the offenses committed by B.
➢ Even though there is an exemption that FCS is
protected by secrecy, in this case, it is exempted from
that rule or is excluded from the protection.
 Exceptions To The Exemptions
These are the certain cases or exceptions to the exemptions:
3. Freeze order pursuant to Anti-Money Laundering Act and
Anti-Terror Law.
➢ If there is a probability or chance that the deposit money
is related to the case of unlawful activity, then the Anti-
Money Laundering Council (AMLC) may issue the freeze
order or the account will be frozen, NO transactions,
withdrawals, transfers, deposits and any other
transactions related can be made.
 EXAMPLE
Ace group robbed a bank and use the money to fund the
weapons which caused the killing of people in a large part
of the country.
➢ In this situation, there is still an ongoing investigation
and the Anti-Money Laundering Council (AMLC) has a
probable decision that the money in the deposit accounts
is subjected to unlawful acts in which the AMLC issues a
freeze order and froze the accounts for 15 days.
➢ Although there is protection on the bank deposits of
foreign currency, in this case, it is part of that
exemption.
GARNISHMENT
 What is Garnishment?
❖ A legal procedure by which a creditor can
collect what a debtor owes by reaching the
debtor's property when it is in the hands of
someone other than the debtor.
❖ Garnishment is a drastic measure for
collecting a debt.
 Garnishment Of Deposits
Garnishment: Bank accounts may be garnished by the
creditors of the depositor.
➢ In garnishment, there is no violation of the bank secrecy
law since the amount of the deposit is not actually
disclosed.
General Rule:
The prohibition against the examination of or inquiry
into a bank deposit under Republic Act 1405 does not
preclude it from being garnished to ensure the satisfaction
of a judgment.
 Garnishment Of Deposits
Exception:
Deposits exempt from garnishment:
1. Foreign currency deposits, Section 8 of RA 6426
(this is stated in the previous slide about Exemption
from Process of Foreign Currency Deposits)
2. Those exempt under Rules of Court:
PENALTIES FOR
VIOLATION OF
R.A. NO. 6426
Penalties for Violation of R.A. No. 6426
➢ Any willful violation of this Act or any regulation duly
promulgated by the Monetary Board pursuant hereto
shall subject the offender upon conviction to:
➢ Imprisonment of not less than 1 year nor more than
5 years
➢ A fine of not less than 5,000 nor more than P25,000
➢ or both such fine and imprisonment at the discretion
of the court. (Sec. 5)
UNCLAIMED
BALANCES
LAW
 Unclaimed Balances Law (RA. 3936, AS AMENDED BY PD 679)
"Unclaimed balances“ shall include:
1. credits or deposits of money,
2. bullion (Gold/Silver ingots, bar, or coins)
3. security or other evidence of indebtedness of any kind, and
4. interest
thereon that is made with banks, buildings and loan associations, and trust corporations.

In order for it to be classified as “Unclaimed Balances”, the amount deposited must either belong to a
known person to be dead, as well as any person who don’t engage in any deposits or withdrawals for the
past ten years.

The unclaimed balance with banks, buildings and loan associations, and trust corporations together with its
proceeds and increase, will be submitted to the “Treasurer of the Philippines” for the credit of the account of
the government of the republic of the Philippines.

Purpose: for the benefit of the public

“BANKS”, “BUILDING AND LOAD ASSOCIATIONS”,
and “ TRUST CORPORATION” MEANING
1. BANKS
- The function of a Bank is to collect deposits from the public and lend those deposits for the
development of Agriculture, Industry, Trade and Commerce. Bank pays interest at lower rates to the
depositors and receives interests on loans and advances from them at higher rates.

2. BUILDING AND LOAN ASSOCIATIONS

- A building and loan association is an organization created for the purpose of accumulating a fund
by the monthly subscription, or savings of its members, to assist them in building or purchasing for
themselves dwellings or real estate, by loaning to them the requisite money from the funds of the
society.

3. TRUST CORPORATION
- A trust company is a legal entity that acts as a fiduciary, agent, or trustee on behalf of a person
or business for the purpose of administration, management, and the eventual transfer of assets to a
beneficial party. The trust company acts as a custodian for trusts, estates, custodial arrangements,
asset management, stock transfer, beneficial ownership registration, and other related arrangements.
 Example

Mark, who has deposit worth 500,000 on Liwanag Bank on May 9, 2020. After 8
years, the bank noticed that Mark doesn't have any transaction with the past 8
year. Is that makes Mark money classified as "unclaimed balance?"

the answer is "NO", because mark's deposit is only inactive for the past 8 year.
But, if it's 10 years, then it will be classified as unclaimed balance and be
submitted to the Treasurer of the Philippines
 Information
Required in the
SWORN STATEMENT
 The names and last known The interest due on such
01 place of residence or post
04
unclaimed balance, if
office addresses of the any, and the amount
persons in whose favor such
thereof.
unclaimed balances stand;

The amount and the date of the

02 outstanding unclaimed balance
and whether the same is in
money or in security, and if the
latter, the nature of the same;

The date when the person in

03 whose favor the unclaimed
balance stands died, if known,
or the date when he made his
last deposit or withdrawal; and
 POSTING requirement
The above-mentioned sworn statement shall
be posted in a conspicuous (observe and easily
seen) place in the premises of the bank,
building and loan association, or trust
corporation concerned for at least sixty (60)
days from the date of filing thereof.
 FAILURE TO SUBMIT SWORN
STATEMENT
If the president, cashier or managing officer of the bank, building and
loan association, or trust corporation neglects or refuses to make and
file the sworn statement required by this action, such bank, building
and loan association, or trust corporation shall pay to the Government
the sum of five hundred pesos a month for each month or fraction
thereof during which such default shall continue.

Sec. 4, Unclaimed Balances Act

Procedure for
ESCHEAT
 Meaning of escheat
• Escheat means that it is the right of a
government to take ownership of estate
assets or unclaimed property. It most
commonly occurs when an individual dies with no
will and no heirs.
• In the unclaimed balances, there is also the
same procedures in which the person who has
not made further deposits or withdrawals during
the preceding 10 years or more.
 Procedure for escheat
1. A notice to the depositor will be given at his
last known place of residence or post office
address.
2. The bank will then report, through a sworn
statement, to the Treasurer of the Philippines
the existence of such deposits.
- The Treasurer of the Philippines will inform time to time the
solicitor general the existence of unclaimed balances.
 Procedure for escheat
3. After that, the Solicitor General (representative
of the government) will then initiate the proper
escheat proceedings in court.

➢Escheat proceedings- judicial process in which

the state steps in and claims the abandoned left
vacant, or unclaimed property, without there being
an interested person having a legal claim.
Procedure for escheat (continuation)….

4. A copy of the complaint and summons shall be served upon the

president, cashier or managing officer of each defendant bank,
building and loan association or trust corporation and a
publication of such Summons a newspaper of general
circulation.
5. After trial, and it is determined that such balances are
unclaimed, the court shall render judgment declaring such
balances escheated in favor of the Government.
6. Such unclaimed balances, together with the increase and
proceeds thereof, shall be deposited with the Treasurer of the
Philippines to credit of the Government of the Republic of the
Philippines to be used to as Congress may direct.
Procedure for
REACTIVATION
 01 Letter Request of Depositor/Creditor
The depositor/creditor shall write his
depository bank requesting for the Write a request
for reactivation
reactivation of his account which was
of his account
included in the report of unclaimed
balances to the Bureau of the Treasury.

02
The institution where the
unclaimed balances
is/covered institution
shall verify the request
for reactivation
Authentication
The covered institution shall
authenticate and verify the request for
reactivation and the signature of the
depositor/creditor.
03 Letter Request of the Covered Institution
The depository bank shall write the Bureau
of the Treasury through the authorized Depository bank shall
approving official, requesting authority to write to the Bureau of
reactivate the deposit account concerned Treasury to request
attaching to its letter the stamped verified authority to reactivate
letter of the depositor/creditor. the deposit account

04
The covered
institution/depository bank
shall ensure that the BOT and
its officials and employee is
free from any liability when
the account is reactivated
Deed of Undertaking
The covered institution, through its
responsible authorized officer, shall execute
a Deed of Undertaking ensuring that the
Bureau of the Treasury and its officials and
employees shall be free and harmless from
any liability once the account is reactivated.
05 Letter of Authority to Reactivate
Finding complete documentation The BOT, through his
supporting the request, the Bureau of the authorized officer shall
Treasury, through the authorized officer give authority to the
shall issue the authority to the covered depositary bank to
reactivate the account
institution to reactivate the account.

06 Letter Request of the Covered

In case the one who is
requesting for reactivation is a
juridical person such as
corporation, it must be authorized
by the BOD evidenced by a
board resolutions or secretary’s
certificate
Institution
In case the requesting party/deposit/creditor
is a juridical entity/person, the request must be
accompanied with corresponding board resolutions
and /or Secretary's Certificate showing that the
signatory to the request for reactivation is fully
authorized to transact with the Bureau of the
Treasury relative to the reactivation of its account.
07 Approving Authority
The authority to reactivate on unclaimed balance account/s shall be issued by
the following officers:

a. Division Chief/Head Law & Litigation Division aggregate amount of unclaimed balance not
Legal Service exceeding P100,000

b. Director, Legal Service aggregate amount of unclaimed balance

exceeding P100,000 but not exceeding P500,000

c. Deputy Treasurer of the Philippines aggregate amount exceeding P500,000 but not
exceeding P1,000,000

d. Treasurer of the Philippines aggregate amount of unclaimed balances

exceeding P1,000,000
 REPUBLIC ACT No. 3591

An Act Establishing the Philippine

Deposit Insurance Corporation
What is Philippine Deposit Insurance Corporation (PDIC)?

Philippine Deposit Insurance Corporation (PDIC) is a government instrumentality

established on June 22, 1963 by Republic Act 3591 to insure the deposits of all banks
which are entitled to the benefits of insurance. The PDIC is an attached agency of the
Department of Finance. PDIC exists to provide permanent and continuing deposit
insurance coverage for the depositing public.

PDIC exercises:
 complementary supervision of banks
 adopts responsive resolution methods
 ensures prompt settlement of insured deposits
 applies efficient management of receivership and liquidation functions.
To further help the PDIC, the government
created Republic Act 9576 an act increasing
the maximum deposit insurance coverage,
and in connection therewith, to strengthen
the regulatory and administrative authority,
and financial capability of the Philippine
Deposit Insurance Corporation (PDIC)

RA 9576 principally increased

the maximum deposit insurance
coverage to P500,000 from
P250,000 as large and established
banks in the West collapsed at
the height of the financial crisis.
 The latest amendments to RA 3591 are contained in RA 10846
signed into law on May 23, 2016. RA 10846 empowered PDIC with
stronger authorities to protect the depositing public and promote
financial stability. The new law also includes important provisions
to ensure that the PDIC remains financially and institutionally
strong to fulfill its mandate under its Charter.

The PDIC has now the authority to:

 help depositors have quicker access to their insured deposits should their bank close
 resolve problem banks while still open
 hasten the liquidation process for closed banks
 mete out stiffer sanctions and penalties against those who engage in unsafe and
unsound banking practices
 What is the purpose/objective of PDIC?
 PDIC exists to provide deposit insurance coverage for the depositing
public to help promote public confidence and stability in the economy.
It ensures prompt payment of insured deposits, exercises
complementary supervision of banks, adopts responsive resolution
methods, and applies efficient management of receivership and
liquidation functions.

 PDIC was created to “promote and safeguard the interests of the

depositing public by way of providing permanent and continuing
insurance coverage on all insured deposits.”

 The PDIC also aims to strengthen the mandatory deposit insurance

coverage system to generate, preserve, and maintain faith and
confidence in the country’s banking system, and protect it from illegal
schemes and machinations.
 What are the
functions of PDIC?/
Function to act
as/Basic Functions of
the Philippine
Deposit Insurance
Corporation
 Three (3) Basic Function to act as:

1. Deposit Insurer-the PDIC shall promote and safeguard the interests of the
depositing public by way of providing permanent and continuing insurance
coverage on all insured deposits.

As Deposit Insurer, PDIC assesses member-banks and collects from them

insurance assessment payments. All banks that are licensed to operate as
banks by the Bangko Sentral ng Pilipinas are mandated to become member-
banks of PDIC.

2. Co-regulator of banks - as a bank regulator, the PDIC is empowered to

examine and investigate banks.

As Co-regulator of banks, the PDIC conducts offsite and onsite monitoring of

banks to ensure that banks are managed well and are not conducting
business in an unsafe and unsound manner. The PDIC also assists banks to
become stronger through bank strengthening initiatives and financial
assistance.
● Receiver and liquidator of closed banks - the
PDIC as receiver shall control, manage and
administer the affairs of the bank.

● As Receiver, the PDIC administers the assets,

records and affairs of the closed bank; and
preserves the closed bank’s assets for the benefit
of the bank’s creditors. Depositors with deposits
in excess of the deposit insurance coverage or
uninsured deposits are considered creditors of
the closed bank.

● When a closed bank can no longer be

rehabilitated, PDIC is directed by the Monetary
Board to proceed with the liquidation of the
bank as Liquidator. Liquidation of a closed bank’s
assets involves conversion of real and other
properties acquired (ROPA) and other assets to
liquid assets to facilitate distribution to creditors.
Application of a bank to be an insured bank

INSURED AND NON – INSURED BANK

"Insured Bank" means any bank the deposit of

which are insured in accordance with the
provision of this Act;
"Non-Insured Bank" means any bank the
deposit of which are not insured. ‘INSURED’ means to provide
protections to the
depositors against loss if
the bank or thrift
institution fails.

Note: ALL banks are

MANDATORY to insure
their deposits and pay
premium to PDIC.
Application of a bank to be an insured bank

 Any bank of banking institution which is engaged in the business of

receiving deposits as herein defined on the effective date of this Act, or
which thereafter may engage in the business of receiving deposits, may
insure its deposit liabilities with the Corporation.

 Before approving the application of such bank to become an insured bank,

the Board of Directors shall give consideration to the factors enumerated in
Section 5

 Shall determine upon the basis of a thorough examination of such bank,

that its assets in excess of its capital requirements are adequate to enable it
to meet all its liabilities to depositors and other creditors as shown by the
books of the bank.
The factors to be considered by the Board of
Directors shall be the following: (Section 5)

1 2 3

The financial history and The adequacy of its Its future earnings
condition of the Bank capital structure prospects

4 5

The convenience and needs of the

The general character of community to be served by the Bank and
its management whether or not its corporate powers are
consistent with the purposes of this Act.
What is PDIC's maximum deposit coverage/Maximum
deposit insurance coverage of PDIC? MAXIMUM LIABILITY
● Previously, up to 250,000 per
depositor per bank R.A no. 9576
signed by the President on April
29 2009, doubled the coverage up
to 500,000

● Effective June 1, 2009, the

maximum deposit insurance
coverage is P500, 000 per
depositor per bank. All deposit
accounts by a depositor in a closed
bank maintained in the same right
and capacity shall be added
together.
Insured Deposits
 INSURED DEPOSITS

Amount due to any bona fide (good faith, legitimate deposits) depositor for
legitimate deposits in an insured bank net of any obligation of the
depositor to the insured bank as of the date of closure, but not to exceed
P500,000.

How to consider legitimate depositor?

•No owner/holder of any passbook, certificate of deposit, or other evidence

of deposit shall be recognized as a depositor entitled to the rights under
the PDIC charter unless the passbook, certificate of deposit or evidence
of deposit is determined by the PDIC to be an authentic document or
record of the issuing bank.

Ex. Atm, Passbook

 Examples of types of deposits covered:

Savings Deposit - is one wherein you deposit your

savings with the bank and earn interest on the same

Special Savings - An amount deposited by the

members of the Association but does not form part of
the Capital. It shall earn interest computed based on
the prevailing rate as determined by the Board of
Trustees.

Demand/Checking Account - A demand deposit

account (DDA) is a bank account from which
deposited funds can be withdrawn at any time,
without advance notice.
Negotiable Order of Withdrawal (NOW) – interest bearing deposit account that
combines the payable on demand feature of checks and investment feature of savings
account

Certificate of Time Deposits - A certificate of deposit (CD) is a product offered by

banks and credit unions that provides an interest rate premium in exchange for the
customer agreeing to leave a lump-sum deposit untouched for a predetermined period
of time. The money must remain in the account for the fixed term in order to earn the
stated interest rate.

Foreign currency Deposit - is a type of time deposit issued by banks to investors who
would like to keep foreign currency for future use or hedge against foreign currency
fluctuation. The money deposited in the FCFD account cannot be withdrawn until the
agreed fixed term has expired.
Example 1
.
Jac, Shaina & Isabel maintains deposit to Banko Mo ‘To 500,000,
700,000 and 100,000 respectively. Due to bankruptcy, Banko Mo ‘To
decide to close its operation.

Under PDIC’s maximum deposit coverage, each of them will get

Jac Shaina Isabel

500,000 500,000 100,000
Q: IF THE DEPOSIT ACCOUNT IN A CLOSED BANK IS MORE THAN P500,000.00, WHAT
HAPPENS TO THE EXCESS OF THE MAXIMUM AMOUNT OF INSURED DEPOSIT?

A: The claim for the uninsured portion of the deposit is a claim against the assets of the
closed bank.

Q: WHAT IS THE MODE OF PAYMENT OF THE INSURED DEPOSITS?

A: Either (1) by cash or (2) by making available to each depositor a transferred deposit in
another insured bank in an amount equal to the insured deposit of such depositor

Q: WHEN SHOULD THE DEPOSITOR OF A CLOSED BANK FILE HIS DEPOSIT

INSURANCE CLAIM WITH THE PDIC?

A: Within 2 years from the date of bank takeover. Otherwise, all rights of the depositor
with respect to the insured deposit shall no longer be honored. But he may still make a
claim against the assets of the closed bank.
Example 2

Juvilyn has a certificate of deposit at Landbank and he also has a certificate of

deposit at BDO the amounts would each be insured seperately up to 500,000

Ques: If I have deposits in several different insured banks, will my deposits be

added together for insurance purposes?

Ans: No. Deposits in different banking institutions are insured separately.

However, if a bank has one or more branches, the main office and all branch
offices are considered as one bank
Adjustment of Maximum Deposit Insurance:

The amount of coverage may be adjusted in such amount, for

such a period, and/or for such deposit products, provided:

1. The Monetary Board has determined that there is a

condition that threatens the monetary and financial
stability of the banking system that may have systematic
consequences as defined under RA No. 3591;

2. Approval by a unanimous vote of the Board of Directors

of the PDIC in a meeting called for the purpose and
chaired by the DOF Secretary;

3. Approval of the President of the Philippines.

Adjustment of maximum deposit insurance:

Under Section 22 of the PDIC Charter, a systematic risk

refers to the possibility of failure of one bank to settle net
transactions with other banks will trigger a chain reaction,
depriving other banks of funds leading to a general
shutdown of normal clearing and settlement activity. It
also means the likelihood of a sudden, unexpected collapse
of confidence in a significant portion of the or financial
system with potentially large real economic effects.

Banking Coverage: The liabilities of any bank or banking

institution, which I engaged in he business of receiving
deposits s herein defined on the effective date of the PDIC
Act, or which thereafter may engage in the business of
receiving deposits, shall be insured with the PDIC.
DETERMINATION OF THE
AMOUNT DUE
Per Bank: the entitlement to deposit
insurance is on a per bank basis. Such that
Accounts "By", "In Trust For (ITF)" or "For
if X has a deposit with A Bank and B Bank
the Account of (FAO)" another
and both banks closed, X is entitled to
person:
P500, 000 insurance coverage for each
bank.
1. In a "By" account (Juan by Pedro) -
Juan is the depositor.
Per Depositor, Per Capacity Rule: all
2. In an "TTF" account (Juan ITF Pedro) -
deposits in the bank maintained in the
Pedro is the depositor.
same right and capacity for his benefit
3. In a "FAO" account (Juan FAO Pedro) -
either in his own name or in the name of
Pedro is the depositor.
others shall be added together in
determining the insured amount, and
regardless of the type of account.
 INDIVIDUAL ACCOUNTS
All individual accounts of a depositor, including the above where
ownership is vested in him, shall be insured to a maximum of
P500,000.
● ILLUSTRATION: How much is Fe Santos's insured deposit if she has the following four deposit accounts in the
same bank?

Account Name Deposit (in PHP) Insured Deposit of Fe

Santos
Fe Santos 100,000 100,000
Ben Santos For the 100,000 100,000
Account of Fe Santos
Charlie Santos In 100,000 100,000
Trust For Fe Santos
Fe Santos’ Store (Sole 700,000 200,000
Proprietorship)
TOTAL P 1,000,000 P 500,000
JOINT ACCOUNTS
A joint account regardless of whether the conjunction "and", "or", "and/or" is used
shall be insured separately from any individually owned deposit account, provided
that:

1. If the account is held jointly by two or more natural persons, or by two or more
juridical persons or entities, the maximum insured deposit shall be divided into as
many equal shares as there are individuals, juridical persons or entities, unless a
different sharing is stipulated in the document of deposit, and

2. If the account is held by a juridical person or entity jointly with one or more natural
persons, the maximum insured deposit shall be presumed to belong entirely to such
juridical person or entity.
Provided, further, that the aggregate of the interest of each co-
owner over several joint accounts, whether owned by the same or
different combinations of individuals, juridical persons or entities,
shall likewise be subject to the maximum insured deposit of
P500,000.

The P500,000 entitlement to joint deposits is separate from the

P500,000 applicable to the individually owned accounts by the
depositor, giving him a maximum of P1,000,000 insurance coverage.

In short, a depositor who maintains both individual and joint

accounts may be insured up to a total of P1,000,000: P500,000 for
all his individual accounts, P500,000 for all his joint accounts.
Example:

The couple lan and Paolo Pangilinan have the following account balances with Banco Inidoro:
lan Pangilinan P500,000
Paolo Pangilinan P500,000
lan Pangilinan and/or Paolo Pangilinan P500,000

Q: How much are the insured amounts?

A: All the 3 accounts are insured because the deposits are maintained in different rights and
capacities. A joint account shall be insured separately from any individually-owned deposit
account. (Sec. 4(g) PDIC Charter).

Q: How much can lan Pangilinan recover from PDIC?

A: P750,000(P500,000+P250,000) The and/or account shall be divided into as many entities in
whose names the account is recorded.
Example

The bank records of Bank Pink show the following joint accounts and their balances:
Rose and/or Lisa P500,000
Rose and/or Jisoo P500,000
Rose and/or Jennie P500,000

Q: Is each account insured?

A: Yes

Q: How much can Rose recover from the PDIC?

A: P500,000. The aggregate interest of each co-owner over several joint accounts,
whether owned by the same or different combinations of individuals, juridical
persons or entities, shall likewise be subject to the maximum insured deposit of
P500,000.
Illustration:
Juan Dela Cruz maintains the following accounts with ABC Bank.

Account Name Type of Deposit Balance

Juan Dela Cruz Savings P 600,000.00
Juan Dela Cruz AND Demand 500,000.00
Maria Dela Cruz
Juan Dela Cruz OR Time 800,000.00
Pedro Dela Cruz

How much is the total insured and uninsured deposit of Juan Dela Cruz?
 ANSWER:

Account Name Type of Balance Insured Uninsured

Deposit
Juan Dela Cruz Savings P 600,000 P 500,000 P 100,000
Juan Dela Cruz Demand 500,000 250,000 0
AND Maria
Dela Cruz
Juan Dela Cruz Time 800,000 250,000 150,000
OR Pedro Dela
Cruz
Total P 1,000,000 P 250,000
Procedure for the PDIC
 1. PDIC shall commence the determination of
How about these insured deposits due the depositors of a
closed bank upon its actual takeover of the
procedure? closed bank.

2. PDIC shall give notice to the depositors of

the closed bank of the insured deposits due
them by whatever means deemed
appropriate by the Board of Directors

3. PDIC shall publish the notice once a week

for at least 3 consecutive weeks in a
newspaper of general circulation or, when
appropriate, in a newspaper circulated in
the community or communities where the
closed bank or its branches are located.
Claim: Claims are filed during the claims settlement operations period, as announced in
the Notice to Depositors published in national or local newspapers, or posted in the
bank premises and conspicuous places within the locality, and in the PDIC website.

Those required to file claims:

1. Depositors with valid deposit accounts with balances of more than Php100,000.
2. Depositors who have outstanding obligations with the closed bank regardless of
amount of deposits.
3. Depositors with account balances of less than Php100,000 who have no updated
addresses in the bank records or who have not updated their addresses through the
Mailing Address Update Form (MAUF) issued by the PDIC.
4. Depositors who maintain their accounts under the name of business entities,
regardless of type of account and account balance.
5. Depositors with accounts not eligible for early payment, regardless of type of account
and account balance per advice of PDIC.
 Those NOT required to file claims:

1. Valid deposit accounts

2. Balance of Php 100,000 and below
3. No obligations with closed bank
4. Complete and updated addresses in the bank records of through the MAUF issued by the PDIC.

Example;
Miho, a depositor of a closed bank, who has a valid deposit account with balance of Php98,000. Is
Miho required to file deposit insurance claims?

No, because a depositor must have a balance of more than 100,000 in his valid deposit account. In
the example, Miho has 98,000 balance which is less than 100,000 thus, Miho is not required to
file claims.
Who should sign the deposit insurance claim form?
1. Depositor of the account - for depositors 18 years old and above;
2. Parent - if below 18 years’ old
3. Agent - in the case of "By" accounts;
4. Trustee - in the case of In Trust for (ITF" accounts)”
5. Each Depositor - in the case of joint accounts such as "Or", "And/Or" or "And"
accounts

Steps in filing
Steps in filing:
1. Prepare the following documents:
a. Original evidence of deposits
b. One valid photo-bearing ID with clear signature
c. Original PSA birth certificate if below 18
d. Original copy of notarized SPA for claimants who are not signatories in the bank records
2. Submit personally or through mail
FILING OF CLAIMS WITH PDIC

● For account holders of more than PhP100,000

● claims must be filed during the onsite Claims Settlement Operations (CSO)
period, as announced in the
a. Notice to Depositors published in national or local newspapers
b. posted in the bank premises and conspicuous places within the
locality
c. PDIC website.
● Depositor who failed to file their claims during the onsite CSO may;
a. do so personally
b. through mail by sending a duly accomplished and notarized Claim
Form
Certificate of Deposit
No owner/holder of any negotiable certificate of
deposit shall be recognized as a depositor entitled to
the rights in PDIC Act unless his name is registered as
owner/holder thereof in the books of the issuing bank.

Example;
Zia filed a claims by showing her certificate of
depositor, claiming she is a depositor of a closed bank,
however her name cannot be found or is not registered
in the books of the issuing bank. Is Zia entitled to the
rights in PDIC Act?

No, for a depositor to be entitled to the rights in the

PDIC Act must be registered as owner/holder of any
negotiable certificate of deposit in the books of the
issuing bank
What are covered by the PDIC Deposit Insurance
PDIC insures valid deposits in domestic offices of its member- banks. Deposits are
considered valid if, upon determination by PDIC, are recorded in the
bank’s records, and are evidenced by inflow of cash.

By Deposit Account:
By Deposit Types: i) Single Account
i) Savings ii) Joint Account
ii) Special Savings iii) Account “By”, “In Trust For” and “For
iii) Demand/Checking the Account of”
iv) Negotiable Order of Withdrawal
v) Time Deposits By Currency:
i) Philippine Peso
ii) Foreign Currencies considered as
part of BSP’s international reserves.
iii) Foreign Currencies considered as part
of BSP’s international reserves.
Public Policy Objectives
The Philippine Deposit Insurance Corporation (PDIC) was
established to promote and safeguard the interests of the
depositing public by way of providing insurance coverage on
all insured deposits. The PDIC also aims to strengthen the
mandatory deposit insurance coverage system to generate,
preserve, and maintain faith and confidence in the country’s
banking system, and protect it from illegal schemes and
machinations.
 Mandates of the Philippine Deposit Insurance Corporation
(PDIC)
Consistent with is public policy objectives, the PDIC has the following mandates:

I. Deposit Insurance. The PDIC provides a maximum deposit insurance coverage of

Php500,000.00 per depositor per bank. To pay claims on insured deposits, PDIC builds up the
Deposit Insurance Fund (DIF) primarily through assessments of banks at an annual flat rete of l/5 of
their total deposit liabilities.

II. Receivership of Closed Banks. PDIC proceeds with the liquidation process upon order of the
Monetary Board of the Bangko Sentral ng Pilipinas (BSP). The assets of the closed bank are managed
and eventually disposed of to settle claims of creditors in accordance with the preference and
concurrence of credits as provided by the Civil Code of the Philippines
Mandatory Membership

Membership with the PDIC is mandatory for all banks licensed by the Bangko Sentral ng
Pilipinas (BSP) to operate in the Philippines.

[A] Banks incorporated under Philippine laws, such as commercial banks, savings banks,
mortgage banks, stock savings and loan associations, development banks, cooperative
banks, and rural banks

[B] Domestic branches of foreign banks. Scope of Deposit Insurance Protection. –

PDIC provides a maximum deposit insurance coverage of Php500,000 per depositor per
bank. It covers all types of bank deposits in banks whether denominated in local or foreign
currencies. All deposit accounts of a depositor in a closed bank maintained in the same
right and capacity shall be added together.
As of 22 April 2022, there are 497 banks in the Philippine banking system.
These consist of 45 commercial banks (including branches of foreign
banks), 45 thrift banks (savings banks, mortgage banks, stock savings and
loan associations, and development banks), and 407 rural banks
(including cooperative banks).
 A joint account shall be insured separately from any
individually-owned deposit account. As of 31
December 2017, around 57.1 million accounts in 587
banks are covered by deposit insurance. Of the total
number of accounts, 96.3% are with balances not
exceeding the maximum deposit insurance coverage
Php500,000 per depositor per bank. For the same
period, total deposits in the Philippine banking
system amounted to Php11.7 trillion, of which 20.8%
is covered by deposit insurance
Specific risks to a bank covered by PDIC

The Philippine Deposit Insurance Corporation covers

only the risk of a bank closure ordered by the Monetary
Board. Thus, bank losses due to theft, fire, closure by
reason of strike or existence of public disorder,
revolution or civil war, are not covered by PDIC.
DEPOSIT ACCOUNTS NOT ENTITLED TO
PAYMENT
 Excluded by the PDIC Deposit Insurance

Republic Act No. 9576 stipulates that PDIC will not pay deposit insurance for the following
accounts or transactions:

1. Investment products such as bonds, securities and trust accounts

2. Deposit accounts which are unfunded, fictitious or fraudulent.

3. Deposit products constituting or emanating from unsafe and unsound banking practices.

4. Deposits that are determined to be proceeds of unlawful activity as defined under the Anti-
Money laundering Law.
5) deposits that are determined to be the proceeds of an unlawful activity.
A penalty of prision mayor or a fine of not less than P50,000 but not more
than P2 million will be imposed on any officer of the bank found to have
conducted business in an unsafe and unsound manner.

The recent amendments to the PDIC Charter authorized the Corporation to

conduct special bank examinations whenever there is a threatened or
impending closure of said bank and inquire into deposit accounts and all
information related in case there is a finding of the unsafe and unsound
practice. The authority to conduct examination will enable the PDIC to
effectively manage the risks to the DIF which were increased when the
maximum deposit insurance coverage was doubled to P500,000.
1. Deposit products that resulted from splitting of deposit.

Splitting of Deposit – occurs whenever:

A. deposit account with an outstanding balance more than P500,000 is broken down and
transferred to two or more accounts in the name of persons or entities who have no
beneficial ownership in the transferred deposits in their names
B. within 120 days immediately preceding or during a bank-declared bank holiday or
immediately preceding a closure order issued by the Monetary Board
C. for the purpose of availing the maximum deposit insurance coverage.

This is considered a criminal act punishable by imprisonment of not less than 6 years but not
more than 12 years or a fine not less than P50,000 but not more than P10,000,000, or both,
at the discretion of the court
2. Deposit products or money placements by the head office of a foreign bank in its branch in the
Philippines because there is only one entity.

3. Deposits that are determined to be the proceeds of an unlawful activity as defined under RA 9160
or the Anti-Money Laundering Act, as amended

4. Deposits payable in a place outside the Philippines (like those in foreign branches)

5. Deposit accounts or transactions which are unfunded and that are fictitious or fraudulent

6. Deposit accounts or transactions constituting and/or emanating from, consultation with BSP,
after due notice and hearing, and publication of a unsafe and unsound banking practice/s, as
determined by PDIC, in consultation with BSP, after due notice and hearing and publication of a
cease and desist order issued by PDIC against such deposit accounts or transactions

7. Investment products such as bonds and securities, trust accounts and other similar instruments
 Illustration:
Mr. X maintains P250,000 in ABC Bank’s Manila Branch and P300,000 in ABC
Bank’s US Branch. In the event of a closure of ABC Bank, how much is Mr. X’s
insured deposit?

ANSWER: P250,000. Since the P300,000 deposited in ABC Bank’s US Branch is not
covered being payable outside of the Philippines.

Mandates of the Philippine Deposit Insurance Corporation (PDIC)

Consistent with is public policy objectives, the PDIC has the following mandates:

I. Deposit Insurance.
The PDIC provides a maximum deposit insurance coverage of Php 500,000 per
depositor per bank. To pay claims on insured deposits, PDIC builds up the Deposit
Insurance Fund (DIF) primarily through assessments of banks at an annual flat rete
of I/5 of their total deposit liabilities.
II. Receivership of Closed Banks.

PDIC proceeds with the liquidation process upon order of the Monetary
Board of the Bangko Sentral ng Pilipinas (BSP). The assets of the closed
bank are managed and eventually disposed of to settle claims of creditors in
accordance wit the preference and concurrence of credits as provided by
the Civil Code of the Philippines.
 Scope of Deposit Insurance Protection

PDIC provides a maximum deposit insurance coverage of PhP500,000 per depositor

per bank.

o It covers all types of bank deposits in banks whether denominated in local or

foreign currencies.

o All deposit accounts of a depositor in a closed bank maintained in the same right
and capacity shall be added together.

o A joint account shall be insured separately from any individually-owned deposit

account.
As of 31 December 2020, around 80.1 million
accounts in 535 banks are covered by
deposit insurance. Of the total number of
accounts, 96.7% are with balances not
exceeding the maximum deposit insurance
coverage of PhP500,000 per depositor per
bank.

For the same period, total deposits in the

Philippine banking system amounted to
PhP14.87 trillion, of which 20.6% is
covered by deposit insurance.

What are not covered by the
PDIC deposits insurance?
The following, whether denominated, documented, recorded or
booked as deposit by the bank, are excluded from PDIC deposit
insurance (Section 4 (f) of the PDIC Charter):
• Investment products such as bonds and
securities, trust accounts and other similar
instruments
• Deposit accounts or transactions that:
 Are unfunded, fictitious or fraudulent
 Constitute and/or emanate from unsafe
and unsound banking practice/s3 as
determined by the PDIC, in
consultation with the BSP, after due
notice and hearing and publication of
PDIC’s cease & desist order against
such deposit accounts/transactions
 Are determined to be proceeds of an
unlawful activity as defined in the
AntiMoney Laundering Act (Republic
Act 9160, as amended)
Deposits emanating from unsafe and unsound banking
practices are not insurable.

Unsafe and unsound deposit-related activities include, among others: (PDIC

Regulatory Issuance No. 2011-01)

 Deposit-related practice/activity/transaction without the approval or

adequate controls required under existing laws, rules and regulations

 Failure to keep bank records within bank premises - Granting high

interest rates, when bank has:

(i) negative unimpaired capital, or

(ii) liquid assets to deposit ratio less than 10%

 Non-compliance with PDIC regulations

PDIC Composition
✓DOF Secretary - ex officio Chairman

✓PDIC President - appointed by President of the

Philippines - Vice Chairman of the Board

✓BSP Governor - ex officio Member

✓4 members from the private sector - appointed by the

President of the Philippines
 Coverage of Intellectual
1 Property Rights

Functions of the Intellectual

2 Property Office (IPO)

Contents 3
Organizational Structure of
IPO

Prescriptive Period of Actions

4 for Damages under IPC

Jurisdiction over disputes

5 under IPC
Intellectual Property

Definition
Intellectual property (IP) -
refers to creations of the mind,
such as inventions; literary and
artistic works; designs; and
symbols, names and images used
in commerce.
 Intellectual Property Rights
Definition Definition of terms
Intangible Assets – an asset that is not
The intellectual property rights is any and
physical in nature
all rights associated with intangible assets
Examples: Inventions, Logos, Business or Trade
owned by a person or company and
Names, Industrial Designs, Works of
protected against use without consent.
Authorship, Domain Names and many more…

Law
INTELLECTUAL PROPERTY CODE OF THE
Section 1. Title. - This Act shall be
PHILIPPINES [republic act no. 8293] an act
prescribing the intellectual property code and
known as the "Intellectual
establishing the intellectual property office, Property Code of the Philippines."
providing for its powers and functions, and for
other purposes
 R.A. No. 8293
• Intellectual Property Code of
the Philippines
• Effectivity: 1 January 1998
and approved June 6, 1997

 It shall protect and secure the

exclusive rights of scientists,
inventors, artists and other gifted
citizens to their intellectual
property and creations, particularly
when beneficial to the people, for
such periods as provided in this Act.
The use of intellectual property
bears a social function.
Example
 Types of Intellectual Property Rights
Patents Trademarks
Patents protects the rights of the inventors Trademarks protects logos , sounds, words,
from stealing, selling or usage of their 01 02 colors, symbols or any representation used by
inventions without their permission or consent. a company, a person, and/or business to
distinguish its service or product.

Copyrights Trade secrets

Copyrights protects the rights of the
founder or the original creator of an
03 04 Trade secrets protects the company’s
intellectual property that’s confidential and
intellectual property such as literary and not disclosed to the public due to its
artistic works. confidentiality as it holds a valuable asset to
the company.
Example of Patents
Examples of Trademarks
Example of Copyrights
Example of Trade Secrets
 Geographical
Origin/Indication
• Signs used on goods that have a specific
geographical origin and possess qualities that
are essentially attributable to that place of
origin
Examples: Strawberry is the representation of
Baguio. While in Bulacan their representation of
that place is Cotton. Tuna in General Santos City.
Industrial Design
• Constitutes the ornamental or aesthetic
aspect of an article.
• A design may consist of three-dimensional
features, such as the shape or surface of an
article, or of two-dimensional features, such
as patterns, lines or color. In short, it has
something to do with aesthetics and designs.
Examples: Embroideries in fabrics, Unique
colors, Mini cooper car (Mr. Bean’s Car), Coca
Cola contour bottle, Rocking wheel chair, Angle
poise lamp and many more
What is Intellectual Property Office?
 The Intellectual Property Office of the
Philippines shortened as IPOPHL, is a government
agency attached to the Department of Trade and
Industry in charge of registration of intellectual
property and conflict resolution of intellectual property
rights in the Philippines.
 It was established under Republic Act No. 8293 also
known as Intellectual Property Code of the Philippines,
which took effect on January 1, 1998 during the
administration President Fidel V. Ramos.

Section 4.3. The term "Office" refers to the

Intellectual Property Office created by this Act. 4.4
The term "IPO Gazette" refers to the gazette published
by the Office under this Act. (n)
Intellectual Property Office
of the Philippines
 Functions of the Intellectual Property Office (IPO).
5.1. To administer and implement the State policies declared in this Act, there is hereby created the Intellectual Property
Office (IPO) which shall have the following functions:

a. Examine applications for grant of letters patent for inventions and register utility models and
industrial designs;
b. Examine applications for the registration of marks, geographic indication, integrated circuits;
c. Register technology transfer arrangements and settle disputes involving technology transfer
payments covered by the provisions of Part II, Chapter IX on Voluntary Licensing and develop and
implement strategies to promote and facilitate technology transfer;
d. Promote the use of patent information as a tool for technology development;
e. Publish regularly in its own publication the patents, marks, utility models and industrial designs, issued
and approved, and the technology transfer arrangements registered;
f. Administratively adjudicate contested proceedings affecting intellectual property rights; and
g. Coordinate with other government agencies and the private sector efforts to formulate and
implement plans and policies to strengthen the protection of intellectual property rights in the country.
 Section 5.2

 The Office shall have custody of all

records, books, drawings, specifications,
documents, and other papers and things
relating to intellectual property rights
applications filed with the Office.
 Prescriptive Period of Actions for Damages

CANCELLATION OF REGISTRATION
• A petition to cancel a registration of a mark under this act may be
filed with the Bureau of Legal Affairs by any person who believes
that he is or will be damaged by the registration of a mark.
PERIOD
General Rule: Within five (5) years from the date of the registration of
the mark under this Act.
What is jurisdiction ?
 In general, Jurisdiction was defined as the right, power, or authority
to administer justice through the hearing and resolution of conflicts
or determining the controversies.

What is jurisdiction under disputes?

Original Jurisdiction of Director General (Section 7.1-C)
 Over disputes relating to the terms of a license involving the
authors right to public performance of other communications of
his work
What is jurisdiction under disputes?
Original Jurisdiction of Bureau of Legal Affairs
 According to Section 10 of Republic Act 8293, popularly known as the
Intellectual Property Code of the Philippines , as modified, the Bureau of
Legal Affairs has administrative jurisdiction over:
a. opposition to the application for registration of marks;
b. cancellation of trademarks;
c. cancellation of patents, utility models, and industrial designs;
d. petitions for compulsory licensing of patents.
e. administrative complaints for violations of laws involving intellectual
property rights. Jurisdiction is limited to complaints where the total
damages claimed are not less than P200,000. Provisional remedies such as
temporary restraining order, preliminary injunction and attachment may be
granted in accordance with the Rules of Court.
What is jurisdiction under disputes?
Original Jurisdiction of Bureau of Legal Affairs
 According to Section 10 of Republic Act 8293, popularly known as the
Intellectual Property Code of the Philippines , as modified, the Bureau of
Legal Affairs has administrative jurisdiction over:
f. The Director of Legal Affairs has the power to hold and punish for
contempt all those who disregard orders or writs issued in the course of
the proceedings and after hearing impose administrative penalties. This
includes:
a. Infringement of trademark;
b. Unfair competition;
c. Infringement of patent, utility model and industrial design;
d. Infringement of copyright and related rights;
e. False designation of origin
 Meaning of Patent. Give examples.
 What are patentable inventions.
 Requirements
 Non-patentable inventions
 When is there right to patent?
 What is first to file rule?
Patent is a grant issued by the
government to an inventor, designer or
maker, the right to exclude others from
making, using or selling his invention,
design or utility model within the
country for a specific term, in exchange
of his patentable disclosure.
Example:
Ms. X, a botanist, saw a unique flower in her best
friend's garden during her vacation in her best
friend's hometown, and while she was there, she did
some experiment with it and came up with the idea
that the flower could be used as a perfume, but during
the process, she realized that the flower could also be
used as a spices and in the production of cosmetics.
Afterwards, she filed a patent application for her
invention and the government granted it, so she has a
period of 20 years to exercise her exclusive rights in
preventing others in commercially exploiting her
inventions and enjoy the protection of the law but upon
the expiration of the prescribed period her invention
will go to the public domain.
Patentable Inventions - Any technical
solution of a problem in any field of
human activity which is new, involves an
inventive step and is industrially
applicable shall be patentable. It may
be, or may relate to, a product, or
process, or an improvement of any of
the foregoing.
Requirements of Patent

1.Novelty
• An invention shall not be considered new if it forms
part of prior art.

Prior art:
a. Which has been made available to the public
anywhere in the world, before the filing date or
the priority date of the application claiming the
invention.
b. Those already covered by an earlier application
Examples:
- new products such as toys, appliances, tools ,medical
devices, pharmaceutical drugs
- software
-business methods

An invention must possess the essential elements of novelty,

originality and precedence,
and for the patentee to be entitled to the protection, the
invention must be new to the world.
2. Inventive Step

• An invention involves an inventive step

if, having regard to prior art, it is not
obvious to a person skilled in the art
at the time of the filing date or priority
date of the application claiming the
invention.
3. Industrial Applicability

• An invention that can be

produced and used in any
industry shall be industrially
applicable.
Non- Patentable Inventions

The following shall be excluded from patent protection:

a. Discoveries, scientific theories and mathematical
methods
b. Schemes, rules and methods of performing mental acts,
playing games or doing business and programs
Example
Imagine that you have invented a bicycle generator. Can you get a patent for your
invention?
• Yes, if your bicycle generator is completely new, meaning not known anywhere in the
world.
• It must also differ significantly from the generators that are known, and generate
electricity every time it is used.

Which aspects of your invention can be patentable?

Non- Patentable Inventions

c. Methods for treatment of the human or animal body by

surgery or therapy and diagnostic methods practiced on the
human or animal body. This provision shall not apply to
products and composition for use in any of these methods;

Note: Patent must not prevent doctors from curing and

preventing illnesses (Contrary to the nature of patent, which it
can give an inventor the right to exclude others from making or
using his invention)
Non- Patentable Inventions

d. Plant varieties or animal breeds or essentially biological process for the

production of plants or animals. This provision shall not apply to micro-organism
and non-biological and microbiological processes.

Determining whether a plant or animal is obtained by exclusively

biological
• examining whether there is a change in a heritable characteristic of the claimed
organism which is the result of a technical process exceeding mere crossing and
selection, i.e. not merely serving to enable or assist the performance of the
essentially biological process steps
• Thus plants whose DNA is modified through genetic engineering is patentable
because it is not merely a biological process and undergone a technical processes
while conventional breeding are not because it essentially undergone a
biological process.
Non- Patentable Inventions

e. Aesthetic creations;

The aesthetic effect itself is not patentable, neither in a product nor in a

process claim. Nevertheless, if an aesthetic effect is obtained by a technical
structure or other technical means, although the aesthetic effect itself is
not of a technical character, the means of obtaining it may be.

Note: technical aspects, e.g. a 'substrate’ or underlying substance or layer

such as a canvas or a cloth

Thus if someone forms of the image on the canvas or the pattern on the
cloth. If technical aspects are present in such an aesthetic creation, it is not
an aesthetic creation 'as such' and it is not excluded from patentability.

f. Anything which is contrary to public order or morality.

When is there a right to patent?

There is a right to patent if any

invention, innovation, creation, and the
likes falls under the category of
patentable inventions.
Who has the right to patent?

According to Section 28 of R.A

8293,“the right to patent belongs to the
inventor, his heirs, or assigns. When two
or more persons have jointly made an
invention, the right to a patent shall
belong to them jointly.”
What if there are multiple claimants for the
patent?
In such cases the Section 29 of R.A 8293
(First to File Rule) will apply, “if two or more persons
have made the invention separately and
independently of each other, the right to the patent
shall belong to the person who filed an application
for such invention, or where two or more applications
are filed for the same invention, to the applicant
who has the earliest filing date or, the earliest
priority date”.
Example:
Jose invented "product" A but decided not to registered to patent the product
so that it may be spread and used by public however during this time Juan also
invented "product A" but unlike Jose he applied for the patent of the said
product.

In this example no matter how early Jose finished the creation of "product A"
he wont acquire the right to patent unless he applies for one.

where two or more applications are filed for the same invention, to the
applicant who has the earliest filing date or, the earliest priority date.

Using the same example, if both Juan and Jose applies for patent at the 24th
of April then whoever is the earliest down to the last second shall obtain the
right to patent
Law on Patents
 SECTION 30. Inventions Created Pursuant
to a Commission.

30.1. The person who commissions the work shall own the
patent, unless otherwise provided in the contract.

30.2. In case the employee made the invention in the course

of his employment contract, the patent shall belong to:
 SECTION 30. Inventions Created Pursuant
to a Commission.

(a) The employee, if the inventive activity is not a part of his

regular duties even if the employee uses the time, facilities and
materials of the employer.
(b) The employer, if the invention is the result of the performance
of his regularly-assigned duties, unless there is an agreement,
express or implied, to the contrary. (n)
ILLUSTRATION:
Mr. X, an auditor working in an auditing firm,
during the slack season, had so much free time.
While he was in the office, using the firm's laptop
and other resources, he was able to develop a cure
for cancer. Who own the patent to the cure?
ANSWER:
Mr. X. Even if he used the resources of the firm,
the fact remains that developing a cure for cancer
is not part of his regular duties as an auditor. As
such, Mr. X, the employee, should be the owner of
the patent, unless there is an agreement to the
contrary.
 Inventor Right to a Patent
2 or more persons have jointly made The right to a patent shall belong to
an invention. them jointly.
2 or more persons have made the The right to the patent shall belong
invention separately and to the person who filed an
independently of each other. application.
2 or more applications are filed for The applicant who has the earliest
the same invention filing date or, the earliest priority
date.
 Inventor Right to a Patent
Inventions created pursuant to a The person who commissions the
Commission work shall own the patent, unless
otherwise provided in the contract.
The employee made the invention in The employee, if the inventive
the course of his employment activity is not a part of his regular
contract. duties even if he uses the time,
facilities and materials of the
employer.
The employer, if the invention is
the result of the performance of
his regularly-assigned duties, unless
there is an agreement, express or
implied, to the contrary.
Law on Patents
 SECTION 31. Right of Priority.
An application for patent filed by any person who has previously applied for
the same invention in another country which by treaty, convention, or law
affords similar privileges to Filipino citizens, shall be considered as filed as
of the date of filing the foreign application: Provided, That:
(a) the local application expressly claims priority;
(b) it is filed within twelve (12) months from the date the earliest foreign
application was filed; and
(c) a certified copy of the foreign application together with an English
translation is filed within six (6) months from the date of filing in the
Philippines. (Sec. 15, R.A. No. 165a)
 SECTION 31. Right of Priority.

Right of Priority/ Priority Claim:

- Application made locally when an earlier application is filed abroad.
Process:
1. A claim of priority based on an earlier filing date abroad.
2. A local application is filed within 12 months from priority date (application date of
foreign application for patent
3. Certified copy of priority application and English translation thereof within six (6)
months from filing date.

Priority date: date of filing of FOREIGN application for the same invention.
Law on Patents
 What are the rights acquired by the patentee?

The right to a patent belongs to the inventor, his heirs, or

assigns. When two (2) or more persons have jointly made an
invention, the right to a patent shall belong to them jointly
 What are the rights acquired by the patentee?

Patent Rights
-A patent shall confer on its owner the following exclusive rights:

1. Where the subject matter of a patent is a product, to restrain,

prohibit and prevent any unauthorized person or entity from making, using,
offering sale, selling or importing that product.

2. Where the subject matter of a patent is a process, to restrain,

prevent or prohibit any unauthorized person or entity from using the
process, and from manufacturing, dealing in, using, selling or offering sale,
or importing any product obtained directly or indirectly from such process.

3. The right to assign, or transfer by succession the patent, and to

conclude licensing products from the same.
Law on Patents
Term of patent

The term of patent shall be twenty (20) years from the

filing date of the application
Utility Model

It is a protection option, which is designed to protect

innovations that did not met all the requirements required
for standard patents application. It is a right given to the
holder for its exclusive use. It is given in exchange for
public disclosure of how the product works. It is entitled to
seven (7) years of protection from the date of filing with no
possibility of renewal.
 Patent Utility Model
The invention which has novel, inventive step The invention which has mainly a novelty, but
and industrial application can be protected. less or absents in inventive step can be
protected.
The term of protection is 20 years from the The term of protection is between 7 years
date of patent filing. from the date of filing.
The patent cost to obtain and maintain the The cost to obtain and maintain the utility
patent is expensive. model is cheaper.
It requires substantive examination of the It does not require substantive examination
patent application to validate patentability. procedure, as it does not require the
inventive step.
To obtain Patent protection, it requires more To obtain Utility model protection, it
time in the range of 3 years to 5 years. requires only less time in the range of 6
months to 1 year.
Patent protection is available to almost all of Utility model protection is available only in
the countries in the world some countries based on technology.
Conversion of the patent into the utility Conversion of utility model into a patent is
model is always possible. possible under certain circumstances.
Industrial Design

It is any composition of lines or colors or any three-

dimensional (3D) from, whether or not associated with lines
or colors. It should be in unique appearance to and can be a
pattern for an individual product. It shall be valid for five
(5) years from the filing date of the application. It may
be renewed for not more than two (2) consecutive periods
of five (5) years each, by paying the renewal fee.
Braun calculator, design created by Dieter rams co-opted by
Braun, inspired almost all of the calculators from its design.
Even the iPhone calculator was inspired by the Braun calculator
Law on Patents
 CAN PATENT BE CANCELLED?
- Yes
Grounds for cancellation of patent
Any interested party may petition to cancel any patent or any
claim or parts of a claim in an of the following grounds:
1. The invention is not new or patentable;
2. The patent does not disclose the invention in a manner
sufficiently clear and complete for it to be carried out by
any person skilled in the in the art;
3. Contrary to public order or morality;
4. Patent is found invalid in any action for
infringement; and
5. The patent includes matter outside the scope of
the disclosure contained in the application.
 Cancellation by person having right to the patent.
A person declared by final court order or decision as having the
right to the patent may, within three (3) months after the decision
has become final, seek cancellation of the patent, if one has
already been issued.
 Requirement of the petition.
The petition for cancellation shall be in writing, verified
by the petitioner or by any person in his behalf who knows the
facts, specify the grounds upon which it is based, include a
statement of the facts relied upon, and filed in triplicate with the
Bureau. Copies of printed publications or of patents of other
countries, and other supporting documents mentioned in the
petition shall be attached thereto, together with the translation
thereof in English, if not in the English language.
 Cancellation of the patent by the Committee.
If the Committee finds that a case for cancellation has
been proved, it shall order the patent or any specified claim or
claims thereof cancelled.
Law on Patents
LIMITATIONS OF PATENT RIGHTS
The owner of a patent has no right to prevent third parties
from making, using, offering for sale, selling or importing a
patented product in the following circumstances:
a. Using a patented product after it has been put on the
market in the Philippines by the owner of the product, or with
his express consent.
• In case of drugs or medicines, the said limitation applies
after a drug or medicine has been introduced in the Philippines or
anywhere else in the world by the patent owner, or by any party
authorized to use the invention. This allows parallel importation
for drugs and medicines.
• The right to import the drugs and medicines shall be
available to any government agency or any private third party.
b. Where the act is done privately and on a non-
commercial scale or for a non-commercial purpose

c. Exclusively for experimental use of the invention for

scientific purposes or educational purposes.
d. In the case of drugs and medicines, where the act
includes testing, using, making, or selling the invention including
any data related thereto, solely for purposes reasonably related to
the development and submission of information and issuance of
approvals by government regulatory agencies required under any
law of the Philippines or of another country that regulates the
manufacture, construction, use or sale of any product.
OTHER LIMITATIONS:

Right of prior user

Person other than the applicant, who in good faith, started
using the invention in the Philippines, or undertaken
serious preparation to use the same, before the filing date
or priority date of the application shall have the right to
continue the use thereof, but this right shall only be
transferred or assigned further with his enterprise or
business.
Example:
Jay invented a charger that can charge a cellphone through the
use of noise. The applied for and was granted a patent on his
device, effective within the Philippines. But it turns out, a year
before the grant of Jay’s patent, Ken also invented similar device
which he used in his cellphone business in Cebu. Upon knowing,
Jay then filed an injunctive suit against Ken to stop him from
using the device on the ground of patent infringement. Will the
suit prosper?
Answer:

NO, since Ken is a prior user in good faith.

Use by government
A government agency or third person authorized by the
Government may exploit the invention even without agreement
of the patent owner where:

a. The public interest, in particular, national security, nutrition,

health or the development of other sectors, as determined by the
appropriate agency of the government, so requires; or

b. A judicial or administrative body has determined that the

manner of exploitation, by the owner of the patent or his licensee
is anti-competitive; or
c. In the case of drugs and medicines, there is a national
emergency or other circumstance of extreme urgency requiring
the use of the invention; or

d. In the case of drugs and medicines, there is public non-

commercial use of the patent by the patentee, without
satisfactory reason; or

e. In the case of drugs and medicines, the demand for the

patented article in the Philippines is not being met to adequate
extent and on reasonable terms, as determined by the Secretary
of the Department of Health.
What is trademark? Give examples.
Differentiate service mark vs collective mark.
Differentiate trade names from trade dress.
How are marks acquired?
Duration if registration of trademark.
What are the marks that cannot be registered
(non-registrable)?
Can trademark registrations be cancelled?
What will happen if you don’t use the mark
you registered?
Doctrine of Secondary Meaning.
What constitutes infringement.
Dominancy Test v. Holistic Test (test of
trademark infringement)
How is infringement differentiated from unfair
competition?
I. What is trademark? Give examples.
TRADEMARK

“Mark” means any visible sign capable of

distinguishing the goods (trademark) or services (service
mark) of an enterprise and shall include a stamped or
marked container of goods.

Requirements for a mark to be registered:

• visible sign
• capable of distinguishing the one’s goods and
services from another
Visible sign

• words • colors
• letters • logos
• numerals • three dimensional
• figures/pictures • objects
• shapes • combinations
Examples of Trademark:

1 Kodak 2 Apple

Fanciful Trademarks Arbitrary Trademark

• Made-up words which are • Words that have a real,
invented to be used as a common meaning but they are
trademark name completely unrelated to the
product or service
Examples of Trademark:

3 Microsoft 4 Sharp

Suggestive Trademarks Descriptive Trademarks

• Named after a characteristic • Description of the product
of the product or service or service

BAND-AID Generic Trademarks

5
• Cannot be protected as they
are simply a generic description
of the product or service
 II. Differentiate Service Mark vs Collective Mark
SERVICE MARK
Definition A service mark is a brand
name or logo that identifies
the provider of a service.
COLLECTIVE MARK
"Collective mark" means any
visible sign designated as such
in the application for
registration and capable of
distinguishing the origin or any
other common characteristic,
including the quality of goods
or services of different
enterprises which use the sign
under the control of the
registered owner of the
collective mark.
 II. Differentiate Service Mark vs Collective Mark
SERVICE MARK COLLECTIVE MARK

Type of Used to identify the services Used by members of a

Marks or intangible activities of a cooperative, association, or
Covered business, rather than a other collective group.
business’s physical products.

Western Union HALAL

Example
III. Differentiate trade names from trade dress.
TRADEMARK
words, names, slogans, phrases or
logos that serve as source indicators of
products and services.
main requirement to qualify as a
trademark is distinguishing products
and services from others and avoiding
a likelihood of confusion.
When the term service mark is used it
is merely being more specific to
reference that the trademark is used in
relation to services rather than goods.
TRADE DRESS
The design of a building, shapes,
patterns and even the color of
packaging may be regarded as trade
dress.
To qualify for this protection, though,
the design must be distinctive and
serve no functional purpose so it must
be ornamental only.
III. Differentiate trade names from trade dress.

TRADEMARK TRADE DRESS

 The unique shape of a Coca-Cola
 Lines running down the side of K-Swiss shoes.
IV. How are marks A. The rights in a mark
acquired? shall be acquired
through registration
 A trademark registration is
valid for ten (10) years. A
trademark may be renewed
V. Duration of
for periods of ten (10)
registration of years after the expiration of
trademark the original term, upon
payment of the prescribed
fee and upon filing of a
petition for renewal of
registration.
VI. What are the marks that cannot be registered? (non-registrable)
Sec. 123 Registrability. –
123. 1. A mark that cannot be registered if it:

Consists of immoral, deceptive or scandalous matter, or matter may

a. disparage or falsely suggest a connection with persons, or dead,
institutions, beliefs, or national symbols, or bring them tempt or
disrepute:
Consists of the flag or coat of arms or other insignia of the Philippines
b. or any of its political subdivisions, or of any foreign nation, or any
simulation thereof;

Consists of a name, portrait or signature identifying a particular

c. individual except by his written consent, or the name, signature, or
portrait of a deceased President of the Philippines, during the life of
his widow, if any, except by written consent of the widow;
VI. What are the marks that cannot be registered? (non-registrable)
Sec. 123 Registrability. –
123. 1. A mark that cannot be registered if it:

d. Generic signs;

Signs that are customary or usual to designate the goods/services in

e. everyday language or in bona fide and established trade practice;
Signs that designate the kind, quality, quantity, intended purpose,
f. value, geographical origin, time of production of the goods or
rendering of the services, or other characteristics of the
goods/services;

g. Shapes that may be necessitated by technical factors or by the nature

of the goods themselves or factors that affect their intrinsic value;
VI. What are the marks that cannot be registered? (non-registrable)
Sec. 123 Registrability. –
123. 1. A mark that cannot be registered if it:

h. Color alone;

Signs that mislead the public, particularly as to the nature, quality,

i. characteristics or geographical origin of the goods/services; or

j. Signs contrary to public order or morality.

Law on Trademarks
Can Trademark Registration be cancelled? Yes

CANCELLATION OF REGISTRATION
 a petition to cancel a registration
 a mark under this act may be filed with the Bureau of Legal Affairs by any person
who believes that he is or will be damaged by the registration of a mark.
PERIOD:
GENERAL RULE: Within five (5) years from the date of the registration of the
trademark under this Act.
EXCEPTIONS: ILLUSTRATION
a. At any time:
Aspirin, yo-yos, and cellophane are examples of
goods that became generic through consumer
i. If the registered mark becomes misuse of the trademarks to refer to these
the generic name for the goods or products.
services or a portion for which it is Their owners Bayer AG, Duncan Toys Co., and
registered Dupont Cellophane Co. lost their trademark
rights in spite of their efforts to police the use of
the marks.
i. If the registered mark becomes the generic name for the goods or
services or a portion for which it is registered

a generic term cannot become a

trademark, a trademark can become
generic.

the more successful the trademark owner, the

more likely it is that a trademark will become
generic, causing the trademark owner to lose
its exclusive right to use and protect the
trademark.
 CANCELLATION OF REGISTRATION:

EXCEPTIONS:
a. At any time:
ILLUSTRATION

On Sept. 3, 2019, A Inc. filed with the

Intellectual Property Office, a trademark application for
the use of "Coffee Match”. Consequently, after 4 years A
ii. It has been abandoned, Inc. found out that there is a 3rd party opposing the
application alleging a likelihood of confusion between the
applicant's mark and his registered trademark.
So A Inc. decided to abandon the application.
However, this will lead to the cancellation of registration
at any time.
 CANCELLATION OF REGISTRATION

EXCEPTIONS:
a. At any time: ILLUSTRATION

On Sept. 9, 2020, Ben Inc. filed with the

Intellectual Property Office, a trademark application for
iii. Its registration was the use of “Apple Cake”. Ben Inc. imitated the trademark
obtained fraudulently or logo of Apple Technology Company without the latter's
contrary to the provisions consent.
So, Ben Inc.’s application will lead to the cancellation of
of this Act,
their registration at any time.

Consequently, if Ben Inc. knowingly makes a false, material

representation of fact in connection with their trademark
application it will also result in the cancellation of their
registration at any time.
 CANCELLATION OF REGISTRATION
EXCEPTIONS:
a. At any time:
iv. If the registered mark
is being used by, or with the
permission of the registrant
so as to misrepresent the
source of the goods or
services on or in connection
with which the mark is used.
ILLUSTRATION
On Sept. 23, 2020, Sumsong Inc. filed with the
Intellectual Property Office, a trademark application for
the use of “Sumsong”. Samsung Inc. permitted Sumsong
Inc. to have that trademark. However, their product is
also similar to “Samsung” which is the smartphones,
tablets and etc. so this will result in misrepresentation of
the goods and services they are both offering in the
public.
So, Sumsong Inc.’s application will lead to the cancellation
of their registration at any time.
 CANCELLATION OF REGISTRATION
EXCEPTIONS:
b. At any time, if the registered owner of the mark without legitimate reason fails to
use the mark within the Philippines, or to cause it to be used in the Philippines by virtue
of a license during an uninterrupted period of three (3) years or longer.

ILLUSTRATION

On Oct. 3, 2020, M Inc. filed with the Intellectual Property Office, a

trademark application for the use of “McSarap”. Consequently, after registration
M. Inc didn’t use the “McSarap” trademark for 3 consecutive years, so there is a
presumption of abandonment. M Inc. needs to show evidence of use during the
three-year period or that despite the three years of nonuse, there was intent to
resume use of the mark within a reasonably foreseeable time. If M Inc. failed to
do so this will lead to the cancellation of registration at any time.
 CANCELLATION OF REGISTRATION
EXCEPTIONS:
c. Notwithstanding the foregoing provisions, the court or the administrative agency
vested with jurisdiction to hear and adjudicate any action to enforce the rights to a
registered mark shall likewise exercise jurisdiction to determine whether the registration
of said mark may be cancelled in accordance with this Act.

Sec. 154.
- If the Bureau of Legal Affairs finds that a case for cancellation has been made out, it shall
order the cancellation of the registration.
- When the order or judgment becomes final, any right conferred by such registration upon
the registrant of any person in the interest of record shall terminate. Notice of cancellation
shall be published in the IPO Gazette
NOTE:
- The cancellation of registration of a trademark has the effect of depriving the
registrant of protection from infringement from the moment judgment or order of
cancellation has become final.
Law on Trademarks
 NON-USE OF A MARK WHEN EXCUSED
a. Non-use of a mark may be excused
if caused by circumstances arising
independently of the will of the
trademark owner.
- Lack of funds shall not excuse the
non-use of a mark.
c. The use of a mark in connection with
one or more of the goods or services
belonging to the class in respect of
which the mark is registered shall
prevent its cancellation or removal in
respect of all other goods or services
of the same class.
b. The use of the mark in a form
different from the form in which it
is registered, which does not alter its
distinctive character, shall not be
ground for cancellation or removal of
the mark and shall not diminish the
protection granted to the mark.
d. The use of a mark by a company
related to the registrant or applicant
shall inure to the latter's benefit, and
such use shall not affect the validity of
such mark or of its registration:
Provided, that such mark is not used in
such manner as to deceive the public.
 NON-USE OF A MARK WHEN EXCUSED
DECLARATION OF NON-USE
In lieu of a DAU, an applicant or registrant, when warranted shall file a Declaration of
Non-Use (DNU) indicating the ground/s and justification therefor.
Non-use of a mark may be excused in the following cases under Letter A in the
preceding slide:
(a) where the applicant or registrant is prohibited from using the mark in commerce
because of a requirement imposed by another government agency prior to putting the
goods on the market or rendering services;
(b) where a restraining order or injunction was issued by the Bureau of Legal Affairs,
the courts, or quasi-judicial bodies prohibiting the use of the mark, or
(c) where the mark is the subject of an opposition or cancellation case

FORM AND CONTENTS OF DECLARATION OF NON-USE

 The DNU shall be under oath and shall clearly state the facts prohibiting the actual
use of the mark in commerce.
 The corresponding fee for all the classes must also be paid upon filing the declaration.
 NON-USE OF A MARK WHEN EXCUSED

ILLUSTRATION

On Jan. 19, 2020, C Inc. filed with the Intellectual Property Office, a
trademark application for the use of “Candelicious” as a service mark. Consequently,
after registration C. Inc didn’t use the “Candelicious” for the reason that the mark is
subject to an opposition or cancellation case. So non-use of a mark may be excused in
this case.
However, if the non-use of a mark is due to the lack of funds of C. Inc, this will not be
excused and this will result in the cancellation of their registration.

In case C Inc., decided to use their mark as a product mark also. It will be excused for
the cancellation of registration as long as it does not alter its distinctive character or
something that has a special quality or feature which makes it easily recognizable by
the consumers and different from other things of the same type.
Law on Trademarks
 SECONDARY MEANING
 means that a word or phrase originally incapable of
executive appropriation with reference to an article in
the market (because it is geographically or otherwise
descriptive) might nevertheless have been used for so
long and so exclusively by one producer with reference
to his article that in the trade and to that branch of the
purchasing public the word or phrase has come to mean
that the article was his property.
 SECONDARY MEANING

ILLUSTRATION

Apple, we all know that Apple has a

primary meaning, it is a fruit but many people
recognize apple as a brand of computer, mobile
phones, watch, laptop, etc. And that is the
secondary doctrine.
Law on Trademarks
 TRADEMARK INFRINGEMENT

Any person who shall, without the consent of the owner of the registered mark:

1. Use in the commerce any reproduction, counterfeit, copy, or

colorable imitation of a registered mark or the same container or
a dominant feature thereof in connection with the sale, offering
for sale, distribution, advertising of any goods or services
including other preparatory steps necessary to carry out the sale
of any goods or services on or in connection with such use is likely
to cause confusion, or to cause mistake, or to deceive or.
 TRADEMARK INFRINGEMENT
Any person who shall, without the consent of the owner of the registered mark:

2. Reproduce, counterfeit, copy or colorably imitate a registered mark or a

dominant feature thereof and apply such reproduction, counterfeit, copy, or
colorable imitation to labels, signs, prints, packages, wrappers, receptacles,
or advertisements intended to be used in commerce upon or in connection
with the sale, offering for sale, distribution, or advertising of goods or
services on or in connection with which such use is likely to cause confusion,
or to cause mistake, or to deceive, shall be liable in a civil action for
infringement by the registrant for remedies hereinafter set forth:
 Provided, that the infringement takes place at the moment of any of the
acts stated in Subsection 155.1 of this subsection are committed
regardless of whether there is the actual sale of goods or services using
the infringing material.
 TRADEMARK INFRINGEMENT

ILLUSTRATION

When Mang Ando a fast food resto in

Manila city is using an imitated trademark of
Mang Inasal without the latter's consent. Mang
Ando copies the colors, font, and even the style
of the latter's trademark.
 TRADEMARK INFRINGEMENT
 When a mark intends to deceive or cause confusion to the public, there is
an infringement and to be able to find if there is confusion the colorable
imitation must be present.
 There is confusing similarity if there is colorable imitation.

COLORABLE IMITATION

The colorable imitation means that it is there is a

similarity in the words, sound, meaning, special
arrangement, or general appearance of one mark to
another that will mislead an average buyer in their
ordinary purchase.
Illustration of Colorable Imitation

Abibas shoes Adidas

In the illustration above, you can see that there is a product Abibas shoes is having such
resemblance to the original Adidas logo in which there is an imitation that can cause a
buyer to be deceived to purchase because the buyer having in mind that they thought
they bought Adidas but looking closely it is Abibas.
 TRADEMARK INFRINGEMENT
LIKELIHOOD OF CONFUSION
 It is altering or changing the mark with a similar appearance that
results in confusion in the trade or deceives the purchaser, especially
the buyer of the original company creating that product.

TWO TYPES OF CONFUSION

1. Confusion of goods- As to goods in which it is purchasing one
product in belief that the buyer is purchasing the other product.

2. Confusion of business- As to source or origin of such goods in which

although different products the buyer thought that they are
related to each other (two trademarks) but in reality it is not.
 TRADEMARK INFRINGEMENT
CONFUSION OF GOODS

ILLUSTRATION

The Jollibee, a fast food chain business produces products,

chicken products. There is a similar name of a business,
having the same red store named Jellibee that also produces
almost same chicken products but at a cheaper price and the
taste is slightly different from the Jollibee products.
Because of the buyer’s confusion on the appearance of the
store and its mark they mistakenly believed that it is also
one of the Jollibee products but in reality it is Jellibee.
 TRADEMARK INFRINGEMENT
CONFUSION OF BUSINESS

ILLUSTRATION

The Oppo Time is confusingly deceptive on the company

Oppo that is registered mark for the manufacturing the
smartphones while the Oppo Time manufactures watches. In
which if we compare it, they have a different products but
the public will be deceived that they will think that Oppo
(registered mark) is selling now watches. They think that
Oppo and Oppo Time business are likely the same that will
affect on the part of the earlier registered mark, the Oppo.
Law on Trademarks
 TEST OF TRADEMARK INFRINGEMENT
 To be able to know if there is a colorful imitation and likelihood of confusion, you
will use the two tests.
These are two tests to determine namely the Dominancy test and Holistic Test:

DOMINANCY TEST HOLISTIC TEST

Focuses on the similarity of the prevalent or
dominant features
Comparisons on main, essentials, or dominant
features of another of two trademarks.
Question: Whether the use of the mark involved
is likely to cause confusion or mistake in the mind
of the public or deceive purchasers through
dominant features.
Entirety marks in question
Comparison of words, visual, aural, and
connotative comparisons and overall impressions
between all of the two trademarks. Trademarks
in their entirety, labels or hang tags.
Question: Whether the use of mark entirety
creates a confusion in the public in all aspects.
 TEST OF TRADEMARK INFRINGEMENT

DOMINANCY TEST:
ILLUSTRATION

Jollibee is the owner of a family of marks for “Yum burger” sued

respondent LC BigBark for infringement and unfair competition for
using “Yum sandwich”. The Yum burgers are the product of beef
burgers that caters middle and upper customers while the Yum
sandwich is for low-end customers. Is LC BigBark guilty of
infringement?
 TEST OF TRADEMARK INFRINGEMENT

DOMINANCY TEST:
ILLUSTRATION

Answer: Yes, Dominancy Test was applied LC BigBark burgers cater mainly
to the low-income group while petitioners “Jollibee” burgers cater mainly
to the middle and upper income groups. Although there is a difference in
targeted groups, even if this is true, the likelihood of confusion of
business remains, since low-income group might be led to believe that the
Yum sandwich are the low-end beef burgers marketed by petitioners.
After all, petitioners have the exclusive right to use the “Yum burger”
mark. On the other hand, respondents would benefit by associating their
low-end beef burgers through the use of the “Yum sandwich” mark with the
petitioners’ high end “Yum burger” beef burger leading to likelihood of
confusion in the identity of business.
 TEST OF TRADEMARK INFRINGEMENT

HOLISTIC TEST:
ILLUSTRATION

Heinz sauce (authorized to manufacture and sell tomato

ketchup products) sued FC Heinz sauce for infringement
and unfair competition, among others, for using a logo,
packaging, and label tags similar to Heinz. Can FC Heinz
sauce be held guilty of infringement on based on the
similarity?
 TEST OF TRADEMARK INFRINGEMENT

HOLISTIC TEST:
ILLUSTRATION

Answer: Yes. The totality test was applied. Seeing the mostly same
name, logo, packaging and its label, there must be a test in all of its
aspects not only on just the Heinz name but on the prices, packaging
and all other aspects of the product FC Heinz sauce to the original
Heinz sauce. A number of courts have held that to determine
whether trademarks have been infringed, we must consider the mark
as a whole and not as dissected. The court should be guided by its
first impression, for a buyer acts quickly and is governed by a casual
glance.
 TEST OF TRADEMARK INFRINGEMENT

HOLISTIC TEST:
ILLUSTRATION

Answer: Yes. The totality test was applied. Seeing the mostly same
name, logo, packaging and its label, there must be a test in all of its
aspects not only on just the Heinz name but on the prices, packaging
and all other aspects of the product FC Heinz sauce to the original
Heinz sauce. A number of courts have held that to determine
whether trademarks have been infringed, we must consider the mark
as a whole and not as dissected. The court should be guided by its
first impression, for a buyer acts quickly and is governed by a casual
glance.
Law on Trademarks
 TRADEMARK INFRINGEMENT
Using an authorized trademark or a service mark that will lead to the
confusion of the public, deception or having a misunderstanding about
the actual or the earlier registered mark.
Part from the elements are the trademark being infringed is
registered, reproduced, counterfeited, colorable imitated having an
unauthorized selling which leads to confusion to the public.

It uses two tests to know if there will be a trademark

infringement:
1. Dominancy Test- Dominant features
2. Holistic Test- Overall features are being tested to know if there is
a confusion.
 UNFAIR COMPETITION
 It is defined as the passing off upon the public the goods or business of
one person as the goods or business of another with the result of deceiving
the public.

Note:
 Passing off means that through imitating devices on the general
appearance of a certain goods turn their prospective purchaser a mislead
thinking into buying his product under the impression that they are buying
that of believing of buying his competitor products.
 It results in giving a competitor’s appearance rather than the
company/business itself with the intention of deceiving the public.

Penalty imprisonment: 2 to 5 years Fine: 50,000 to 200,000

 UNFAIR COMPETITION
True test of Unfair Competition
 The acts are intended to deceive the original buyer making his purchases
under the ordinary conditions which in ordinary buying in the market.

Key elements:
1. Deception- the action of intending someone to believe that it is
true that they are buying that they really buy the competitor’s
product but it is not true. It can be similarity of marks, packaging,
or presentation of goods.
2. Passing off- doing the imitating devices.
3. Fraud upon the public- the intention of giving a false or
misrepresentation of the product you are offering because of the
deceptive imitating devices.
 UNFAIR COMPETITION
Essential elements:
1. Confusing similarity in the general appearance of the goods.
2. Intent to deceive the public and defraud competitors.

Who are guilty of unfair competition:

A. Any person that sells his goods giving a general appearance of goods
of another dealer or the competitor as if it was theirs making the public
to deceive or influence and defraud of purchasing it.
B. A person through a device or through an artful skill of deceiving,
induces the false belief that the person is offering services of another
who is identified that service in the mind of the public.
C. Any person who shall make a false statement in the course of trade
and in contrary in good faith to discredit the goods, business, or services
of another.
ILLUSTRATION
The act of manufacturing a soft drink bearing the design of a Choca-cola in similar in
design in the Coca-cola which is also selling soft drinks but the difference is there is a
letter h in the Coca-cola design. In which the products of Choca-cola deceived buyers in
purchasing it because of its artful deceiving thinking that it is the product Coca-cola.
The Choca-cola also sells a cheaper price which results to a loss on the part of Coca-
cola because they were selling on a high standard market price. Part from that, they
discredit the Coca-cola products because of price and spreading false information on
the other business, Coca-cola. Thus, if that happens there is a unfair competition.

Choca-Cola Logo Coca-Cola Logo

COMPARISONS

INFRINGEMENT UNFAIR COMPETITION

The law is more limited but recognizes a

The law is broader and more inclusive.
more exclusive right from trademark.

Passing off one’s goods as those of

Unauthorized use of the trademark
another.
Fraudulent intent is unnecessary Fraudulent intent is necessary

Prior registration of a trademark is a

Not necessary in registration
prerequisite to the action
 What is copyright? Examples.
 What are the works protected by copyright?
 Original Work v. Derivative Works
 What are the works not protected?
 What are the rights of an author?
 Ownership of copyright
 Limitations to the rights on copyright
o It is the right over literary and artistic works which are
original intellectual creations in the literary and artistic
domain protected from the moment of creation.
o A right granted by statute to the author or originator
of literary, scholarly, scientific, or artistic productions
including computer programs.
o It relates to artistic creations, such as books, music,
paintings, and sculptures, films and technology-based
works as well as to the main act which, in respect of
literary and artistic creations, may be made only by the
author or his authorization.
 What is copyright? Examples.
 What are the works protected by copyright?
 Original Work v. Derivative Works
 What are the works not protected?
 What are the rights of an author?
 Ownership of copyright
 Limitations to the rights on copyright
 REQUISITES OF A COPYRIGHTABLE WORK
1. Originality – Does not mean novelty. It simply means that the
work owes its origin existence to the author.
2. Expression – A work must be embodied in a medium
sufficiently permanent or stable to permit it to be perceived,
reproduced, or otherwise communicated for a period of more
than transitory duration.
 The works protected by copyright can be group into two;
ORIGINAL WORK and DERIVATIVE WORKS
ORIGINAL WORK
 It is an Original Intellectual Creation by an author, or the original creator, or a
piece of work for which they are the ones who are entitled to copyrights.
 Copyright on original works of authorship is automatic, and registration is not
required for a work to be protected; protection attaches immediately when the
work is completed.
ORIGINAL WORK
 Literary and artistic works, hereinafter referred to as “works”, are original intellectual
creations in the literary and artistic domain protected from the moment of their creation
and shall include in particular:
1. Books, pamphlets, articles and other writings
NOTE: Works are protected by the sole fact of their creation, irrespective of their mode
or form of expression, as well as of their content, quality and purpose
2. Periodicals and newspapers
NOTE: The submission of a literary, photographic or artistic work to a newspaper, magazine
or periodical for publication shall constitute only a license to make a single publication unless a
greater right is expressly granted.
ORIGINAL WORK
3. Letters
NOTE:
 Letters and other private communications in writing are owned by the person to whom they
are addressed and delivered, but they cannot be published or disseminated without the
consent of the writer or his heirs (Civil Code, Article 723)
 The letter writer is generally the copyright owner. He may restrain the publication of
copies of his letter on the ground of his lack of consent. The letter writer does not publish
the letter by merely sending the letter to his correspondent unless it was sent to a
newspaper with intent of publication.
ORIGINAL WORK
4. Lectures, sermons, addresses, dissertations prepared for oral delivery, whether
or not reduced in writing or other material form.
NOTE: Lectures may be copyrightable provided it is written.
5. Dramatic or dramatico-musical compositions; choreographic works or
entertainment in dumb shows;
6. Musical compositions, with or without words
7. Works of drawing, painting, architecture, sculpture, engraving, lithography or
other works of art; models or designs for works of art
8. Drawings or plastic works of a scientific or technical character
ORIGINAL WORK
9. Original ornamental designs or models for articles of manufacture, whether or
not registrable as an industrial design, and other works of applied art.
NOTE: Work of Applied Art
• An artistic creation with utilitarian functions or incorporated in a useful article,
whether made by hand or produce on an industrial scale. It includes all original
pictorials, graphics, and sculptural works that are intended to be or have been
embodied in useful article.
10. Photographic works including works produced by a process analogous to
photography; lantern slides.
ORIGINAL WORK
11. Illustrations, maps, plans, sketches, charts and three-dimensional works relative
to geography, topography, architecture or science.
NOTE: What is copyrightable in a map is the selection, arrangement, and
presentation of the component parts.
12. Audiovisual works and cinematographic works and works produced by a process
analogous to cinematography or any process for making audio-visual recordings;
13. Pictorial illustrations and advertisements
ORIGINAL WORK
14. Computer programs
NOTE: Computer Programs
• Set of instructions expressed in words, codes, schemes or in any other form,
which is capable when incorporated in a medium that the computer can read, of
causing the computer to perform or achieve a particular task or result.
15. Other literary, scholarly, scientific and artistic works
 DERIVATIVE WORK
 A derivative work is as work based on or derived from one or more already
existing works.
 Also known as a “new version”, a derivative work is copyrightable if it includes
what copyright law calls an “original work of authorship”. Any work in which the
editorial, revisions, annotations, elaborations, or modifications represent, as a
whole, an original work of authorship could be considered a derivative work or a
new version.
 DERIVATIVE WORK
 Derivative works shall be protected as new works: Provided, that such new work
shall not:
1. Affect the force of any subsisting copyright upon the original works employed or
any part thereof, or
2. Be construed to imply any right to such use of the original works, or to secure or
extend copyright in such original works
 The copyright protection only covers the additions, changes, or other new
material appearing for the first time in the work. It does not extend to pre-
existing material and does not imply a copyright in that material.
 DERIVATIVE WORK
A. Dramatizations, translations, adaptations, abridgments, arrangements, and other
alterations of literary or artistic works; and
B. (COMPILATION RIGHTS) Collections of literary, scholarly or artistic works,
and compilations of data and other materials which are original by reason of the
selection or coordination or arrangement of their contents.
Example:
Adaptations on Netflix such as; “World of a Married Couple” which is originated
from South Korea and adopted by the Philippines and titled “The Broken Marriage
Vow”.
 What is copyright? Examples.
 What are the works protected by copyright?
 Original Work v. Derivative Works
 What are the works not protected?
 What are the rights of an author?
 Ownership of copyright
 Limitations to the rights on copyright
No protection shall extend, under this law, to:
(a) Any idea, procedure, system, method or operation, concept, principle,
discovery or mere data as such, even if they are expressed, explained,
illustrated or embodied in a work;
(b) News of the day and other miscellaneous facts having the character of
mere items of press information; or
(c) Any official text of a legislative, administrative or legal nature, as well
as any official translation thereof.
No protection shall extend, under this law, to:
(d) Any work of the government of the Philippines
Prior approval of the government agency or office wherein the work is
created shall be necessary for exploitation of such work for profit.
No prior approval or conditions shall be required for the use for any purpose
of statutes, rules and regulations, and speeches, lectures, sermons, addresses,
and dissertations, pronounced, read or rendered in courts of justice, before
administrative agencies, in deliberative assemblies and in meetings of public
character.
No protection shall extend, under this law, to:
(e) Pleadings and decisions of courts and tribunals
This pertains to the “original decisions” and not the SCRA published volumes since
these are protected under derivative works
 What is copyright? Examples.
 What are the works protected by copyright?
 Original Work v. Derivative Works
 What are the works not protected?
 What are the rights of an author?
 Ownership of copyright
 Limitations to the rights on copyright
ECONOMICAL RIGHTS
 Shall consist of the exclusive right to carry out, authorize or prevent the following acts:
1. Reproduction of the work or substantial portion of the work;
2.Dramatization, translation, adaptation, abridgment, arrangement or other
transformation of the work:
3. The first public distribution of the original and each copy of the work by
sale or other forms of transfer of ownership;
4. Public performance of the work
ECONOMICAL RIGHTS
 Shall consist of the exclusive right to carry out, authorize or prevent the following acts:
5. Rental of the original or a copy of an audiovisual or cinematographic work, a work
embodied in a sound recording, a computer program, a compilation of data and other
materials or a musical work in graphic form, irrespective of the ownership of the
original or the copy which is the subject of the rental;
6. Public display of the original or a copy of the work;
7. Other communication to the public of the work
MORAL RIGHTS
 The author of a work shall, independently of the economic rights in Section 177 or the
grant of an assignment or license with respect to such right, have the right:
1. To require that the authorship of the works be attributed to him, in particular, the right that
his name, as far as practicable, be indicated in a prominent way on the copies, and in connection
with the public use of his work;
2. To make any alterations of his work prior to, or to withhold it from publication;
3. To object to any distortion, mutilation or other modification of, or other derogatory action in
relation to, his work which would be prejudicial to his honor or reputation; and
4.To restrain the use of his name with respect to any work not of his own creation or in a
distorted version of his work.
MORAL RIGHTS - Breach of Contract.
 An author cannot be compelled to perform his contract to create a work or for the
publication of his work already in existence. However, he may be held liable for damages
for breach of such contact.
MORAL RIGHTS - Waiver of Moral Rights
 An author may waive his rights mentioned in Section 193 by a written instrument, but no
such waiver shall be valid where its effects is to permit another:
1. To use the name of the author, or the title of his work, or otherwise to make use of
his reputation with respect to any version or adaptation of his work which, because of
alterations therein, would substantially tend to injure the literary or artistic reputation
of another author; or
2. To use the name of the author with respect to a work he did not create
TERM OF MORAL RIGHTS
 The rights of an author under this chapter shall last during the lifetime of the author
and for fifty (50) years after his death and shall not be assignable or subject to
license.
 The person or persons to be charged with the posthumous enforcement of these rights
shall be named in writing to be filed with the National Library. In default of such
person or persons, such enforcement shall devolve upon either the author’s heirs, and in
default of the heirs, the Director of the National Library.
 POSTHUMOUS WORK means a work made accessible to the public after the death of its
author.
DURATION OF COPYRIGHT
 What is copyright? Examples.
 What are the works protected by copyright?
 Original Work v. Derivative Works
 What are the works not protected?
 What are the rights of an author?
 Ownership of copyright
 Limitations to the rights on copyright
Copyright ownership shall be governed by the following rules;
Copyright shall belong to the author of the
ORIGINAL CREATOR
work
Co-authors shall be the original owners of the
copyright and in the absence of agreement,
their rights shall be governed by the rules on
co-ownership.
JOINT AUTHORSHIP
If a work consists of identifiable parts that
can be used separately: the author of each
part shall be the original owner of the
copyright in the part that he has created.
Copyright ownership shall be governed by the following rules;
The employee, if the creation of the object
of copyright is not a part of his regular duties.
COURSE OF EMPLOYMENT
The employer, if the work is the result of the
performance of his regularly-assigned duties.
The person who so commissioned the work
shall have ownership of the work.
COMMISSIONED WORK
The copyright thereto shall remain with the
creator, unless there is a written stipulation
to the contrary.
Copyright ownership shall be governed by the following rules;
Copyright shall belong to the writer subject to
LETTERS
the provisions of Article 723 of the civil code.
The copyright shall belong to:
a. The producer
b. The author of the scenario
c. The composer of the music
d. The film director
AUDIOVISUAL WORK e. The author of the work so adapted
Subject to stipulations among the creators.
For the exhibition, the producer shall
exercise the copyright
Copyright ownership shall be governed by the following rules;
The publishers shall be deemed to represent the
authors of articles and other writings published
without the names of the authors or under
ANONYMOUS AND pseudonyms, unless—
PSEUDONYMOUS 1. the contrary appears, or
WORKS 2. the pseudonyms or adopted name leaves no doubt
as to the author’s identity, or
3. if the author of the anonymous works discloses his
identity.
CONTRIBUTION TO When an author contributes to a collective work, his
COLLECTIVE right to have his contribution attributed to him is
WORK deemed waived unless he expressly reserves it.
 RIGHT OF ASSIGNEE
Within the scope of the assignment or license, the assignee or licensee is entitled to
all the rights and remedies which the assignor or licensor had with respect to the
copyright
 RIGHT OF OWNER TO ACCOUNTING
The copyright owner has the right to regular statement of accounts from the
assignee or the licensee with regard to assigned or licensed work.
 CO-OWNED TO ACCOUNTING
If two (2) or more persons jointly own a copyright or any part thereof, neither of the
owners shall be entitled to grant licenses without the prior written consent of the
other owner or owners.
 COPYRIGHT AND THE MATERIAL OBJECT
The copyright is distinct from the property in the material object subject to it.
Consequently, the transfer assignment or licensing of the copyright shall not itself
constitute a transfer of the material object. Nor shall a transfer or assignment of
the sole copy or of one or several copies of the work imply transfer assignment or
licensing of the copyright.
 FILLING OF ASSIGNMENT OF LICENSE
An assignment or exclusive license may be filed in duplicate with the National Library
upon payment of the prescribed fee for registration in books and records kept for
the purpose. Upon recording, a copy of the instrument shall be, returned to the
sender with a notation of the fact of record. Notice of the record shall be published
in the IPO Gazette.
 DESIGNATION OF SOCIETY
The owners of copyright and related rights or their heirs may designate a society of
artists, writer, composers, and other right-holders to collectively manage their
economic or moral rights on their behalf. For the said societies to enforce the rights
on their members, they shall be first secure the necessary accreditation from the
Intellectual Property Office.
 What is copyright? Examples.
 What are the works protected by copyright?
 Original Work v. Derivative Works
 What are the works not protected?
 What are the rights of an author?
 Ownership of copyright
 Limitations to the rights on copyright
 Plagiarism vs. Copyright Infringement
Plagiarism Copyright Infringement
To constitute infringement, it is not
The deliberate and knowing presentation of necessary that the whole or even a
another person's original ideas or creative large portion of the work shall have
expressions as one's own. Plagiarism can been copied. If so much is taken that
involve oral, visual, auditory or written work. the value of the original is sensibly
diminished, or the labors of the original
author are substantially and to an
injurious extent appropriated by
another, that is sufficient in point of
law to constitute piracy.
 Plagiarism vs. Copyright Infringement
Plagiarism Copyright Infringement
It is an ethical issue or an act of academic
dishonesty. It involves injury to a person's
Involves legal issue.
reputation through exclusion (the failure to
attribute).
May or may not give rise to a criminal or civil action
Always give rise to criminal or
under the copyright law. It is mostly an
civil action.
administrative matter or disciplinary action.
Liability for plagiarism involves job Liability for copyright
dismissal/suspension, besmirched reputation, denial infringement results in an award
of certification or recognition of achievement, etc. of damages.
 Example
Plagiarism but not Copyright Infringement:
A student copies a few sentences of a 20-page book illustrating and describing species of birds
to use in article on evolution submitted for her high school newspaper but fails to provide a
citation or footnote explaining that the information came from the book.

* This student may have committed plagiarism by not properly attributing the information and
making it seem like the information originated from the student. However, the student will
most likely not be found to have committed copyright infringement because such an
inconsequential amount was used in an educational setting in a manner that is unlikely to harm
the authors market for the work that the use is likely a fair use
 Example
Copyright Infringement but not Plagiarism:
A high school student copies the entire bird species book that she includes in several article
published in the paper, but she puts a citation at the bottom of each article that includes the
author’s name, the title of the book, and how the entire article is taken directly from the book.

* While the student did not commit plagiarism because she properly attributed the author and
did not try to pass the article off as her own work. She committed copyright infringement
because she copied the entire work without permission, which likely infringes the author’s rights
under copyright law.
 Example
Both Plagiarism and Copyright Infringement:
A young writer, hoping to be published, copies line for line a popular wizard book series. The
young writer sends the work to her publisher and says she wrote it.

* This author has committed plagiarism by submitting someone else’s work as her own and, in
addition, has committed copyright infringement by copying someone else’s protected work
without permission.
Is authorization needed when using another person's work?
 A person intending to use another person's work must always obtain
authorization from the copyright owner before using a protected work,
especially if the resulting work or use will have a significant effect on the
owner's rights,
 Example: if it will affect the normal exploitation of the work or would
otherwise reasonably prejudice the legitimate interests of the author.
 Such authorization is usually in the form of a licensing agreement or an
assignment of rights.
 When is authorization not necessary? What are the
limitations of a copyright?
 Use of a work without prior authorization is allowed so long as it is
consistent with the principle of “fair use".

Fair use has been defined as a privilege to use the copyrighted material in a
reasonable manner without the consent of the copyright owner or as copying
the theme or ideas rather than their expression.
Fair Use of a Copyright Work:
 Fair use of copyrighted work for criticism, comment, news reporting,
teaching including multiple copies for classroom use, scholarship, research and
similar purposes is not an infringement of copyright.
 Proper use of citations does not ordinarily result in infringement. However,
the attribution or citation must be consistent within the parameters of
"fair use". Otherwise, there will be infringement.
 What are the factors to be considered in determining if the use
of a work is within the scope of “'fair use"?
 In determining whether the use made of a work in any particular case is fair use, the factors to
be considered shall include:
a) The purpose and character of the use, including whether such use is of a commercial nature or is non-
profit educational purposes;
b) The nature of the copyrighted work;
c) The amount and substantiality of the portion used in relation to the copyrighted work as a whole. This
means use is considered fair for small quantities, where the portion used is not significant to the entire work,
and where the amount is appropriate for the intended educational purpose.
d) The effect of the use upon the potential market for or value of the copyrighted work.
 Example
A library has a book that is out of print and unavailable. The book is an important one in the
professor's field that she needs for her research. The professor would like to copy the book
for her files.
FAIR USE? Yes. This is an example of personal use. If one engages in the fair use analysis,
one finds that: (1) the purpose of the use is for educational;
(2) The professor is using the book, a creative work, for research purposes;
(3) Copying the entire book would normally exceed the bounds of fair use, however, since the
book is out of print and no longer available from any other source, the copying is acceptable;
(4) Finally, the copying will have no impact on the market for the book because the book is no
longer available from any other source.
 Example
A professor wishes to use a textbook he considers to be too expensive. He makes copies of the
book for the class.

FAIR USE? No. Although the use is educational, the professor is using the entire work, and by
providing copies of the entire book to his students, he has affected the market. This conduct
clearly interferes with the marketing monopoly of the copyright owner. The professor should
place a copy on reserve or require the students to purchase the book.
 Is the reproduction of copyrighted material for personal purposes
punishable by this law?
 No. If a person uses a book as reference for personal use, there is no infringement.
 But if, for example, a person makes several copies of the book to sell, or
substantially copied its contents, then infringement occurs. Infringement in this
context refers to the economic rights of the copyright owner.
 There is also infringement when a work is used as a reference material and the
resulting work is later widely disseminated without proper authorization from the
copyright owner. This is because it violates his economic right to be remunerated for
his work.
What are the acts that do not constitute copyright infringement?
The following acts shall not constitute infringement of copyright:
1. The reproduction or distribution of published articles or materials in a specialized
format exclusively for the use of the blind, visually and reading-impaired persons:
Provided, that such copies and distribution shall be made on a non-profit basis and shall
indicate the copyright owner and the date of the original publication.
2. The recitation or performance of a work, once it has been lawfully made accessible to
the public, if done privately and free of charge or if made strictly for a charitable or
religious institution or society.
What are the acts that do not constitute copyright infringement?
3. Making of quotations from a published work if they are
i. compatible with fair use
ii. only to the extent justified for the purpose, including quotations from newspaper
articles and periodicals in the form of press summaries
iii. the source and the name of the author, if appearing on the work, are mentioned
4. Reproduction or communication to the public by mass media of articles on current
political, social, economic, scientific or religious topic, lectures, addresses and other
works of the same nature
What are the acts that do not constitute copyright infringement?

5. Reproduction and communication to the public of literary, scientific or artistic

works as part of reports of current events by means of photography, cinematography
or broadcasting
6. Inclusion of a work in a publication, broadcast, or other communication to the public,
sound recording or film, if such inclusion is made by way of illustration for teaching
purposes and is compatible with fair use
What are the acts that do not constitute copyright infringement?
7. Recording made in schools, universities, or educational institutions of a work included
in a broadcast for the use of such schools, universities or educational institutions. Such
recording must be deleted within a reasonable period after they were first broadcast
and that such recording may not be made from audiovisual works which are part of
the general cinema repertoire of feature films except for brief excerpts of the work
8. Making of ephemeral recordings by a broadcasting organization by means of its own
facilities and for use in its own broadcast;
What are the acts that do not constitute copyright infringement?

9. Use made of a work by or under the direction or control of the Government, by the
National Library or by educational, scientific or professional institutions where such use
is in the public interest and is compatible with fair use;
10. Public performance or the communication to the public of a work, in a place where no
admission fee is charged in respect of such public performance or communication
What are the acts that do not constitute copyright infringement?
11. Public display of the original or a copy of the work not made by means of a film, slide,
television image or otherwise on screen or by means of any other device or process.
Provided that
i. either the work has been published, or
ii. that the original or the copy displayed has been sold, given away or otherwise
transferred to another person by the author
12. Use made of a work for the purpose of any judicial proceedings or for the giving of
professional advice by a legal practitioner.
Does 'fair use' include non-print materials, such as sources
from the internet?
 Yes, the principle of fair use applies to non-print materials, including those
disseminated or published on the internet. It must be remembered that a
work is protected from the moment it is created. Whether it is created in the
traditional print format or in a digital format, the work remains protected.
 Moreover, the Philippines acceded to the WIPO Internet Treaties (March
2002), which ensures that copyright owners continue to be protected when
their works are disseminated through the internet.
 Is using citations sufficient compliance to 'fair use"?
 No. Mere attribution or citation of the work is not sufficient. The making of
quotations from a published work does not constitute infringement only if it is
compatible with fair use and only to the extent justified for the purpose.
 To illustrate, although the protected work is referenced, if the resulting
work is sold, whether for profit or not, it may arise into an infringement .
 Moreover, if the dissemination of the resulting work or use results to a
significant drop in the protected work's market or value, it is no longer fair
use.
 Is there copyright infringement when the person who failed to properly cite the
copied work obtained it from a free source i.e., internet website?
 Yes. The law does not require that in order to be protected, the work must be
sold for a fee. The mere fact that the source where he obtained the work is free of
charge does not absolve him of using it in accordance with fair use and making proper
attributions or citations to the author of the work.
 The law requires that making quotations from a published work must be:
(a) compatible to fair use;
(b) only to the extent justified for the purpose; and
(c) Its source and name of the author must be mentioned.
 Reproduction of a single copy
The private reproduction of a published work in a single copy shall be
permitted, without the authorization of the owner of copyright in the
work where:
1. The reproduction is made by a natural person
2. Exclusively for research and private study
Is there copyright infringement if a person reproduced a single copy published work?

 None. However, the single copy reproduction must be made by a natural person exclusively
for research and private study, and further provided that it will not comprise the entire book,
or a substantial part thereof, nor would comprise of compilation of data and other materials.
The permitted reproduction should likewise not extend in cases where it would unreasonably
conflict with the normal exploitation of the work or would otherwise reasonably prejudice the
legitimate interests of the author. Therefore, the reproduction of an entire book by a student
or teacher is not permitted.
 Moreover, if the work is reproduced by a company, department or other juridical entity, or
several copies are reproduced, there is copyright infringement. This is no longer consistent with
'fair use".
When is there copyright infringement?
 A person infringes on the copyright owner's rights when he:
a) Directly commits copyright infringement;
b) Benefits from the infringing activity of the perpetrator and that he has notice of
the infringing activity; and
c) With knowledge of the infringing activity, induces, causes or materially
contributes to the infringement.
 In other words, there is copyright infringement when there is an unauthorized
performance of any right exclusively granted by law to the copyright owner.
Kinds of Copyright Infringement
A. Direct Infringement – it is an infringement by a person who without
the consent of the owner of the copyright, does anything the sole
right to do which is by law conferred on the owner of the copyright
such as unauthorized translations, infringement by reproduction, or
unauthorized public performance of work

B. Indirect Infringement – dealings with works of direct infringement

Who are liable in case of copyright infringement?
 The following persons or entities may be held liable:
a) The one who commits the infringement being the direct infringer.
b) The buyer of the material is likewise liable because mere possession of infringed materials is
a violation of copyright laws.
c) If the lessor or owner of the establishment where the infringing material are sold or
found has knowledge of such activity, they may be liable. The receipt of a share from the sale
of the materials is not necessary. The payment of rent to the lessor is deemed to be a "benefit".
d) Any person who has knowledge of the infringing activity and induces causes or materially
contributes to the infringement may be held liable.
Defenses Against Charge Of Infringement
1. Fair dealing or fair use
2. Consent or permission of copyright holder
3. Common source
De Minimis Principle - Refers to minimal things, small and trivial. Certain
acts would be considered too minimal to be considered acts of
infringement.
Can a school be held liable if it sells modules, which contents are cut
and pasted from different published books and materials?

Yes. Under the circumstance the school may either be considered as:
direct infringer or a person who has knowledge of an infringing
activity and materially contributes to the infringement.
What can a copyright owner do if he discovers an establishment sells
illegally reproduced work, i.e. book-a-like?
 In order to serve as proof of notice to the infringing activity and to afford the
seller or distributor of copyrighted work the chance to correct his actions, the
publisher or the copyright owner may send a demand letter to the owner of the
establishment, informing him of the infringed articles being sold in his store and
asking for the removal thereof.
 If the owner of the establishment failed to remove the requested articles, he or
she may be held solidarily liable with the person who directly committed the
infringing activity.
 What are the remedies available to a copyright
owner in case infringement?
 A copyright owner has civil or criminal remedies under the law

Civil Remedies
1. Injunction The court may order the defendant to desist from an infringement,
among others, to prevent the entry into the channels of commerce of imported goods
that involve an infringement, immediately after customs clearance of such goods.
Civil Remedies
2. Damages - Pay to the copyright proprietor or his assigns or heirs such actual damages,
including legal costs and other expenses, as he may have incurred due to the infringement as
well as the profits the infringer may have made due to such infringement, and in proving profits
the plaintiff shall be required to prove sales only and the defendant shall be required to prove
every element of cost which he claims, or, in lieu of actual damages and profits, such damages
which to the court shall appear to be just and shall not be regarded as penalty.

NOTE : Such other terms and conditions, including the payment of moral and exemplary
damages, which the court may deem proper, wise and equitable and the destruction of
infringing copies of the work even in the event of acquittal in a criminal case.
Criminal Remedies
 The copyright owner may likewise apply for a search warrant which includes the authority to
seize and break open. Thereafter, the owner shall file a criminal case within 60 days from
the issuance thereof.
Seizure and Impounding
Deliver under oath, for impounding during the pendency of the action, upon such
terms and conditions as the court may prescribe, sales invoices and other documents
evidencing sales, all articles and their packaging alleged to infringe a copyright and
implements for making them.

Destruction without any compensation

Deliver under oath for destruction without any compensation all infringing copies or
devices, as well as all plates, molds, or other means for making such
infringing copies as the court may order
 Are other remedies available to a copyright owner
outside of court?
 The copyright owner may file an administrative complaint before the Bureau of
Legal Affairs (BIA) for intellectual property violations valued Two Hundred
Thousand Pesos (Php 200,000.00) and above. (Sec. 10.2 of the Intellectual
Property Code)
Intellectual Property Code
 Enter title Enter title Enter title

Original works of Inventions, such as Any word, phrase,

authorship, such as processes, machines, symbol, and/or
books, articles, manufactures, design that
songs, photographs, composition of identifies and
sound recordings, matters as well as distinguishes the
motion pictures and improvement to source of the goods
other works these of one party from
those of others
 RA No. 8293, as amended by RA No. 10372

The di ffe ren ces betw een the three (3) are as f ollow s :

COPYRIGHT PATENT TRADEMARK

New, useful, Goods

Subject matter of Literary, scientific,
and industrially manufactured or
the right. or artistic work
applicable inventions produced

Where right is to Intellectual Intellectual

National Library
be registered? Property Office Property Office
 RA No. 8293, as amended by RA No. 10372

The d i f f e re nc e s be t we e n t h e t hre e ( 3 ) a re a s fo llow s :

COPYRIGHT PAT E N T TRADEMARK

Protection starts at: Creation Application Issuance of CoR

Lifetime of the author

Duration of the + generally 50 years
20 years 10 years
right. after the death of
the author
 COPYRIGHT TRADEMARK PATENT
• Protection is • This is a brand element • This concerns
automatically granted which distinguishes obtaining protection
to the author for your goods and services for new inventions
Definition:
their original, creative from those of your that are new,
or intellectual work. competitors and other original and useful.
traders.
• Works: Books, • Marks: Word mark, a • Invention will be
lectures, dramatic and logo mark or a slogan, patented if: Novel
musical works, shapes, and or Original, has an
cinematography. unconventional marks Inventive step (non-
drawings, paintings, like colours, sounds, obvious) and has
Subject to:
architecture, gestures, animation, some industrial
sculpture, holograms etc are also application.
photographs, registrable as a
illustrations, maps, trademark.
plans sketches etc.
 COPYRIGHT TRADEMARK PATENT

• To distribute copies or • Exclusive right to • Exclusive authority over

phonorecords of the use the mark and the patented invention,
work to the public by prevent anyone from right to exclude others
sale or other transfer using it without and exploit the patent
of ownership, or by permission. It also and earn from it.
Rights:
rental, lease, or lending gives the owner the
• To perform the work right to license,
publicly in person or assign and sell the
through audio mark in return of
transmission. some compensation.
• Valid for life time of • Valid for 10 years. • Valid for 20 years.
the author + 50 years • Can be renew the • Territorial rights within
Validity:
after his / her death. trademark every 10 a specific area
years.
• Protect original • Distinguishes • Grants exclusive right to
creative / or product or service exploit an invention.
Purpose:
intellectual work. from competitors.
Securities
Regulation Code
TABLE OF CONTENTS
1. Primary purposes of SRC 9. Uncertificated security
2. Definition of securities 10. Tender offer rule
3. Example of securities 11. Processes under Tender
4. Debt securities Offer Rule
5. Different kinds of debt 12. Proxy Solicitation
securities 13. Insider trading (read all
6. Test to determine if topics pertaining to this)
Security 14. Power of SEC
7. Registration of Securities 15. Offenses
8. Exempt securities and 16. Elements of Investment
exempt transactions Contract
 01
Primary
purposes of
SRC
Section 2. Declaration of State Policy

The State shall

1. Establish a socially conscious,
free market that regulates
itself,
2. Encourage the widest
participation of ownership in
enterprises,
3. Enhance the democratization of
wealth,
4. Promote the development of the
capital market
5. Protect investors
6. Ensure full and fair disclosure
about securities
7. Minimize ifnot totally eliminate
insider trading and other
fraudulent or manipulative devices
and practices which create
distortions in the free market.
The most important purpose is
to protect investors or the
investing public.
 02
Definition of
securities
 SECURITIES
Securities are shares,
participation or interests in a
corporation or in a commercial
enterprise or profit-making
venture and evidenced by a
certificate, contract,
instruments, whether written
or electronic in character.
(Section 3.1)
Securities are documents that represent an interest, or an
ownership right, in something else. For corporations,
securities represent a business's property and debts.

A security can be a stock, which represents a share of a

business's ownership; a bond, which acts as a "IOU" from a
business to an individual; or an option, which is the right
to acquire something at a fixed price in the future.
Corporations, governments, and individuals invest and
raise their money through buying and selling securities.
 03
Example of
securities
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, certifies of deposit
for a future subscription;
c. Fractional undivided interests in
oil, gas or other mineral rights;

d. Derivatives like option and

warrants;
Derivatives - are those whose value
depends on the interest in the
underlying security. In simple
terms, derivatives' existence is
based on the underlying security, it
will not exist if there isn't an
underlying security that it will be
based.
Security Options - These are
contracts that give the buyer the
right but not the obligation to buy
or sell an underlying security at a
predetermined price which is called
the exercise or strike price on or
before a predetermined date which
is called the expiry date which can
only be extended in accordance with
the rules of the exchange
Warrants - These are rights to
subscribe or purchase new
shares or even existing shares in
a company on or before a pre-
determined date called the
expiry date and they generally
have a longer exercise period
 Main difference
(Options vs Warrants)

Warrants may generally have a

longer exercise period than options
e. Certificates of assignments,
certificates of participation,
trust certificates, voting trust
certificates or similar
instruments
f. Proprietary or nonproprietary
membership certificates in
corporations; and

g. Other instruments as may in the

future be determined by the
Commission.
 04
Debt
securities
 Debt securities

It refers to financial instruments that contain a

promise from the issuer to pay the holder a defined
amount by a specific date, i.e., the point at which the
debt security matures.
 Debt securities

The issuer (corporations or government) raise funds like

bonds, notes, or debt instruments from the investors or
creditors then the investors will purchase a debt instruments to
issuer and will only get it at the time when a loan matures plus
the interest over the life of the loan.
 Debt securities

Corporation Investors
Or << purchase debt instrument Or
repay principal + interest >> Creditors
Government
 Examples of Debt Securities
• Bonds and notes - can be issued on a standalone, once off basis or on a
repeat programme basis. Those issued under a programme are known as
medium-term notes or MTNs. This allows an issuer to make multiple
issues on the back of one principal set of documents. This saves the issuer
both time and money.

• Interest-bearing securities - Most debt securities provide for interest

payments to be made at regular intervals. Like interest on a loan, interest
on a debt security can be at a fixed, floating or variable rate basis.

• Zero coupon securities - Zero coupon securities do not bear interest, but
instead are issued at a discount to their face value.
 05
Different
kinds of debt
securities
1. Form of Borrowings – The second main source of capital, it
is usually represented by promissory notes, bonds, or
debentures. Long term loans are usually evidenced by
promissory notes.
1. Bonds – approvals: It is a series of instruments
representing units of indebtedness and regarded as one
entire debt. Bonds differ from debentures in that the
former is usually secured by a mortgage or pledge of
corporate property.
Three parties:
 The debtor-corporation
 The creditor-bondholder, and
 The trustee (representative of all the
creditor debtors
• Debentures are issued on the general credit of the
corporation since it is not secured by any collateral. They
are not bonded indebtedness in the true sense and thus
would not need the approval of the stockholders.
• Bond and debentures earn interest, which must be paid
by the corporation whether or not it earns profits (c.f. to
dividends) at the stipulated period, it’s a fixed charged
which the corporation cannot avoid.
3. Convertible securities – the privilege to exchange his
class of securities with another class. The contract will
usually specify not only the security to which it may be
converted, but also the ratio of conversion, and the period
within which the privilege may be exercised.
a. Stock option warrants – options to purchase stocks in the
corporation at a specified price not lower than par,
exercisable by the grantee at any time within a specified
period. It is usually given as incentive compensation to
valuable executives and employees.
b. There is specific provision on the law regarding stock
options/convertible securities, but the SEC has issued rules as
to stock options for the interest of the investors.

c. The corporation must retain or authorize enough of the junior

securities to meet the conversion or stock option when
exercised.
4. Hybrid Securities – because preferred shares and bonds
are created by contract, it is possible to create stock which
approximates the characteristics of debt securities. (has
BOTH stock and debt provisions)

a. Income bond – interest rate is dependent on the earnings.

b. The features are not mutually exclusive and there is
practically no limit to the variety of combinations which a
draftsman may adopt.
c. The differentiation if a hybrid is a stock or bond is crucial for
tax purposes. If it’s a bond – the interest is a deductible from
gross income. If it’s a stock – the “interest” paid is actually
dividends and are therefore not deductible.
5. Trust Indenture – document where the rights of the parties
are defined, it is between the debtor corporation and a trustee
as the representative of all the bondholders. Typically, it will
contain a description of the property mortgaged, provisions of
its care and maintenance, the payment of taxes, the amount
authorized under the issue, conversion and redemption
privileges, the conditions under which the mortgage may be
released, the duties of the trustee, the conditions for default,
and the remedies in case of such default.
 06
Test to
determine if
Security
HOWEY TEST
Determining if investment
contract exists

• To determine whether a
transaction qualifies as an
investment contract. We use
the Howey Test. This tests
gives us the elements which
must be present for a contract
to be an investment contract
HOWEY TEST (CICPE)
1. There must be a contract
transaction or scheme
2. An investment of money
3. Investment is made in a
common enterprise
4. Expectation of profits; and
5. Profits arising primarily
from the efforts of others
 EXAMPLE OF INVESTMENT CONTRACT:
Power Homes Unlimited Corporation,
requires investor to pay P5,000,000 to
become a Business Center Owner, which
entitles him to recruit two person who
should pay P5,000,000 each and out of
which he shall receive a commission of
P2,000,000. In case the two persons
recruited would also recruit two persons
each to pay P5,000,000 who will become
their down lines, commission will also be
earned, and so on.
 EXAMPLE OF INVESTMENT CONTRACT:
Here, Business Center Owner is
considered as an investment contract
because all the elements are present.
There is an investment of money which
is invested in a common enterprise and
the investor would be earning primarily
from the efforts of his recruits and their
recruits, as the pyramid goes on.
 07
Registration
of Securities
REGISTRATION OF SECURITIES

Subsection 8 requires the registration of all securities. It

shall be registered by the issuer filing a proclaimed
registration statement with respect to such securities in
such form and containing such information and documents
as the Commission prescribes in the Commission's main
office. Until such approval by the Commission, the
Securities cannot be sold, offered for sale or distributed
within the Philippines.
 PROCEDURE:
1. Filing of SWORN REGISTRATION STATEMENT
containing the information as the SEC may by rule require.

a. Signatories to registration statement Executive officer,

principal operating officer, principal financial officer,
comptroller, principal accounting officer, corporate secretary.

b. Written consent of the expert named as having certified any

part of the registration statement, whenever necessary.

c. Where the registration statement includes shares to be sold

by selling shareholders, a written certification by such selling
shareholders as to the accuracy of any part of the registration
statement contributed to by such selling shareholders shall
also be filed.
 PROCEDURE:

2. PAYMENT of the filing fees which shall not

exceed 1/10 of 1% of the aggregate price at which
such securities are proposed to be offered.

3. PUBLICATION of notice of the filing of the

registration statement in two newspapers of
general circulation once for two consecutive
weeks.
 PROCEDURE:

4. Within 45 days after the date of filing, or by

such later date to which the issuer has
consented, the SEC shall give an ORDER
declaring the registration statement effective or
rejecting it.

5. PROSPECTUS under oath that all

requirements satisfied and all statements in
registration statement and in such prospectus
are correct.
 08
Exempt
securities
and exempt
transactions
EXEMPT SECURITIES

1. For those issued or guaranteed by the

Government of the Philippines, or by any
political subdivision, agency or
instrumentality.

- So, the government guaranteed or issued it does not

need any registration statement
EXEMPT SECURITIES

2. Those issued or guaranteed by the Government of

any Country with which the Philippine maintains
diplomatic relations (on the basis of reciprocity).

-Its talking about government issued shares and stocks.

EXEMPT SECURITIES

3. Certificate issued by a receiver or by a trustee in

bankruptcy duly approved by the proper adjudicatory
body (court)
- So, if there is approval by the court then it does not need any
registration state.
EXEMPT SECURITIES

4. The sale of any security, or its derivatives which, by

law, is under the supervision and regulation of the
Office of the Insurance Commission, Housing and land
use regulatory board, or the Bureau of Internal
Revenue.

- if the Bureau of Internal Revenue will sell a land or shares of

stocks, that would be result to the future proceeding of the
BIR.
EXEMPT SECURITIES

5. Any security issued by a bank (except its own

shares of stock).

6. Ordinary deeds or instruments that are not

normally sold to the public such as
contract of lease, contract of sale, contract of real
estate mortgage
EXEMPT TRANSACTIONS

Exempt transactions is not perfect because in section

10.2 allows the SEC to accept other transactions if it
finds that the requirements of registration is not
necessary in the public interest or for the protection of
the investors.

Such as by the reason of the small amount involved or

the limited character of the public offering.
EXEMPT TRANSACTIONS

Issuer or its representative may apply for the exemption by

filling a notice with the SEC for confirmation of the
exemption and until there is confirmation of any person
claiming the exemption has the burden of proof to prove that
is entitled to the exemption.

Note: Even if a certain type of security is exempt from

registration. The provisions of the Security Regulations
Code must still be followed in any sale or transfer
EXEMPT TRANSACTIONS
(Examples)

1. BROKER'S transaction, executed upon customer's orders, on

any registered Exchange or other trading market. An
ISOLATED transaction in which any security is sold, offered for
sale.
2. Subscription or delivery by the owner thereof, or by his
representative for the owner's account, sale or offer for sale or
offer for sale, subscription or delivery not being made in the
course of repeated and successive transaction of a like character
by such owner, or on his account by such representative and
such owner or representative not being the underwriter of such
security
EXEMPT TRANSACTIONS
(Examples)

3. The distribution by a corporation actively engaged in the

business authorized by its articles of incorporation, of securities to
its stockholders or other security holders as a STOCK dividend or
other distribution out of surplus.

4. The issue and delivery of any security in exchange for any other
security of the same issuer pursuant to a right of
CONVERSION entitling the holder of the security surrendered in
exchange to make such conversion PROVIDED: Registered under
SRC or Exempt.
EXEMPT TRANSACTIONS
(Examples)

5. EXCLUSIVE SALE - The sale of capital stock of a corporation to

its own stockholders exclusively, where no commission or other
remuneration is paid or given directly or indirectly in connection
with the sale of such capital stock.

6. PRIVATE PLACEMENT - The sale of securities by an issuer to

fewer than twenty (20) persons in the Philippines during any
twelve-month period.
EXEMPT TRANSACTIONS
(Examples)

7. SUBSCRIPTIONS for shares of the capitals stocks of a

corporation prior to the incorporation thereof or in pursuance of an
increase in its authorized capital stocks under the Corporation
Code, WHEN no expense, commission, compensation or
remuneration is paid or incurred in the sale or disposition of such
securities
EXEMPT TRANSACTIONS
(Examples)

8. SALE TO SOPHISTICATED (Qualified) Buyers:

The sale of securities to any number of the following qualified buyers:
a. Bank;
b. Registered investment house
c. Insurance company;
d. Pension fund or retirement plan maintained by the Government of the
Philippines, Political subdivision, manage by a bank or other persons authorized by
the Bangko Sentral to engage in trust functions;
e. Investment company or
f. Such other person as the SEC may rule by determine as qualified buyers, on the
basis of such factors as financial sophistication, net worth, knowledge, and
experience in financial and business matters, or amount of assets under
management
EXEMPT TRANSACTIONS
(Examples)

9. MORTGAGE-BACKED SECURITIES
10. INSOLVENCY or bankruptcy At any judicial sale, or sale by
an executor, administrator, guardian or receiver
or trustee

11. By or for the account of a pledge holder, or mortgagee or any

of a pledge lien holder selling of offering for sale or delivery in the
ordinary course of business and not for the purpose of avoiding
the provision of SRC, to LIQUIDATE a bonafide debt, a security
pledged in good faith as security for such debt.
EXEMPT TRANSACTIONS
(Examples)

12. The EXCHANGE of securities by the issuer with

the existing security holders exclusively, where no
commission or other remuneration is paid or given
directly or indirectly for soliciting such exchange.
NOTE: The SEC MAY EXEMPT other
transactions where not necessary in public
interest or for protection of investors such as
small amount or limited character of public
offering. However, an exemption fee of 1/10 of
1% of the maximum aggregate price or issued
value of the securities should be paid.
 09
Uncertificated
security
 Under the Uniform
Commercial Code,
uncertificated security
is a share or other
interest in property or
an enterprise, or an
obligation of an issuer
that is not represented
by an instrument but is
registered on the
issuer's books.
Note: This interest is not
documented but it is
registered.

- It is a security evidenced
by electronic or similar
records.
- A corporation whose
securities are registered
pursuant to this Code or
listed on a securities
Exchange may:
 If so, resolved by its
Board of Directors and
agreed by a
shareholder, investor or
securities intermediary,
issue shares to, or
record the transfer of
some or all of its shares
into the name of said
shareholders, investors
or, securities
intermediary in the
form of uncertificated
securities.
 The use of
uncertificated securities
in these circumstances
shall be without
prejudice to the rights of
the securities
intermediary
subsequently to require
the corporation to issue
a certificate in respect.
of any shares recorded
in its name; and
 If so, provided in its
articles of incorporation and
by-laws, issue all of the
shares of a particular class
in the form of uncertificated
securities and subject to a
condition that investors may
not require the corporation
to issue a certificate in
respect of any shares
recorded in their name.
 Transfers of securities,
including an uncertificated
securities, may be validly made
and consummated by
appropriate book-entries in the
securities accounts maintained
by securities intermediaries, or
in the stock and transfer book
held by the corporation or the"
stock transfer agent and such
bookkeeping entries shall be
binding on the parties to the
transfer.
 A transfer under this
subsection has the effect of the
delivery of a security in bearer form
or duly indorsed in blank
representing the quantity or
amount of security or right
transferred, including the
unrestricted negotiability of that
security by reason of such delivery.
. However, transfer of
uncertificated shares shall only be
valid, so far as the corporation is
concerned, when a transfer is
recorded in the books of the
corporation so as to show the names
of the parties to the transfer and the
number of shares transferred.
 10
Tender offer
rule
Tender offer - means a publicly announced intention by a
person acting alone or in concert with other persons
(hereinafter referred to as "person") to acquire outstanding
equity securities of a public company
Tender offer is in place in protecting the minority shareholders
against any scheme that dilutes the share value of their
investments. It gives the minority shareholders the chance to
exit the company under reasonable terms giving them the
opportunity to sell their shares at the same price as those of the
majority shareholders
Processes under Tender Offer Rule

When is tender offer rule mandatory or required to be made?

A: The tender offer rule shall be mandatory in the following
acquisitions

19.2.1. 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.
19.2.2. 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.
19.2.4. Any person or group of persons acting in concert, who
intends to acquire thirty five percent (35%) of the outstanding
voting shares or such outstanding voting shares that are
sufficient to gain control of the board in a public company
directly from one or more stockholders shall be required to make
a tender offer for all the outstanding voting shares. The sale of
shares pursuant to the private transaction or block sale shall
not be completed prior to closing and completion of the tender
offer.
19.2.5. If any acquisition that would result in ownership of over
fifty percent (50%) of the total outstanding equity securities of a
public company,
 The acquirer shall be required to make a tender offer under this
Rule for all the outstanding equity securities to all remaining
stockholders of the said company at a price supported by a
fairness opinion provided by an independent financial advisor or
equivalent third party. The acquirer in such a tender offer shall
be required to accept all securities tendered. (Amended IRR of
the SRC, Rule 19.2)
Example 1: (TENDER OFFER)
An investor approaches the shareholders of Emerald
Company whose stock shares are selling for ₱20 per share. The
investor offers the shareholders ₱30 per share, but the offer will arise
if the said investor will be able to acquire more than 50% of the
Emerald’s Company total outstanding shares. The reason for offering
the premium is to convince a large number of shareholders to sell
their shares.
Example: (MANDATORY TENDER OFFER)

XYZ Corporation, has two principal stockholder-corporations, Cosmic

Corporation who owns 70% and Dapper Corporation who owns 18%.
In a row, the principal stockholders of Cosmic Corporation are: Cosmic
A (32%), Cosmic B (21%) and Cosmic C (17%).
Cosmic A and Cosmic B agreed to sell their shares to Dapper
Corporation.
In this case, Dapper Corporation will have to use the mandatory
tender offer:
1. Dapper Corporation will own the 70% shares of Cosmic
Corporation (32%+21%+17%);
2. Cosmic Corporation likewise owns 70% of XYZ Corporation,
resulting in 49% (70% x 70%) indirect ownership;
3. Accordingly, they will own a total of 66% of XYZ Corporation (49%
indirect ownership + 17% direct ownership).
Independently, Dapper Corporation is required to make a tender offer
to the stakeholders of XYZ Corporation.
 11
Processes
under
Tender Offer
Rule
1. The bidder must file a Schedule TO. A bidder must, as soon as
practicable on the commencement date of the tender offer, file a
Schedule TO with the SEC. The bidder must deliver a copy of
the Schedule TO to the target company, any other bidder that
has filed a Schedule TO for an outstanding offer, and to each
national securities exchange on which the target company’s
securities trade.
Note: Schedule TO: The buyer’s tender offer statement. This is the
official legal document that describes the offer, and includes the “offer
to purchase,” the document that gets sent to stockholders. It is required
to include, among other things, the target’s name; the number of shares
sought and the price offered; any conditions attached to the offer; the
background of any discussions or other contacts between the buyer and
the target; the source and amount of funds the buyer has available for
the purpose; the reasons the buyer is making the offer and what it
proposes to do if it succeeds; and who is soliciting shares for the buyer.
2. The target must file a Schedule 14D-9. Within 10 business days
of the commencement of a tender offer, the target company’s
board of directors must disseminate a statement to its security
holders disclosing the target company’s position with respect to
the offer. A Schedule 14D-9 must be filed with the SEC on the
date the recommendation is first published, sent or given to
security holders.
Schedule 14D-9: The target company’s SEC filing in response to
an offer. It is a description of the target company board’s
recommendation concerning the offer or a statement why the
board is unable to take a position with respect to the offer.
Whether the board advises stockholders to accept or reject,
the company has to file this schedule. It includes who the
board members are, which securities they are talking about,
and whether they have made any arrangements with the
bidder or among their own stockholders.
3. Dissemination of information. To enable a bidder to send
the offer documents to the target company shareholders,
the target may either provide the bidder with a shareholder
list or directly mail the offer to purchase to its stockholders. If
there is a mailing to stockholders, it will be sent to all holders.
4. Minimum duration of offer. A tender offer must remain open
for at least 20 business days after it begins. However, tender
offers are often not completed within 20 business days when
their conditions are not satisfied within that initial period. Also,
an offer must remain open for at least 10 business days after
certain material changes. In addition, security holders have
withdrawal rights and may withdraw tendered shares during the
entire period the equity tender offer remains open.
 12
Proxy
Solicitation
Proxy refers to the proxy, consent or authorization.

Proxies must be in writing, signed by the

stockholder or his duly authorized representative and file
before the scheduled meeting with the corporate
secretary. 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.
No broker or dealer shall give any proxy, consent or any
authorization, in respect of any security carried for the
account of the customer, to a person other than the
customer, without written authorization of such customer.
A broker or dealer who holds or acquire the proxy for at
least ten percent (10%) or such percentage as the
commission may prescribe of the outstanding share of
such issuer, shall submit a report identifying the
beneficial owner of ten days after such acquisition, for its
own account or customer, to the issuer of security, to the
exchange where the security is traded and to the
Commission.
 13
Insider
trading
What Is Insider Trading?

Insider trading involves trading in a public

company's stock by someone who has non-public, material
information about that stock for any reason. Insider trading
can be either ILLEGAL or LEGAL depending on when the
insider makes the trade. Insider trading is ILLEGAL when
the material information is still NONPUBLIC, and this sort
of insider trading comes with harsh consequences.
2 Types of Insider Trading:
• Legal traders
• Illegal traders
Legal traders are insiders who are familiar with the
company, such as employees of publicly traded companies
often buy or sell their stocks. When insiders either buy or
sell in their own securities, they must state their actions
to the SEC (Security and Exchange Commission). Various
shareholders and dealers use the information to classify
companies with their potential investment. If the insiders
are buying the stock, they probably know more about their
company or corporation than anyone else, so it is a
superior thing to buy stocks from the company.
Illegal traders are those who trade material information to the non-
public around the world, while the information and the efforts to
impose them differ significantly. However, the SEC’s job is to make
sure that all shareholders are making choices based on similar
information. In addition, insider trading can be illegal because it
ruins all choices and confidence investors have for the company.
Therefore, when investors hear of any stories about the company’s
performance, they will act based on the information acquired. In
other words, either sell their stock, or buy more depending on how
well or bad the company’s performance is.
When Is Insider Trading Illegal?

Insider trading is deemed to be illegal when the material

information is still non-public and this comes with harsh
consequences, including both potential fines and jail time. Material
nonpublic information is defined as any information that could
substantially impact the stock price of that company. Obviously,
being privy to such information could influence an investor's
decision to buy or sell the security which would give them an edge
over the public who do not have such access. Martha Stewart's
2001 ImClone trading is a prime example of this
When Is Insider Trading Legal?

Legal insider trading happens in the stock market on a

weekly basis. The question of legality stems from the SEC's
attempt to maintain a fair marketplace. Basically, it is legal
when company insiders engage in trading company stock as long
as they report these trades to the SEC in a timely manner. The
Securities Exchange Act of 1934 was the first step to the legal
disclosure of transactions of company stock. For example,
directors and major owners of stock must disclose their stakes,
transactions, and change of ownership
*To sum up, insider trading is selling or buying stocks, bonds,
and securities from a company with nonpublic confidential
information about the company. There are two types of insider
trading legal and illegal, legal insider trading are the
employees, manager or who works in the company trades their
stocks, bonds or securities within the information that they
know from the company. While the illegal insider trading, are
those who trade with important information that is not in the
public. Anyone can be an insider, an insider can be an
individual who works in the company, an individual who over
hears information, or a broker.
 14
Power of
SEC
SEC POWERS AND FUNCTIONS
a. Have jurisdiction and supervision over all corporations, partnership
or associations who are the grantees of primary franchises and/or a
license or a permit issued by the Government;
b. Formulate policies and recommendations on issues concerning the
securities market, advise Congress and other government agencies on
all aspect of the securities market and propose legislation and
amendments thereto;
c. Approve, reject, suspend, revoke or require amendments to
registration statements, and registration and licensing
applications;
d. Regulate, investigate or supervise the activities of persons to
ensure compliance;
(e) Supervise, monitor, suspend or take over the activities of
exchanges, clearing agencies and other SROS; e Impose sanctions
for the violation of laws and rules, regulations and orders, and
issued pursuant thereto;
f. Prepare, approve, amend or repeal rules, regulations and orders,
and issue opinions and provide guidance on and supervise
compliance with such rules, regulation and orders;
g. Enlist the aid and support of and/or deputized any and all
enforcement agencies of the Government, civil or military as well
as any private institution, corporation, firm, association or person
in the implementation of its powers and function under its Code;
h. Issue cease and desist orders to prevent fraud or injury to the
investing public;
i. Punish for the contempt of the Commission, both direct and
indirect, in accordance with the pertinent provisions of and
penalties prescribed by the Rules of Court,
j. Compel the officers of any registered corporation or association
to call meetings of stockholders or members thereof under its
supervision;
k. Issue subpoena duces tecum and summon witnesses to appear in
any proceedings of the Commission and in appropriate cases, order
the examination, search and seizure of all documents, papers, files
and records, tax returns and books of accounts of any entity or person
under investigation as may be necessary for the proper disposition of
the cases before it, subject to the provisions of existing laws,
l. Suspend, or revoke, after proper notice and hearing the franchise or
certificate of registration of corporations, partnership or associations,
upon any of the grounds provided by law; and in.
m. Exercise such other powers as may be provided by law as well as
those which may be implied from, or which are necessary or incidental
to the carrying out of, the express powers granted the Commission to
achieve the objectives and purposes of these laws.
 15
Offenses
 OFFENSES

The Securities Regulation Code (SRC) or Republic Act (RA) 8799 in 2000
provided for the SEC's reorganization to give greater focus on the
Commission's role in capital market development, fostering good
corporate governance and enhancing investor protection. The SRC also
defined in clear terms fraud and criminal offenses related to securities
transactions, and strengthened SEC regulatory functions over all entities
dealing in securities.
 The SRC restated the requirements for the submission of an annual
report by companies of their operations, together with FS, certified by
an independent CPA. It also included provisions on internal record
keeping and accounting controls to be complied with by companies.
 SEC has the power to make, amend and rescind such accounting rules
and regulations as may be necessary to carry out the provisions of the
SRC and those of the CCP relative to financial reporting. Rules and
regulations governing registration statements and prospectuses for
various classes of securities and issuers, and defining accounting,
technical and trade terms used.
o In line with this, the Special Accounting Rules was issued in 2001 as part
of the SRC IRR. Rule 68 has undergone several amendments, the latest of which was in 2011;
and is presently in the process of amendments. Financial Reporting Bulletins are also issued by
the Commission as needed to cover additional Financial Reporting Requirements.
OFFENSES:
• 1st Offense - The term "first offense" is used to describe situations where a defendant is facing
charges for the very first time - and they have no previous criminal record, or at least no prior
convictions.
 2nd Offense - The words "second or subsequent offense," mean you have been convicted of the
same offense at least one time before. The significance of the words "second" or "second or
subsequent" is that many penalties are greater after a first offense for the same crime. Jail
sentences could be longer, fines could be higher, and misdemeanors can sometimes be elevated to
felonies.
 3rd Offense – The ‘third offense’ implies that you have been charged for the same offense more
than once, and the penalty of are far greater than the previous charges. This also serves as last
chance as commission of a fourth offense for the same violation is a ground for the
suspension/revocation of the erring company's registration or secondary license.
(The Scale of Fines Followed in the following example can be found on ths link)
https://www.sec.gov.ph/wp-content/uploads/2019/11/2017ScaleOfFines.pdf
EXAMPLE:
1. KKW Corporation was supposed to file the notice of suspension to file reports (SEC Form 17-
EX) [Section 17.1 Rule 1] on April 1, 2022. They was only able to file the notice on April 5, 2022.
How much will the KKW Corporation be subjected to if this offense was a;
o 1 st Offense
 1st Offense on Late filing of notice of suspension to file reports will be fined P10,000 plus P100 per day of
delay
 KKW Corporation will be fined of P10,000 plus P400 [4 days of delay]
 Total fine of P10,400
o 2 Offense
nd

 2nd Offense on Late filing of notice of suspension to file reports will be fined P20,000 plus P200 per day
of delay
 P20,000 + P800 [4 days of delay]
 Total fine of P20,800
o 3 Offense
rd

 3rd offense on Late filing of notice of suspension to file reports will be subject to P50,000 plus P600 per
day of delay
 P50,000 + P2,400
 KKW Corporation will be fined for a total of P52,400
EXAMPLE:
2. Helen Corporation failed to comply with any of the other procedural
requirements of SRC Rule 20. What will be the offense Helen Corporation if
they only complied 1 week later.
o 1st offense
 The failure to comply with any of procedural requirements will be reprimand or given a
warning for a first offense
o 2 offense
nd

 If Helen Corporation failed to comply for the second time, the corporation will be fined P50,000
plus P500 per day of filing the amended report
 P50,000 + P3,500 [for a week of delay]
 Helen Corporation will face P53,500 fine for the second offense
o 3rd offense
 Helen Corporation will be fined for P100,000 plus P1,000 per delay of filing the amended report
 P100,000 + P7,000
 P107,000
 16
Elements of
Investment
Contract
A contract involving the investment of money in a common
enterprise . Where a person is led to expect profits Investment
Contract as defined in SEC Implementing Rules – a contract,
transaction, or scheme whereby a person invests his money in a
common enterprise and is led to expect primarily from the efforts
of others.
FIVE ELEMENTS OF AN INVESTMENT
CONTRACT: (CICEP)

1. Contract, transaction, scheme

2. Investment of money
3. Common enterprise
4. Expectation of profits
5. Primarily from the efforts of others
EXAMPLE:

Quizbee Corp. is common enterprise and it is authorized to issue 100,000

shares with P10 par value. On June 1, 2020 they issued 10,000 shares of
P10 par value for P15 per share to Hatwell. The latter invest P150,000 in
exchange for the shares of the corporation.

Here, Hatwell became a stockholder/investor in the Quizbee Corp just by

buying stocks from the corporation. Investors buy stocks in the hopes of
profiting from the company's employees' efforts. Thus the buying of
stocks passed the Howey Test.
THANK YOU FOR
LISTENING!
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Obligations of the Vendor

1. To transfer the ownership of the
thing sold.
2. To deliver.
3. To warrant the thing sold.
Sales Part III: Obligations of the 4. To preserve the thing from
Vendor perfection to delivery, otherwise he
can be held liable for damages.

Atty. Maria Estella M. Maniquis

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• The vendor/seller is obliged to deliver the

thing sold including its accession and
accessories in the condition in which they
were upon the perfection of the contract
(Articles 1495 and 1537).
• Accession - the right by virtue of which the
owner of a thing becomes the owner of
The critical factor in all the different modes of everything which is produced thereby, or
which is incorporated or attached thereto,
effecting delivery which gives legal effect to the either naturally or artificially.
act, is the actual intention of the creditor to
• Accessory - things joined to or included with
deliver, and its acceptance by the vendee. the principal thing for the latter’s
embellishment, better use, or completion.

TRANSFER OF OWNERSHIP DELIVERY OF THE THING

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What are the 1. Actual or Real Delivery

2. Legal or Constructive Delivery
different kinds of
delivery?

Kinds of Delivery
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Example of actual or real

Actual or real delivery delivery
- This is the kind of delivery done by:
1. physically placing the thing sold in the 1. Alex sold his laptop to Glenn. As soon as Alex
hands of the vendee (in case of physically delivered the laptop to Glenn, there
is already actual or real delivery. (in case of
movables), or movable)
2. physically placing it in his possession or 2. Alex and Glenn executed a Contract of Sale
control (in case of immovables) [Article wherein Alex is selling his property for P3M to
1497] Glenn. The said Contract of Sale was notarized
and became a public instrument. (in case of
immovables)

Actual or Real Delivery Actual or Real Delivery

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- It covers all those acts which,

although not conferring physical
possession of the thing, have been What are the different kinds
held by construction of law
equivalent to acts of real delivery of CONSTRUCTIVE delivery?

Legal or Constructive Delivery

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1. Legal Formalities
When the sale is made through a
2. Traditio Simbolica (symbolic delivery)
public instrument, the execution
3. Traditio Longa Manu (delivery by the long hand) of such instrument is equivalent
4. Traditio brevi manu (delilvery by the short hand) to the delivery of the thing sold.
5. Consitutum possessorium (delivery by agreement This is understood that the
of possessors) intention of the party executing
6. Quasi-tradition (delivery of incorporeal property) it is to transfer ownership.

Kinds of Legal or Constructive

Delivery
Legal Formalities
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This delivery takes place by

delivery of a token or symbol (ex:
keys) representing the thing
TRADITIO which is delivered.
SYMBOLICA

Traditio Symbolica
(symbolic delivery)
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Example:
Delivery of the key of the
warehouse where the bulk of
TRADITIO LONGA MANU
sacks of rice is stored or kept.
(delivery by the long hand)
- This is equivalent to the
delivery of the thing

Traditio Symbolica
(symbolic delivery)
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Delivery of a movable by mere Note:

consent or agreement of the Delivery ”by mere consent or
parties if the thing cannot be agreement of the contracting parties”
transferred to the possession of is qualified by the phrase “if the thing
the vendee at the time of sale. sold cannot be transferred to the
(Article 1499) possession of the vendee at the time of
the sale”

Traditio Longa Manu Traditio Longa Manu

(delivery by the long hand) (delivery by the long hand)
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EXAMPLE:
- This form of delivery is effected
by the seller pointing out the Allan is selling his 3 carabaos to
George. Since he cannot immediately
object that will be sold to the
deliver it because the carabaos are
buyer, with the intention that heavy and difficult to move, the
ownership shall pass. mere pointing of the 3 carabaos to
George will constitute tradition longa
manu.

Traditio Longa Manu Traditio Longa Manu

(delivery by the long hand) (delivery by the long hand)
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- In this kind of delivery, there is no

need to deliver the thing sold
because the vendee is already in
possession of the object even
TRADITIO BREVI MANU before the sale and thereafter
(delivery by the short hand) continues in possession thereof in
the concept of an owner. This
applies to movable s only.

Traditio Brevi Manu

(delivery by the short hand)
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Example:
Marla lends her laptop to Jean so Jean can use it
for her online class. After one week, Jean decided
to buy the laptop from Marla.
TRADITIO
- here, there is no need for Marla to
deliver the laptop to Jean because it is already in CONSTITUTUM
Jean’s possession. POSSESSORIUM
Delivery by agreement of possessors
- after Traditio Brevi Manu, Jean now
enjoys the possession of the laptop as the owner

Traditio Brevi Manu

(delivery by the short hand)
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- The opposite of Traditio Brevi Manu • In this case, instead of the vendor
delivering the thing to the vendee
• It takes place when the vendor continues
in possession of the property sold not as so that the latter may, in turn,
owner but in some other capacity, as for deliver it back to the vendor, the
example, when the vendor stays as a law considers that all these have
tenant of the vendee. taken place by mere consent or
• Applies to both movable and immovable. agreement of the parties.

Traditio Constitutum Possessorium Traditio Constitutum Possessorium

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Example:
Allan is the owner of the house and lot in A.
Mabini, Caloocan City.
Since he needs money, he sold his property to Jen
for P5M. QUASI TRADITION
After payment of P5M, both parties agreed that
Allan will stay in the property, not as an owner, Delivery of incorporeal property
but as a lessee (nangungupahan) and will pay the
rent to Jen.

Traditio Constitutum Possessorium

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Corporeal v. Incorporeal Things

CORPOREAL

- Properties that are visible and tangible (nahahawakan)

- Example: land, laptop, dress, ref, cellphone

WHAT IS THE INCORPOREAL

DIFFERENCE BETWEEN - Intellectual or conventional property

CORPOREAL AND - things that cannot be seen or handled.

INCORPOREAL - Example: copyrights and trademarks, lease, mortgage.

Stocks, shares

PROPERTY? Quasi Tradition

delivery of incorporeal property
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Delivery is effected:
1. by the execution of a public instrument; or
2. When that mode of delivery is not applicable,
by the placing of the titles of ownership in the
How is delivery possession of the vendee; or
3. By allowing the vendee to use his rights as
effected in incorporeal new owner with the consent of the vendor.
things?
Quasi Tradition
delivery of incorporeal property
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EXAMPLE:
Girlie sold 100 shares of stocks of
PLDT to Boying. If Girlie endorsed the
TRANSACTION ON SALE or RETURN
certificate of stock to Boying, vs. TRANSACTION ON SALE ON
ownership is already transferred. APPROVAL OR ON TRIAL OR
Note: Endorsement is a term in negotiable instrument. SATISFACTION

Quasi Tradition
delivery of incorporeal property
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- The ownership of the goods is transferred to

the buyer on delivery, but the buyer has the
option to return the goods to the seller within
the time fixed in the contract, or if no time has
been fixed, within a reasonable time.
- This is a sale that depends on the discretion of
the buyer; it is a sale within a resolutory
condition.

Transaction on Sale or - Even if the buyer likes the quality of the item,
he/she can return if.
Return Transaction on Sale or Return
(Article 1502)
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Example:

Aljean bought a dress at Zalora. Within 7

days, she can return the dress provided it
is with the original tag and has not yet
been used.
Transaction on Sale on
Approval or on Trial or
Transaction on Sale or Return Satisfaction
(Article 1502)
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- The ownership of the goods remain with the

seller despite delivery, but shall be transferred to
- A business arrangement wherein an the buyer in the following cases:
individual who is interested in 1. When he signifies his approval or acceptance
purchasing a specific item is of the goods;
allowed to use the time for a given 2. When he does an act adopting the transaction;
length of time. At the end of that or
time, if the individual is satisfied 3. When he does not signify his approval or
with the item, he/she agrees to acceptance of the goods but retains the goods
without giving notice of rejection within the
purchase it. time fixed in the contract, or within a
reasonable time, and such time has expired.

Transaction on Sale on Approval or on Trial or Transaction on Sale on Approval or on Trial or

Satisfaction Satisfaction

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SALE OR RETURN SALE ON APPROVAL OR ON

TRIAL/SATISFACTION
Ownership to the goods passes to the buyer Ownership passes to the buyer upon his
upon delivery. acceptance of the goods or the expiration of
the time given to him to signify his
acceptance.
Sale is subjected to resolutory condition. Sale is subject to suspensive condition.

The risk of loss is on the buyer. The risk of loss is on the seller.
The buyer may return the goods even if he The buyer has no right to return the goods if
is satisfied of its quality. he is satisfied of its quality.

The ownership of the goods passes to the
buyer on delivery and subsequent return of
the goods reverts ownership in the seller.
The ownership remains in the seller until
DELIVERY THROUGH
the buyer signifies his approval or
acceptance to the seller. CARRIER

COMPARISON
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Where the seller is authorized or required to
send the goods to the buyer, delivery to the
carrier constitutes delivery to the buyer.
Exceptions:
- When a contrary intention appears (when
the parties did not intend the delivery of
the goods through the carrier)
- When there is implied reservation of
ownership.
Where the seller is authorized or required to
send the goods to the buyer, delivery to the
carrier constitutes delivery to the buyer.
Exceptions:
- When a contrary intention appears (when
the parties did not intend the delivery of
the goods through the carrier)
- When there is implied reservation of
ownership.

DELIVERY THROUGH CARRIER DELIVERY THROUGH CARRIER

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Kinds of Delivery to Carrier

1. Free Alongside Ship or Vessel (FAS)

2. Free on Board (FOB)
What are the different
3. Cost, Insurance, Freight (CIF)
kinds of delivery to
4. Collect on Delivery (COD)
carrier?
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The seller pays all charges and bears the risk

until the goods are placed alongside the
vessel nominated by the buyer at the named
port of shipment.
Example of ALONGSIDE:
on a barge or dock within reach of the
transport’s ship so that they can be loaded
aboard the vessel
FREE ALONGSIDE SHIP OR
VESSEL (FAS)
Free Alongside Ship or Vessel
(FAS)
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The risk of loss of or damage to the

goods passes from the seller to the buyer
when the goods are alongside the ship,
and the buyer bears all costs from that
moment onwards.

FREE ONBOARD (FOB)

Free Alongside Ship or Vessel
(FAS)
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Goods are to be delivered free of expense to the

buyer to the point where they are free on board. The
point of FOB determines where ownership passes:

a. FOB Shipping Point – the delivery of the goods to

the carrier is equivalent to delivery to the buyer,
and at that point, the risk of loss pertains to the
buyer.

b. FOB Destination – only when the vessel has

arrived at the point of destination would there
be delivery to the buyer and prior to that point
in time, the risk of loss will be borne by the
seller
COST, INSURANCE, FREIGHT
(CIF)
Free On board (FOB)
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It signifies the price fixed covers

the cost of the goods, the
expenses of the freight and the
insurance all of which are to be
paid by the seller to the point of
destination.
COLLECT ON DELIVERY
(COD)
Cost, Insurance, Freight (CIF)
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The carrier acts for the seller in

collecting purchase price, which
the buyer must pay to obtain
possession of the goods. What happens when the seller’s
title is VOIDABLE?

Collect on Delivery (COD)

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If the seller’s title is voidable, but

the same has not been avoided at
the time of the sale, the buyer
acquires a good title to the goods,
Rules on the completeness of
provided he buys them in good delivery of movables
faith, for value and without notice
of the seller’s defect of title.

Seller’s title is voidable

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Thank
You!

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CONDITION
WHAT IS THE DIFFERENCE
LEGAL FRAMEWORK BETWEEN WARRANTY AND ■ Refers to an uncertain event or contingency upon
the happening of which the obligation or right of the
Warranties
Obligations of the Vendee
Actions for Breach of Contract of Sale
CONDITION? contract depends. In such case, the obligation of the
contract does not attach until the condition is
Causes of Extinguishment of Sale performed.
Assignment of Credits

1 2 3

EFFECTS OF NON-FULFILLMENT OF WARRANTY 2 KINDS OF WARRANTIES:

CONDITION ■ Refers to a statement or representation made by the
seller of goods, contemporaneously and as part of the 1. Express
1. The other party may:
a. Refuse to proceed with the contract; or contract of sale, having reference to the character, 2. Implied
b. Proceed with the contract, waiving performance of the quality or title of the goods, and by which he promises or
condition. undertakes to ensure that certain facts are or shall be
2. If the other party has promised that the condition as he then represents.
should happen or to be performed, such first-mentioned Ex:
party may also treat the nonperformance of the condition
as a breach of warranty. ■ A bought a laptop from B, with a stipulation that the laptop
will be repaired for free if it will break within the first year.

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EXPRESS WARRANTIES: IMPLIED WARRANTIES: In a contract of sale, there is:

- Prom ise by the seller relating to the thing in w hich the natural tendency of 1. An implied warranty on the part of the seller that he
such prom ise is to induce the buyer to purchase the sam e, and the buyer
purchases the thing relying thereon
has the right to sell the thing at the time when the
ownership is to pass.
- The seller explicitly guarantees the quality of the goods or service being sold
- They are the warranties deemed included 2. An implied warranty that the thing shall be free from
Ex: in all contracts of sale by operation of law any hidden faults or defects, or any charge or
100% cotton
encumbrance not declared or known to the buyer
(warranty against hidden defect).
M ade in the USA
18k gold
3. The goods must be reasonably fit for the purpose in
which it was acquired; and
Organic orange juice
Honey from N ew Zealand 4. The goods must be merchantable in quality.

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OBLIGATIONS OF THE VENDEE

1. To accept the delivery of the thing sold;
OBLIGATIONS OF THE 2. To pay the price of the thing sold at the
time and place stipulated in the contract; ACTIONS FOR BREACH
and
VENDEE 3. To bear the expenses for the execution and OF CONTRACT OF SALE
registration of the sale and putting the
goods in a deliverable state, if such is the
stipulation.

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ACTIONS FOR BREACH OF CONTRACT OF ACTIONS FOR BREACH OF CONTRACT OF ACTIONS FOR BREACH OF CONTRACT OF
SALE SALE: ACTIONS BY THE SELLER SALE: ACTIONS BY THE BUYER
It can be categorized between: 1. Maintain an action for the price of the goods if the
1. Actions by the Seller buyer wrongfully neglects or refuses to pay. 1. Bring an action for specific
2. Maintains an action for damages if the buyer performance if the seller has
2. Actions by the Buyer wrongfully neglects or refuses to accept any and
pay for the goods. broken the contract to deliver
3. Rescind the contract if the buyer has repudiated
the sale, or manifested his inability to perform his
specific goods.
obligation, or has committed a breach of contract,
where the goods have not been delivered to the
buyer.
(Note: Repudiate – refused to accept)

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ACTIONS FOR BREACH OF CONTRACT OF SALES ARE EXTINGUISHED:

SALE: ACTIONS BY THE BUYER 1. By the same causes as all other obligations:
a. Payment or performance of the obligation

EXTINGUISHMENT OF
2. In case of breach of warranty by the seller, the buyer m ay, at his election: b. Loss of the thing due

a. Accept or keep the goods and set up against the seller, the breach of c. Condonation or remission of debt’
warrant by way of recoupm ent or dim inution or extinction of the price; d. Confusion or merger of rights
b. Accept or keep the goods and m aintain an action against the seller for
dam ages for breach of warranty;
SALE e.
f.
Compensation
Prescription
c. Refuse to accept the goods and m aintain an action against the seller for g. Annulment
dam ages for breach of warranty; and
h. Rescission
d. Rescind the sale and refuse to receive the goods; or if the goods have i. Fulfillment of resolutory condition
already been received, return them or offer to return them to the seller j. Novation
and recover the price or any party thereof w hich has been paid.
2. By redemption, whether conventional or legal redemption

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2

WHAT IS THE DIFFERENCE
BETWEEN LEGAL AND
CONVENTIONAL
REDEMPTION?
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PERIOD OF REDEMPTION
1. When the right of redemption has been agreed upon and no period is
fixed within which the right shall be exercised, the prescriptive period
shall be 4 years from the date of the contract.
2. When a period is fixed by the parties, or when the period agreed upon is
indefinite, such as when the repurchase may be made ”at any time”, the
right of redemption must be exercised within 10 years from the date of
the contract. This is the maximum prescriptive period, and any
stipulation as to the excess shall be null and void.
3. In case a final judgment in a civil action has been rendered by the court
declaring the contract to be pacto de retro sale of immovable property,
the vendor a retro may still exercise the right within 30 days from the
rendition of final judgment.
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EXAMPLES OF LEGAL REDEMPTION
■ 1. Sale of a co--owner of his share to a third person (Art.
1620)
■ 2. When a credit or other incorporeal right in litigation is
sold (Art. 1634)
■ 3. Sale of an heir of his hereditary rights to a third party (Art.
1088)
■ 4. Sale of adjacent rural lands not exceeding 1 hectare (Art.
1621)
■ 5. Sale of adjacent small urban lands bought merely for
speculation (Art. 1622)
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CONVENTIONAL REDEMPTION CONVENTIONAL REDEMPTION
- It occurs when the vendor reserves the right to repurchase NOTE:
the thing sold, with the obligation to return to the vendee:
a. Price of the sale
There can be no conventional redemption unless it has been
stipulated upon in the contract of sale.
b. Expenses of the contract
c. Necessary and useful expenses made on the thing sold,
and
The right to redeem must be reserved by the seller through a
stipulation to that effect in the contract.
d. Any other legitimate payments made because of the sale.
* This is applicable in the contract of pacto de retro sale or sale with a
right to repurchase. In this kind of sale, the vendee is subrogated to the
rights and actions of the vendor.
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LEGAL REDEMPTION PURPOSE OF LEGAL REDEMPTION
The right to be subrogated, upon the same terms and 1. To enable the debtor to pay less than the value of the
credit;
conditions stipulated in the contract, in the place of
one who acquires a thing by purchase or dation in 2. To prevent speculation on the part of the assignee; and
payment, or by any other transaction whereby 3. To put an end to the ligitation.
ownership is transmitted by onerous title
* Subrogation – the substitution of one person or group by
another in respect of a debt or insurance claim, accompanied
by the transfer of any associated rights and duties.
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