You are on page 1of 28

SECURITIES REGULATION

CODE
SECURITIES
• - are shares, participation or interests

• in a corporation or in a commercial
enterprise or profit-making venture
and
• evidenced by a certificate, contract,
instrument,

• whether written or electronic in


character.
Q: Asia Pacific Finance Co. (Asia Pacific) was
engaged in purchasing receivables at a
discount. Baas contend that Asia Pacific was
organized as an investment house which
could not engage in the lending of funds
obtained from the public through receipt of
deposits. The disputed promissory note, deed
of chattel mortgage and continuing
undertaking were not intended to be valid and
binding on the parties as they were merely
devices to conceal their real intention which
was to enter into a contract of loan in violation
of banking laws. Is Asia Pacific engaged in
banking?
A: No. As defined in Section 2(a) of the Revised
Securities Act, securities “shall include commercial
papers evidencing indebtedness of any person, financial
or non-financial entity, irrespective of maturity, issued,
endorsed, sold, transferred or in any manner conveyed
to another with or without recourse, such as promissory
notes”. Clearly, the transaction between the petitioners
and respondent was one involving not a loan but
purchase of receivables at a discount, well within the
purview of “investing, re-investing, or trading in
securities” which an investment company, like Asia
Pacific is authorized to perform and does not constitute a
violation of the General Banking Act. But here, the funds
supposedly “lent” to petitioners have not been shown to
be obtained from the public by way of deposits, hence,
the inapplicability of banking laws. (Baas vs. Asia Pacific
Finance Corporation, G.R. No. 128703, October 18,
2000)
UNCERTIFIED SECURITY
- A security evidenced by electronic or
similar records.
-Section 8 – Requirement of Registration

Section 9 – Exempt Securities

Section 10 – Exempt Transactions


PRE-NEED PLANS

-Are contracts which provide for the performance


of future services or the payment of future
monetary considerations at the time of actual
need, for which planholders pay in cash or
installment at stated prices, with or without
interest or insurance coverage and includes life,
pension, education, interment, and other plans
which the Commission may from time to time
approve.
RULES ON
-Section 16 of the SRC
PRE-NEED PLANS
CONDITIONS WHEN SEC MAY ISSUE CEASE
AND DESIST ORDER
1) It must conduct proper investigation or
verification; and,
2) There must be a finding that the act or
practice, unless restrained will operate as a
fraud on investors or is otherwise likely to
cause grave or irreparable injury or prejudice
to the investing public. (SEC vs. Performance
Foreign Exchange Corp., G.R. No. 154131,
July 20, 2006)
CAN THE SEC ISSUE A CEASE AND DESIST ORDER EVEN
WITHOUT TRIAL?

-Yes – Section 64 of the SRC

It was sufficient that the company was amply appraised


of the results of the SEC investigation and then given the
reasonable opportunity to present its defense. A formal
trial or hearing is not necessary to comply with the
requirements of due process. Its essence is simply the
opportunity to explain one’s position. (Primanila Plans, Inc.
vs. SEC, G.R. No. 193791, August 6, 2014)
HOW MAY VIOLATIONS OF THE SRC BE
PURSUED?
-Must be referred first to SEC
-Doctrine of primary jurisdiction
WHAT ABOUT CIVIL SUITS?
-RTC has jurisdiction
TENDER OFFER
-Is an offer by the acquiring person to stockholders of a
public company for them to tender their shares therein
on the terms specified in the offer. The Tender Offer
Rule applies also in an indirect acquisition arising from
the purchase of shares of a holding company of the
listed firm. Tender offer is in place to protect minority
stockholders 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
stockholders.
Cemco Holding Inc. versus National Life Insurance Co., G.R. No. 171815,
August 7, 2007
ELECTION CONTEST
-Refers to any controversy or dispute involving title or
claim to any elective office in a stock or non-stock
corporation, the validation of proxies, the manner
and validity of elections, and the qualifications of
candidates, including the proclamation of winners, to
the office of the director, trustee or other officer
directly elected by the stockholders in a close
corporation or by members of a non-stock
corporation where the articles of incorporation or
by-laws so provide.
JURISDICTION OVER VALIDATION OF PROXIES IN RELATION TO
THE EXISTENCE OF QUORUM FOR THE ELECTION OF DIRECTORS
-SEC has jurisdiction.

-SEC vs. CA, G.R. No. 187702, October 22, 2014


JURISDICTION ON THE MATTER OF VALIDITY OF
PROXIES IN RELATION TO ELECTION CONTROVERSIES
-RTC

- GSIS vs. CA, G.R. No. 183905, April 16, 2009


DOES SEC HAVE THE POWER TO COLLECT FEES FOR EXAMINING
AND FILING OF ARTICLES OF INCORPORATION AND BY-LAWS?
-Yes
-SEC versus GMA Network, Inc., G.R. No. 164026, December 23, 2008
-Republic Act No. 3531 (R.A. No. 3531) provides that where the
amendment consists in extending the term of corporate existence, the
SEC shall be entitled to collect and receive for the filing of the
amended articles of incorporation the same fees collectible under
existing law as the filing of articles of incorporation.
IT IS ARGUED THAT THE SANDIGANBAYAN HAS JURISDICTION OVER A
STOCKHOLDERS’ SUIT TO ENFORCE ITS RIGHTS OF INSPECTION UNDER
THE CORPORATION CODE WHERE THE COMPANY SUBJECT MATTER OF
THE COMPLAINT IS SEQUESTERED?

RTC and not Sandiganbayan


(Abad vs. Philippine Communications Satellite
Corporation, G.R. No. 200620, March 18, 2015
INSIDER/INSIDER TRADING
Section 3. 8 of the SRC and Section 27 of the SRC

3.8. "Insider" means


(a) the issuer;
(b) a director or officer (or any person performing similar functions) of, or
a person controlling the issuer; gives or gave him access to material
information about the issuer or the security that is not generally available to
the public;
(d) A government employee, director, or officer of an exchange, clearing
agency and/or self-regulatory organization who has access to material
information about an issuer or a security that is not generally available to
the public; or
(e) a person who learns such information by a communication from any
forgoing insiders.
REASON FOR PROHIBITION

The duty to disclose is based on 2 factors:


1) Existence of a relationship giving access, directly
or indirectly to information intended to be
available only for a corporate purpose
2) Inherent unfairness involved when a party takes
advantage of such information knowing it is
unavailable to those with whom he is dealing.
(SEC vs. Interport Resources Corp., G.R. No. 135808,
October 6, 2008)
A FACT OF SPECIAL SIGNIFICANCE

It may be:
1) A material fact which would be likely, on being
made generally available to effect the market
price of a security to a significant extent; or,
2) One which a reasonable person would
consider especially important in determining
his course of action with regard to the shares
of stocks. (SEC vs. Interport, G.R. No. 135808,
October 6, 2008
PUBLIC COMPANY

Not limited to a company whose shares of stocks


are publicly listed; even companies whose shares
are offered only to a specific group of people,
are considered a public company, provided they
meet the requirements enumerated in the SRC
such as existence of assets exceeding P50M and
395,998 shareholders. (Philippine Veterans Bank
vs. Callangan, G.R. No. 191995, August 3, 2011)
INVESTMENT CONTRACT
A contract, transaction or scheme where a persons
invests his money in a common enterprise and is
led to expect profits primarily from the efforts of
others.
Sale of internet website does not fall under
investment contract as buyers do not invest money
in the company that it could use for running some
business that would generate profits for the
investors. (SEC vs. Prosperity Com, Inc., G.R. No.
164197, January 25, 2012)
IS NETWORK MARKETING AN INVESTMENT CONTRACT?

No. Network marketing, a scheme adopted by


companies for getting people to buy their
products where the buyer can become a down-
line seller, who earns commissions from purchases
made by new buyers who he refers to the person
who sold the product to him, is not an investment
contract. (SEC vs. Prosperity Com, Inc., G.R. No.
164197, January 25, 2012)
Q: Becky Sia, an unregistered broker, convinced Al and
Fonso to make an investment under a second product,
Performance Management Portfolio (PMPA) which provides
a more limited guarantee for the principal investment of
USD 100,000 and a 80%-20% sharing of the profit
between the client and PIPC respectively. In both schemes,
the client’s participation will be limited to choosing two
currencies, which will in turn be traded by professional
traders abroad. Profit earned from the transaction will then
be remitted to the client’s account every 8 weeks.

Is this an investment contract? Is there a violation of the


SRC?
A: Yes.

SEC vs. Santos, G.R. No. 195542, March 19, 2014


DEVICES AND PRACTICES IN WHICH
SECURITY PRICE IS MANIPULATED

- Section 24 of the SRC

You might also like