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BATAS PAMBANSA BILANG. 178BATAS PAMBANSA BLG. 178 - THE
REVISED SECURITIES ACT
CHAPTER
I
Title and Definitions
Section 1. Title. — This Act shall be known as the
Revised Securities Act. (1a)
Sec. 2. Definitions. — For purposes of this Act:
(a) "Securities" shall include bonds, debentures,
notes, evidences of indebtedness, shares in a company, pre-organization
certificates or subscriptions, investment contracts, certificates of
interest or participation in a profit sharing agreement, collateral
trust certificates, equipment trust certificates (including conditional
sale contracts or similar interests or instruments serving the same
purpose), voting trust certificates, certificates of deposit for a
security, or fractional undivided interest in oil, gas, or other
mineral rights, or, in general, interests or instruments commonly
considered to be "securities", or certificates of interests or
participation in, temporary or interim certificates for, receipts for,
guarantees of, or warrants or rights to subscribe to or buy or sell any
of the foregoing; or 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, repurchase
agreements, certificates of assignments, certificates of participation,
trust certificates or similar instruments; or proprietary or
non-proprietary membership certificates, commodity futures contracts,
transferable stock options, pre-need plans, pension plans, life plans,
joint venture contracts, and similar contracts and investments where
there is no tangible return on investments plus profits but an
appreciation of capital as well as enjoyment of particular privileges
and services.
(b) "Person" means an individual, a corporation, a
partnership, an association, a joint-stock company, a trust, any
business organization, or a government or political subdivision
thereof. As used in this paragraph, the term "trust" shall include only
a trust where the interest or interests of the beneficiary or
beneficiaries are evidenced by a security.
(c) "Sale" or "sell" shall include every contract of
sale or disposition of a security or interest in a security, for value.
The terms "offer to sell" "offer for sale", or "offer" shall include
every attempt or offer to dispose of, or solicitation of an offer to
buy, a security or interest in a security, for value.
(d) "Buy" and "purchase" shall include any contract
to buy, purchase, or otherwise acquire.
(e) "Issuer" means every person who issues or
proposes to issue any security; except that with respect to
certificates of deposit, voting trust certificates, or certificates of
interest or shares in an unincorporated investment trust, not having a
board of directors or persons performing similar functions or of the
fixed restricted management, or unit type, the term "issuer" means any
person or persons performing the acts and assuming the duties of
depositor or manager pursuant to the provisions of the trust or other
agreement or instrument under which such securities are issued; and
except that with respect to fractional undivided rights in oil, gas, or
other mineral rights, claims or properties, the term "issuer" means the
owner of any such right or property or of any interest therein, whether
whole or fractional, who creates fractional interests therein for the
purpose of public offering.
(f) "Dealer" means any person engaged in the business
of buying and selling securities for his own account, through a broker
or otherwise, but does not include any person insofar as he buys or
sells securities for his own account, either individually or in some
fiduciary capacity, but not as a part of a regular business.
(g) "Salesman" shall include every natural person,
other than a dealer, employed or appointed or authorized by a dealer,
issuer or broker to sell securities in any manner. The partners in a
partnership and the executive officers of a corporation or other
association registered as a dealer shall not be salesmen within the
meaning of this definition.
(h) "Broker" means any person engaged in the business
of effecting transactions in securities for the account of others but
does not include a bank.
(i) "Exchange" means any organization, association,
or group of persons, whether incorporated or unincorporated which
constitutes, maintains, or provides a market place or facilities for
bringing together purchasers and sellers of securities or for otherwise
performing with respect to securities the functions commonly performed
by a stock exchange as that term is generally understood, and includes
the market place and the market facilities maintained by such
exchange.
(j) "Facility", when used with respect to an
exchange, includes its premises, tangible or intangible property,
whether on the premises or not, any right to the use of such premises
or property or any service thereof for the purpose of effecting or
reporting a transaction on an exchange including, among other things,
any system of communication to or from the exchange, by ticker or
otherwise, maintained by or with the consent of the exchange, and any
right of the exchange to the use of any property or service.
(k) "Member", when used with respect to an exchange,
means (1) any natural person permitted to effect transactions on the
floor of the exchange without the services of another person acting as
broker, (2) any registered broker or dealer with which such a natural
person is associated, (3) any registered broker or dealer permitted to
designate as a representative such a natural person, and (4) any other
registered broker or dealer which agrees to be regulated by such
exchange and with respect to which the exchange undertakes to enforce
compliance with the provisions of this Act, the rules and regulations
thereunder, and its own rules.
(l) "Bank" means an institution authorized to operate
as such by the Central Bank of the Philippines.
(m) "Director" means any director of a corporation or
any person performing similar functions with respect to any
organization, whether incorporated or unincorporated.
(n) "Commission" means the Securities and Exchange
Commission.
(o) "Clearing agency" means any person who acts as an
intermediary in making payments or deliveries or both in connection
with transactions in securities or who provides facilities for
comparison of data respecting the terms of settlement of securities
transactions, to reduce the number of settlements of securities
transactions, or for the allocation of securities settlement
responsibilities. Such term also means any person, such as a securities
depository, who (1) acts as a custodian of securities in connection
with a system for the central handling of securities whereby all
securities of a particular class or series of any issuer deposited
within the system are treated as fungible and may be transferred,
loaned, or pledged by bookkeeping entry without physical delivery of
securities certificates, or (2) otherwise permits or facilitates the
settlement of securities transactions without physical delivery of
securities certificates.
(p) "Transfer agent" means any person who engages on
behalf of an issuer of securities or on behalf of itself as an issuer
of securities in (1) countersigning such securities upon issuance; (2)
monitoring the issuance of such securities with a view to preventing
unauthorized issuance, a function commonly performed by a person called
a registrar; (3) registering the transfer of such securities; (4)
exchanging or converting such securities; or (5) transferring record
ownership of securities by bookkeeping entry without physical issuance
of securities certificates.
(q) "Underwriter" means any person who has purchased
from an issuer with a view to, or offers or sells for an issuer in
connection with, the distribution of any security, or participates or
has a direct or indirect participation in any such undertaking, or
participates or has a participation in the direct or indirect
underwriting of any such undertaking; but such term shall not include a
person whose interest is limited to a commission from an underwriter or
dealer not in excess of the usual and customary distributors' or
sellers' commission. As used in this paragraph, the term "issuer" shall
include, in addition to an issuer, any person directly or indirectly
controlling or controlled by the issuer, or any person under direct or
indirect common control with the issuer.
(r) "Promoter" includes (1) any person who, acting
alone or in conjunction with one or more other persons, directly or
indirectly, takes initiative in founding and organizing the business or
enterprise of an issuer; or (2) any person who, in connection with the
founding and organizing of the business of an issuer, directly or
indirectly, receives in consideration of services or property or both
services or property ten (10%) per centum or more of any class of
securities of the issuer or ten (10%) per centum or more of the
proceeds from the sale of any class of such securities. However, a
person who receives such securities or proceeds either solely as
underwriting commissions or solely as consideration of property shall
not be deemed a promoter within the meaning of this paragraph if such
person does not otherwise take part in founding and organizing the
enterprise. (2a)
Sec. 3. Administrative agency. — This Act shall be
administered by the Commission which shall continue to have the
organization, powers, and functions provided by Presidential Decrees
Numbered 902-A, 1653, 1758 and 1799 and Executive Order No. 708. The
Commission shall, except as otherwise expressly provided, have the
power to promulgate such rules and regulations as it may consider
appropriate in the public interest for the enforcement of the
provisions hereof. (n)
CHAPTER II
Registration of Securities
Sec. 4. Requirement of registration of securities.
— (a) No securities, except of a class exempt under any of the
provisions of Section five hereof or unless sold in any transaction
exempt under any of the provisions of Section six hereof, shall be sold
or offered for sale or distribution to the public within the Philippine
unless such securities shall have been registered and permitted to be
sold as hereinafter provided.
(b) Notwithstanding the provisions of paragraph (a)
of this Section and the succeeding Section s regarding exemptions, no
commercial paper as defined in Section two hereof shall be issued,
endorsed, sold, transferred or in any other manner conveyed to the
public, unless registered in accordance with the rules and regulations
that shall be promulgated in the public interest and for the protection
of investors by the Commission. The Commission, however, with due
regard to the public interest and the protection of investors, may, by
rules and regulations, exempt from registration any commercial paper
that may otherwise be covered by this paragraph. In either case, the
rules and regulations promulgated by the Commission shall be subject to
the approval of the Monetary Board of the Central Bank of the
Philippines. The Monetary Board shall, however, have the power to
promulgate its own rules on the monetary and credit aspects of
commercial paper issues, which may include the imposition of ceilings
on issues by any single borrower, and the authority to supervise the
enforcement of such rules and to require issues of commercial papers to
submit their financial statements and such periodic reports as may be
necessary for such enforcement. As far as practicable, such financial
statements and periodic reports, when required by both the Commission
and the Monetary Board, shall be uniform.
(c) A record of the registration of securities shall
be kept in a Register of Securities in which shall be recorded orders
entered by the Commission with respect to such securities. Such
register and all documents or information with respect to the
securities registered therein shall be open to the public inspection at
reasonable hours on business days. (4a)
Sec. 5. Exempt securities. — (a) Except as
expressly provided, the requirement of registration under subsection
(a) of Section four of this Act shall not apply to any of the following
classes of securities:
(1) Any security issued or guaranteed by the
Government of the Philippines, or by any political subdivision or
agency thereof or by any of its public instrumentalities, or by any
person controlled or supervised by, and acting as an instrumentality of
said Government, or any certificate of deposit for any of the
foregoing.
(2) Any security issued or guaranteed by the
government of any country with which the Philippines is, at the time of
the sale or offer of sale thereof, maintaining diplomatic relations, or
by any state, province or political subdivision thereof having the
power of taxation or assessment, which security is recognized at the
time of the sale or the offer to sell in the Philippines as a valid
obligation by such foreign government or by such state, province or
political subdivision thereof using the same.
(3) Any security issued or guaranteed by any banking
institution authorized to do business in the Philippines, the business
of which is substantially confined to banking or a financial
institution licensed to engage in quasi-banking, and is supervised by
the Central Bank.
(4) Any security issued by a building and loan
association, non-stock savings and loan association, or similar
institution, substantially all the business of which is confined to the
making of loans to members but does not include any such security where
the issuer takes from the total amount paid or deposited by the
purchaser, by way of any fee, cash value or other device whatsoever,
either upon termination of the investment at maturity or before
maturity an aggregate amount in excess of three per centum of the face
value of such security; or any security issued by rural credit
associations or by cooperative marketing associations which are subject
to regulation and supervision by the proper government agency.
(5) Certificates issued by a receiver or by a trustee
in bankruptcy duly approved by the court.
(6) Any insurance or endowment policy or annuity
contract, or optional annuity contract, issued by a corporation subject
to the supervision of the Insurance Commission.
(7) Any security covering any right or interest in
real property, including a subdivision lot or a condominium unit, where
the sale or transfer of such security is subject to the supervision and
regulation of the Ministry of Human Settlements or any of its
authorized constituent or attached agencies.
(8) Pension plans subject to regulation and
supervision by the Bureau of Internal Revenue and/or the Insurance
Commission.
(b) The Commission may, from time to time and subject
to such terms and conditions as may be prescribed after public hearing,
add to the foregoing any class of securities similar to these
above-enumerated if it finds that the enforcement of this Act with
respect to such securities is not necessary in the public interest and
for the protection of investors. (5a)
Sec. 6. Exempt transactions. — (a) The requirement
of registration under subsection (a) of Section four of this Act shall
not apply to the sale of any security in any of the following
transactions:
(1) At any judicial sale, or sale by an executor,
administrator, guardian or receiver or trustee in insolvency or
bankruptcy.
(2) By or for the account of a pledge holder, or
mortgagee, or any other similar lienholder selling or offering for sale
or delivery in the ordinary course of business and not for the purpose
of avoiding the provisions of this Act, to liquidate a bona fide debt,
a security pledged in good faith as security for such debt.
(3) An isolated transaction in which any security is
sold, offered for sale, subscription or delivery by the owner thereof,
or by his representative for the owner's account, such sale or offer
for sale, subscription or delivery not being made in the course of
repeated and successive transactions 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.
(4) 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; or the issuance of
securities to the security holder or other creditors of a corporation
in the process of a bona fide reorganization of such corporation made
in good faith and not for the purpose of avoiding the provisions of
this Act, either in exchange for the securities of such security
holders or claims of such creditors or partly for cash and partly in
exchange for the securities or claims of such security holders or
creditors; or the issuance of additional capital stock of a corporation
sold or distributed by it among its own stockholders exclusively, where
no commission or other remuneration is paid or given directly or
indirectly in connection with the sale or distribution of such
increased capital stock.
(5) The transfer or exchange by one corporation to
another corporation of their own securities in connection with a
consolidation or merger of such corporations.
(6) The issuance of bonds or notes secured by
mortgage upon real estate or tangible personal property, where the
entire mortgage together with all the bonds or notes secured thereby
are sold to a single purchaser at a single sale.
(7) 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 that the security so
surrendered has been registered and permitted to be sold under this Act
or was, when sold, exempt from the provisions of this Act, and that the
security issued and delivered in exchange, if sold at the conversion
price, would at the time of such conversion fall within the class of
securities entitled to registration under this Act. Upon such
conversion the par value of the security surrendered in such exchange
shall be deemed the price at which the securities issued and delivered
in such exchange are sold.
(8) Broker's transactions, executed upon customer's
orders on any exchange or in the over-the-counter market but not those
made upon the solicitation by brokers of such orders.
(9) Subscriptions for shares of the capital stock of
a corporation prior to the incorporation thereof under the Corporation
Code, when no expense is incurred, or no commission, compensation or
remuneration is paid or given in connection with the sale or
disposition of such securities, and only when the purpose for
soliciting, giving or taking, of such subscriptions is to comply with
the requirements of such law as to the percentage of the capital stock
of a proposed corporation which should be subscribed before it can be
registered and duly incorporated.
(10) The exchange of securities by the issuer with
its existing security holders exclusively, where no commission or other
remuneration is paid or given directly or indirectly for soliciting
such exchange.
(11) Any issuance of any security by a public utility
or service corporation which, in compliance with or pursuant to law,
regulation or decree, is intended to broaden its equity base as well as
to finance a part of the capital investment thereof through the
issuance and sale of stocks.
(b) The Commission may, from time to time and subject
to such terms and conditions as it may prescribe, exempt transactions
other than those provided in the preceding paragraph, if it finds that
the enforcement of the requirements of registration under this Act with
respect to such transactions is not necessary in the public interest
and for the protection of the investors by reason of the small amount
involved or the limited character of the public offering.
(c) A fee equivalent to one-tenth of one per centum
of the maximum aggregate price or issued value of the securities shall
be collected by the Commission for granting a general or particular
exemption from the registration requirements of this Act. (6a)
Sec. 7. Commodity futures contracts. —
Notwithstanding the provisions of paragraph (a) of Sec. 4 and of
Sec. 5 and 6 regarding exemptions, commodity futures contracts may
be registered or otherwise regulated, and futures commission merchants,
futures brokers, floor brokers, pool operators and advisors licensed
and supervised in accordance with the rules and regulations that shall
be promulgated in the public interest and for the protection of
investors by the Commission, with the approval of the Monetary Board of
the Central Bank of the Philippines. Such rules and regulations may,
among other things, provide for the establishment and maintenance by
futures commission merchants, futures brokers, floor brokers, pool
operators and advisors of bank accounts exclusively for margin deposit
of and/or other receipts from customers, the monitoring of withdrawals
from such account through periodic reports and/or examination, the
requirement that at least one of the signatories to fund withdrawals
from such account must be a Filipino citizen and a resident of the
Philippines, the posting by futures commission merchants, futures
brokers, floor brokers, poll operators and advisors of a bond in an
amount sufficient to meet possible claims against them, taking into
account the volume of margin deposits held by them, the establishment
of a common compensation fund to be contributed by all futures
commission merchants, futures brokers, floor brokers, pool operators
and advisors and subject to the control and supervision of the
Commission, and the registration and use by futures commission
merchants, futures brokers, floor brokers, pool operators and advisors
of official receipts to evidence commissions received by them from
customers. However, the Commission shall, after proper notice and
opportunity for hearing, prohibit transactions with respect to all or
specified commodity futures contracts it shall find that such
transactions will be inimical to the economic interest of the country
or may cause grave or irreparable injury or prejudice to the investing
public. (n)
Sec. 8. Procedure for registration. — (a) All
securities required to be registered under subsection (a) of Section four of this Act shall be registered through the filing by the issuer
or by any dealer or underwriter interested in the sale thereof, in the
office of the Commission, of a sworn registration statement with
respect to such securities, containing or having attached thereto, the
following:
(1) Name of issuer and, if incorporated, place of
incorporation.
(2) The location of the issuer's principal business
office, and if such issuer is a non-resident or its place of office is
outside of the Philippines, the name and address of its agent in the
Philippines authorized to receive notice.
(3) The names and addresses of the directors or
persons performing similar functions, and the chief executive,
financial and accounting officers, chosen or to be chosen, if the
issuer be a corporation, association, trust, or other entity; of all
the partners, if the issuer be a partnership; and of the issuer, if the
issuer be an individual; and of the promoters in the case of a business
to be formed.
(4) The names and addresses of the underwriters.
(5) The general character of the business actually
transacted or to be transacted by, and the organization and financial
structure of, the issuer including identities of all companies
controlling, controlled by or commonly controlled with the issuer.
(6) The names and addresses of all persons, if any,
owning of record or beneficially, if known, more than ten (10%) per
centum in the aggregate of the outstanding stock of the issuer as of a
date within twenty days prior to the filing of the registration
statement.
(7) The amount of securities of the issuer held by
any person specified in subparagraphs (3), (4), and (6) of this
subsection, as of a date within twenty days prior to the filing of the
registration statement, and, if possible, as of one year prior thereto,
and the amount of the securities, for which the registration statement
is filed, to which such persons have indicated their intention to
subscribe.
(8) A statement of the capitalization of the issuer
and of all companies controlling, controlled by or commonly controlled
with the issuer, including the authorized and outstanding amounts of
its capital stock and the proportion thereof paid up; the number and
classes of shares in which such capital stock is divided; par value
thereof, or if it has no par value, the stated or assigned value
thereof; a description of the respective voting rights, preferences,
conversion and exchange rights, rights to dividends, profits, or
capital of each class, with respect to each other class, including the
retirement and liquidation rights or values thereof.
(9) A copy of the security for the registration of
which application is made.
(10) A copy of any circular, prospectus,
advertisement, letter, or communication to be used for the public
offering of the security.
(11) A statement of the securities, if any, covered
by options outstanding or to be created in connection with the security
to be offered, together with the names and addresses of all persons, if
any, to be allotted more than ten (10%) per centum in the aggregate of
such options.
(12) The amount of capital stock of each class issued
or included in the shares of stock to be offered.
(13) The amount of the funded indebtedness
outstanding and to be created by the security to be offered, with a
brief statement of the date, maturity, and character of such debt, rate
of interest, character or amortization provisions, other terms and
conditions thereof and the security, if any, therefor. If substitution
of any security is permissible, a summarized statement of the
conditions under which such substitution is permitted. If substitution
is permissible without notice, a specific statement to that effect.
(14) The specific purposes in detail and the
approximate amounts to be devoted to such purposes, so far as
determinable, for which the security to be offered is to supply funds,
and if the funds are to be raised in part from other sources, the
amounts and the sources thereof.
(15) The remuneration, paid or estimated to be paid,
by the issuer or its predecessor, directly or indirectly, during the
past year and the ensuing year to (a) the directors or persons
performing similar functions, and (b) its officers and other persons,
naming them whenever such remuneration exceeded sixty thousand
(P60,000.00) pesos during any such year.
(16) The amount of issue of the security to be
offered.
(17) The estimated net proceeds to be derived from
the security to be offered.
(18) The price at which the security is proposed to
be offered to the public or the method by which such price is computed
and any variation therefrom at which any portion of such security is
proposed to be offered to persons or classes of persons, other than the
underwriters, naming them or specifying the class. A variation in price
may be proposed prior to the date of the public offering of the
security by filing an amended registration statement.
(19) All commissions or discounts paid or to be paid,
directly or indirectly, by the issuer to the underwriters in respect of
the sale of the security to be offered. Commissions shall include all
cash, securities, contracts, or anything of value, paid, to be set
aside, or disposed of, or understanding with or for the benefit of any
other person in which any underwriter is interested, made in connection
with the sale of such security. A commission paid or to be paid in
connection with the sale of such security by a person in which the
issuer has an interest or which is controlled by, or under common
control with, the issuer shall be deemed to have been paid by the
issuer. Where any such commission is paid, the amount of such
commission paid to each underwriter shall be stated.
(20) The amount or estimated amounts, itemized in
reasonable detail, of expenses, other than commission specified in the
next preceding paragraph, incurred or to be incurred by or for the
account of the issuer in connection with the sale of the security to be
offered or properly chargeable thereto, including legal, engineering,
certification, authentication, and other charges.
(21) The net proceeds derived from any security sold
by the issuer during the two years preceding the filing of the
registration statement, the price at which such security was offered to
the public, and the names of the principal underwriters of such
security.
(22) Any amount paid within two years preceding the
filing of the registration statement or intended to be paid to any
promoter and the consideration for any such payment.
(23) The names and addresses of the vendors and the
purchase price of any property or goodwill, acquired or to be acquired,
not in the ordinary course of business, which is to be defrayed in
whole or in part from the proceeds of the security to be offered, the
amount of any commission payable to any person in connection with such
acquisition, and the name or names of such person or persons, together
with any expense incurred or to be incurred in connection with such
acquisition, including the cost of borrowing money to finance such
acquisition.
(24) Full particulars of the nature and extent of the
interest, if any, of every director, principal executive officer, and
of every stockholder holding more than ten (10%) per centum in the
aggregate of the stock of the issuer, in any property acquired, not in
the ordinary course of business of the issuer, within two years
preceding the filing of the registration statement or proposed to be
acquired at such date.
(25) The names and addresses of independent counsel
who have passed on the legality of the issue.
(26) Dates of and parties to, and the general effect
concisely stated of every material contract made, not in the ordinary
course of business, which contract is to be executed in whole or in
part at or after the filing of the registration statement or which has
been executed not more than two years before such filing. Any
management contract or contract providing for special bonuses or
profit-sharing arrangements, and every material patent or contract for
a material patent right, and every contract by or with a public utility
company or an affiliate thereof, providing for the giving or receiving
of technical or financial advice or service shall be deemed a material
contract.
Any contract, whether or not made in the ordinary course of business
with any stockholder, whether a natural or juridical person, owning
more than ten (10%) per centum of the shares of the issuer shall be
deemed a material contract for the purpose of this Act.
(27) A balance sheet as of a date not more than
ninety days prior to the date of the filing of the registration
statement showing all of the assets of the issuer, the nature and cost
thereof, whenever determinable with intangible items segregated,
including any loan to or from any officer, director, stockholder or
person directly or indirectly controlling or controlled by the issuer,
or person under direct or indirect common control with the issuer. In
the event any such assets consist of shares of stock in other
companies, the balance sheet and profit and loss statements of such
companies for the past three years shall likewise be enclosed. All the
liabilities of the issuer, including surplus of the issuer, showing how
and from what sources such surplus was created, all as of a date not
more than ninety days prior to the filing of the registration
statement. If such statement is not certified by an independent
certified public accountant, in addition to the balance sheet required
to be submitted under this schedule, a similar detailed balance sheet
of the assets and liabilities of the issuer, certified by an
independent certified public accountant, of a date not more than one
year prior to the filing of the registration statement, shall be
submitted.
(28) A profit and loss statement of the issuer
showing earnings and income, the nature and source thereof, and the
expenses and fixed charges in such detail and such form as the
Commission shall prescribe for the latest fiscal year for which such
statement is available and for the two preceding fiscal years, year by
year, or, if such issuer has been in actual business for less than
three years, then for such time as the issuer has been in actual
business, year by year. If the date of the filing of the registration
statement is more than six months after the close of the last fiscal
year, a statement from such closing date to the latest practicable
date. Such statement shall show what the practice of the issuer has
been during the three years or lesser period as to the character of the
charges, dividends or other distributions made against its various
surplus accounts, and as to depreciation, depletion, and maintenance
charges, and if stock dividends or avails from the sale of rights have
been credited to income, they shall be shown separately with statement
of the basis upon which credit is computed. Such statement shall also
differentiate between recurring and nonrecurring income and between any
investment and operating income. Such statement shall be certified by
an independent certified public accountant.
(29) Any liabilities of the issuer to companies
controlling or controlled by the issuer shall be disclosed in full
detail as to use of the proceeds thereof, the maturity and repayment
schedule, nature of security thereof, the rate of interest and other
terms and conditions thereof. If the proceeds, or any part of the
proceeds, of the security to be issued is to be applied directly or
indirectly to the purchase of any business, a profit and loss statement
of such business, certified by an independent certified public
accountant, meeting the requirements of subparagraph (28) of this
subsection, for the three preceding fiscal years, together with a
balance sheet, similarly certified, of such business, meeting the
requirements of subparagraph (27) hereof of a date not more than ninety
days prior to the filing of the registration statement or at the date
such business was acquired by the issuer more than ninety days prior to
the filing of the registration statement.
(30) A copy of any agreement or agreements or, if
identical agreements are used, the forms thereof made with any
underwriter, including all contracts and agreements referred to in
subparagraph (19) hereof.
(31) A copy of the opinion or opinions of independent
counsel in respect to the legality of the issue.
(32) A copy of all material contracts referred to in
subparagraph (26) hereof, but no disclosure shall be required by the
Commission of any portion of any such contract if the disclosure of
such portion would impair the value of the contract and would not be
necessary for the protection of the investors.
(33) A detailed statement showing the items of cash,
property, services, patents, goodwill, and any other consideration for
which securities have been or are to be issued in payment.
(34) The amount of cash to be paid as promotion fees,
or of capital stock which is to be set aside and disposed of as
promotion stock, and a statement of all stock issued from time to time
as promotion stock.
(35) In connection with securities issued by a person
engaged in the business of developing, exploiting or operating mineral
claims, a sworn statement of a mining engineer stating the ore
possibilities of the mine and such other information in connection
therewith as will show the quality of the ore in such claims, and the
unit cost of extracting it.
(36) Unless previously filed and registered with the
Commission and brought up to date:
(a) A copy of its articles of incorporation with all
amendments thereof and its existing by-laws or instruments
corresponding thereto, whatever the name, if the issuer be a
corporation;
(b) A copy of all instruments by which the trust is
created or declared and in which it is accepted and acknowledged, if
the issuer is a trust;
(c) A copy of its articles of partnership or
association and all the papers pertaining to its organization, if the
issuer is a partnership, unincorporated association, joint-stock
company, syndicate, or any other form of organization.
(37) A copy of the underlying agreements or
indentures affecting any stock, bonds, or debentures offered or to be
offered by the issuer and outstanding on the part of companies
controlling or controlled by the issuer.
(38) Where the issuer or registrant is not formed,
organized and existing under the laws of the Philippines or is not
domiciled in the Philippines, a written power of attorney, certified
and authenticated in accordance with law, designating some individual
person, who must be a resident of the Philippines, on whom any summons
and other legal processes may be served in all actions or other legal
proceedings against him, and consenting that service upon such resident
agent shall be admitted as valid and proper service upon the issuer or
registrant, and if at any time that service cannot be made upon such
resident agent, service shall be made upon the Commission.
Additional information or documents, including written information from
an expert, may be required, or anyone of the above requirements may be
dispensed with, depending on the necessity thereof for the protection
of the public investors, or their applicability to the class of
securities sought to be registered, as the case may be.
The registration statement shall be signed by the issuer, its principal
executive officer, its principal operating officer, its principal
financial officer, its comptroller or principal accounting officer or
persons performing similar functions. The written consent of the expert
named as having certified any part of the registration statement or any
document used in connection therewith shall also be filed.
Upon filing of the registration statement, the registrant shall pay to
the Commission a fee of not more than one-tenth of one per centum of
the maximum aggregate price at which such securities are proposed to be
offered and the fact of such filing shall be immediately published by
the Commission, at the expense of the registrant, in two newspapers of
general circulation in the Philippines, once a week for two consecutive
weeks, reciting that a registration statement for the sale of such
security has been filed with it, and that the aforesaid registration
statement, as well as the papers attached thereto, are open to
inspection during business hours, by interested parties, and copies
thereof, photostatic or otherwise, shall be furnished to every
applicant at such reasonable charge as the Commission may
prescribe.
Any interested party may file an opposition to the registration within
ten days from the publication.
If after the completion of the aforesaid publication, the Commission
finds that the registration statement together with all the other
papers and documents attached thereto, is on its face complete and that
the requirements and conditions for the protection of the investors
have been complied with, and unless there are grounds to reject a
registration statement as herein provided, it shall as soon as feasible
enter an order making the registration effective, and issue to the
registrant a permit reciting that such person, its brokers or agents,
are entitled to offer the securities named in said certificate, with
such terms and conditions as it may impose in the public interest and
for the protection of investors.
The Commission shall, however, advise the public that the issuance of
such permit shall not be deemed a finding by the Commission that the
registration statement is true and accurate on its face or that it does
not contain an untrue statement of fact or omit to state a material
fact, or be held to mean that the Commission has in any way given
approval to the security included in the registration statement. Every
permit and any other statement, printed or otherwise, for public
consumption, that makes reference to such permit shall clearly and
distinctively state that the issuance thereof is only permissive and
does not constitute a recommendation or endorsement of the securities
permitted to be offered for sale. It shall be unlawful to make, or
cause to be made, to any prospective purchaser any representation
contrary to the foregoing.
Notwithstanding the foregoing, the Commission, for the guidance of
investors, may require issuers to submit their securities to rating by
securities rating agencies accredited by the Commission, to provide all
information necessary therefor, and to report such rating in the
registration statement and prospectus, if any, offering the securities.
If any change occurs in the facts set forth in the registration
statement, it shall be the obligation of the issuer, dealer or
underwriter who filed the original registration statement to submit to
the Commission for approval an amended registration statement.
The Commission, in its order, may fix the maximum amount of commission
or other form of remuneration to be paid in cash or otherwise, directly
or indirectly, for or in connection with the sale or offering for sale
of such securities in the Philippines and the maximum amount of
compensation which the issuer shall pay for mining claims and mineral
rights for which provision is made by the issuer for payment in cash or
securities. The amount of compensation which shall be paid the owner or
holder of such mining claims or mineral rights shall be a fair
valuation thereof, as may be fixed by the Commission, after
consultation with the Bureau of Mines, and after receiving such
technical information as the issuer or dealer or the owner or owners of
such claims may care to submit in the premises.
A copy of the order of the Commission making the registration
effective, together with the registration statement, shall be
transmitted to the exchange wherein the security may be listed and
shall be available for inspection by any interested party during
reasonable hours on any business day.
The order shall likewise be published, at the expense of the
registrant, once in a newspaper of general circulation within ten days
from its promulgation.
The same rules shall apply to any amendment to the registration
statement. (7a)
Sec. 9. Grounds for the rejection of registration.
— The Commission may reject a registration statement and refuse to
issue a permit to sell the securities included in such registration
statement if it finds that —
(1) The registration statement is on its face
incomplete or inaccurate in any material respect or includes any untrue
statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; or
(2) The issuer or registrant —
(i) is not solvent or not in sound financial
condition;
(ii) has violated or has not complied with the
provisions of this Act, or the rules promulgated pursuant thereto, or
any order of the Commission;
(iii) has failed to comply with any of the applicable
requirements and conditions that the Commission may, in the public
interest and for the protection of investors, impose before the
security can be registered;
(iv) has been engaged or is engaged or is about to
engage in fraudulent transactions;
(v) is in any other way dishonest or is not of good
repute; or
(vi) does not conduct its business in accordance with
law or is engaged in a business that is illegal or contrary to
government rules and regulations.
(3) The enterprise or the business of the issuer is
not shown to be sound or to be based on sound business principles;
(4) An officer, member of the board of directors, or
principal stockholder of the issuer is disqualified to be such officer,
director, or principal stockholder; or
(5) The issuer or registrant has not shown to the
satisfaction of the Commission that the sale of its security would not
work to the prejudice of the public interest or as a fraud upon the
purchasers or investors. (n)
Sec. 10. Amendments to the registration statement.
—
(a) If a registration statement is on its face
incomplete or inaccurate in any material respect, the Commission may,
after notice by personal service or the sending of confirmed
telegraphic notice to the registrant, issue an order denying action on
the registration statement until it has been amended in accordance with
such order. When such statement has been amended in accordance with
such order the Commission shall act on the amended registration in
accordance with the procedure mentioned in Section eight hereof.
(b) An amendment filed after the effective date of
the registration statement, shall become effective upon its approval by
the Commission.
(c) If the registration statement includes any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, the Commission may, after notice by personal
service or by sending a confirmed telegraphic notice by personal
service or by sending a confirmed telegraphic notice and after
opportunity for hearing has been granted, issue an order suspending the
effectivity of the registration statement. If the statement is amended
in accordance with requirements, the suspension order shall be lifted.
(d) The Commission may conduct an examination in any
case in order to determine whether an order should issue under
subsection (c) hereof. In making such examination the Commission or any
officer or officers designated by it shall have access to, and may
demand the production of, any books and records of, and may administer
oaths and affirmations to and examine, the issuer, underwriter, or any
other person, in respect of any matter relevant to the examination, and
may in its discretion, require the production of the corporate books
and records, showing, among others, its assets and liabilities and
income statement of the issuer, certified to by a certified public
accountant. Failure of the issuer or underwriter to cooperate, or his
obstruction or refusal to undergo an examination, shall be a ground for
the issuance of a suspension order. (n)
Sec. 11. Periodic and other reports. — (a) Every
issuer of a security registered pursuant to this Act shall file with
the Commission —
(1) Such information and documents as shall keep
reasonably current the information and documents required to be
included in or filed with an application or registration statement
filed;
(2) Such annual reports and such periodicals and
other reports as may be necessary to update information on the
operation of the business of the issuer or registrant; and
(3) Such copies of all circulars, prospectuses, and
other advertising matter, before or at the time of their issuance for
publication, as the issuer or any person acting for him may issue from
time to time, which shall in all cases fully set forth the amount and
nature of the fees or expenses, payable in cash or securities, for
goodwill, organization or promotion and such other matters as may be
necessary for the protection of investors.
Every issuer of a security registered with an exchange shall file a
duplicate original of such information, documents, and reports with the
exchange.
(b) The Commission may prescribed, in regard to
reports made pursuant to this Act, the form or forms in which the
required information shall be set forth, and the items or details to be
shown therein.
(c) If any report required under subsection (a) is
inapplicable to any specified class or classes of issuers such reports
of comparable character as may be applicable to such class or classes
of issuers shall be submitted in lieu thereof. (11a)
Sec. 12. Civil liabilities on account of false
registration statement. — (a) Any person acquiring a security, the
registration statement of which or any part thereof contains on its
effectivity an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make such
statements not misleading, and who suffers damage, unless it is proved
that at the time of such acquisition he knew of such untrue statement
or omission, may sue in a court of competent jurisdiction:
(1) Every person who signed the registration
statement;
(2) Every person who was a director of, or any other
person performing similar functions, or a partner in, the issuer at the
time of the filing of the registration statement or any part,
supplement or amendment thereof with respect to which his liability is
asserted;
(3) Every person who is named in the registration
statement as being or about to become a director of, or a person
performing similar functions, or a partner in, the issuer and whose
written consent thereto is filed with the registration statement;
(4) Every person whose profession gives authority to
a statement made by him, who with his written consent, which shall be
filed with the registration statement, has been named as having
prepared or certified any part of the registration statement, or as
having prepared or certified any report or valuation which is used in
connection with the registration statement, with respect to the
statement in such registration statement, report, or valuation, which
purports to have been prepared or certified by him.
(5) Every underwriter with respect to such security.
(b) Notwithstanding the provisions of subsection (a)
no person, other than the issuer, shall be liable as provided therein
if he proves —
(1) That before the effective date of the part of the
registration statement with respect to which his liability is asserted
(A) he had resigned from or had taken such steps as are permitted by
law to resign from, or ceased or refused to act in, every office,
capacity, or relationship in which he was described in the registration
statement as acting or agreeing to act, and (B) he had advised the
Commission and the issuer in writing that he had taken such action and
that he would not be responsible for such part of the registration
statement; or
(2) That (A) as regards any part of the registration
statement not purporting to be a copy of or extract from a report or
valuation of an expert, and not purporting to be made on the authority
of a public official document or statement, he had, after reasonable
investigation, reasonable ground to believe and did believe, at the
time such part of the registration statement became effective, that the
statements therein were true and that there was no omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; and (B) as regards any part of the
registration statement purporting to be made upon his authority as an
expert or purporting to be a copy of or extract from a report or
valuation of himself as an expert, (i) he had, after reasonable
investigation, reasonable ground to believe and did believe, at the
time such part of the registration statement became effective, that the
statements therein were true and that there was no omission to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) such part of the
registration statement did not fairly represent his statement as an
expert or was not a fair copy of or extract from his report or
valuation as an expert; and (C) as regards any part of the registration
statement purporting to be made on the authority of an expert (other
than himself) or purporting to be a copy of or extract from a report or
valuation of an expert (other than himself), he had no reasonable
ground to believe and did not believe, at the time such part of the
registration statement became effective, that the statements therein
were untrue or that there was an omission to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or that such part of the registration statement
did not fairly represent the statement of the expert or was not a fair
copy of or extract from the report or valuation of the expert; and (D)
as regards any part of the registration statement purporting to be a
statement made by a public official or purporting to be a copy of or
extract from a public official document, he had no reasonable ground to
believe and did not believe, at the time such part of the registration
statement became effective, that the statements therein were untrue, or
that there was an omission to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that such part of the registration statement did not
fairly represent the statement made by the public official or was not a
fair copy of or extract from the public official document.
(c) In determining, for the purpose of paragraph (2)
of subsection (b) of this Section , what constitutes reasonable
investigation and reasonable ground for belief, the standard of
reasonableness shall be that required of a prudent man in the
management of his own property.
(d) The suit authorized under subsection (a) may be
filed to recover such damages as shall represent double the difference
between the amount paid and committed to be paid for the security, not
exceeding the price at which the security was offered to the public,
and (1) the value thereof as of the time such suit was brought, or in
case the security has been disposed of, (2) the price at which such
security shall have been disposed of in the market before the suit, or
(3) the price at which such security shall have been disposed of after
the filing of the suit but before judgment. No underwriter shall be
liable in any suit or as a consequence of suits authorized under
subsection (a) hereof for damages in excess of the total price at which
the securities underwritten by him and distributed to the public were
offered to the public.
In any suit under this or any other section of this Act, the court may,
in its discretion, require an undertaking for the payment of the costs
of such suit, including reasonable attorney's fees. Costs may be
allowed by the Court to the prevailing party litigant in accordance
with Rule 142 of the Rules of Court.
Exemplary damages may also be awarded in cases of bad faith, fraud,
malevolence or wantonness in the violation of this Act or the rules and
regulations promulgated thereunder.
(e) The persons specified in subsection (a) hereof
shall be jointly and severally liable for the payment of damages.
However, any person who becomes liable for the payment of such damages
may recover contribution from any other person who, if sued separately,
would have been liable to make the same payment, unless the former was
guilty of fraudulent representation and the latter was not.
(f) In no case shall the amount recoverable under
this Section exceed double the price at which the security was offered
to the public and such exemplary damages as may be awarded by the
court.
(g) Notwithstanding any provision of law to the
contrary, all persons, including the issuer, held liable under this
Section , shall contribute equally to the total liability adjudged
herein. In no case shall the principal stockholders, directors and
other officers of the issuer or persons occupying similar positions
therein, recover their contribution to the liability from the issuer.
However, the right of the issuer to recover from the guilty parties the
amount it has contributed under this Section shall not be prejudiced.
(n)
Sec. 13. Civil liabilities arising in connection
with prospectuses, communications and reports. — (a) Any person who —
(1) offers to sell or sells a security in violation
of Chapter II, or
(2) offers to sell or sells a security, whether or
not exempted by the provisions of this Act, by the use of any means or
instruments of transportation or communication, by means of a
prospectus or oral communication, which includes an untrue statement of
a material fact or omits to state a material fact necessary in order to
make the statements, in the light of the circumstances under which they
were made, not misleading, the purchaser not knowing of such untruth or
omission, and who shall fail in the burden of proof that he did not
known, and in the exercise of reasonable care could not have known, of
such untruth or omission, shall be liable to the person purchasing such
security from him, who may sue, in any court of competent jurisdiction,
to recover the consideration paid for such security with interest
thereon, less the amount of any income received thereon, upon the
tender of such security, or for damages if he no longer owns the
security.
Exemplary damages may likewise be awarded in cases of bad faith, fraud,
malevolence or wantonness.
(b) Any person who shall make or cause to be made any
statement in any report, or document filed pursuant to this Chapter or
any rule or regulation thereunder, which statement was at the time and
in the light of the circumstances under which it was made false or
misleading with respect to any material fact, shall be liable to any
person who, not knowing that such statement was false or misleading,
and relying upon such statement, shall have purchased or sold a
security at a price which was affected by such statement, for damages
caused by such reliance, unless the person sued shall prove that he
acted in good faith and had no knowledge that such statement was false
or misleading. In any such suit the court may, in its discretion,
require an undertaking for the payment of the costs of such suit, and
assess reasonable costs, including reasonable attorney's fees against
either party litigant.
Every person who becomes liable to make payment under this subsection
may recover contribution as in cases of contract from any person who,
if joined in the original suit, would have been liable to make the same
payment. (n)
Sec. 14. Limitation of actions. — (a) No action
shall be maintained to enforce any liability created under Sec. 12
or Sec. 13 of this Act unless brought within two years after the
discovery of the untrue statement or the omission, or, if the action is
to enforce a liability created under Sec. 13(a) (1), unless brought
within two years after the violation upon which it is based. In no
event shall any such action be brought to enforce a liability created
under Sec. 12 of 13(a) (1) more than five years after the security
was bona fide offered to the public, or under Sec. 13(a) (2) more
than five years after the sale.
(b) No action shall be maintained to enforce any
liability created under Sec. 13(b) or any other provision of this
Act unless brought within two years after the discovery of the facts
constituting the cause of action and within five years after such cause
of action and within five years after such cause of action accrued. (n)
Sec. 15. Suspension of registration. — If, at any
time, the information contained in the statement filed is or has become
misleading, incorrect, inadequate or incomplete, or the sale or
offering for sale of the security may work or tend to work a fraud, the
Commission may require from the person filing such statement such
further information as may in its judgment be necessary to enable the
Commission to ascertain whether the registration of such security
should be revoked on any ground specified in this Act, and the
Commission may also suspend the right to sell such security pending
further investigation, by entering an order specifying the grounds for
such action, and by notifying by mail or personally or by telephone
confirmed in writing, or by telegraph, the person filing such statement
and every dealer and broker who shall have notified the Commission of
an intention to sell such security. The refusal to furnish information
required by the Commission, within a reasonable time to be fixed by the
Commission, may be a proper ground for the entry of such order of
suspension. Upon the entry of any such order of suspension, no further
sales of such security shall be made until the Commission orders
otherwise. Any such sale shall be void.
In the event of the entry of such order of suspension, the Commission
shall give a prompt hearing to the parties interested. If upon such
hearing, the Commission shall determine that the sale of any such
security should be revoked on any ground specified in this Act, it
shall make the necessary findings and enter a final order prohibiting
sales of such security. Until the entry of such final order, the
suspension of the right to sell, though binding upon the persons
notified thereof, shall be deemed confidential, and shall not be
published, unless it shall appear that the order of suspension has been
violated after notice. If however, upon such hearing the Commission
finds that the sale of the security will neither be fraudulent nor
result in fraud, it shall forthwith enter an order revoking such order
of suspension, and such security shall be restored to its status as a
security registered under this Act, as of the date of such order of
suspension. (n)
Sec. 16. Revocation of registration of securities.
— (a) The Commission may, after due notice and hearing, revoke the
registration of any security and the permit to sell such security by
issuing an order to this effect, setting forth its findings in respect
thereto, if upon examination it shall appear that the issuer:
(1) Is insolvent;
(2) Has violated any of the provisions of this Act,
or the rules promulgated pursuant thereto, or any order of the
Commission of which the issuer has notice;
(3) Has been or is engaged or is about to engage in
fraudulent transactions;
(4) Is in any other way dishonest or has made any
fraudulent representation in any prospectus or in any circular or other
literature that has been distributed concerning the issuer of its
securities; or
(5) Does not conduct its business in accordance with
law.
The Commission may compel the production of all the books and papers of
such issuer, and may administer oaths to, and examine the officers of
such issuer or any other person connected therewith as to its business
and affairs, and may also require a balance sheet exhibiting the assets
and liabilities of any such issuer or his income statement or both to
be certified to by an independent certified public accountant.
Whenever the Commission may deem it necessary, it may also require the
submission of such balance sheet or income or profit statement, or
both, with such particulars as the Commission shall point out or
brought down to the latest practicable date.
If any issuer shall refuse to permit an examination to be made by the
Commission, its refusal shall be proper ground for the revocation of
the registration of and permission to sell its securities.
If the Commission deems it necessary, it may issue an order suspending
the right to sell securities pending any investigation. The order shall
state the grounds for taking such action, but such order of suspension,
although binding upon the persons notified thereof, shall be deemed
confidential, and shall not be published. Upon the issuance of the
suspension order, no further sale of such security shall be made until
the same is lifted or set aside by the Commission. Any such sale shall
be void.
Notice of issuance of such order shall be given by mail, or personally,
or by telephone, confirmed in writing, or by telegram, to the issuer
and every dealer and broker who shall have notified the Commission of
an intention to sell such security.
(b) A registration statement may be revoked by the
Commission upon petition made for its withdrawal by the issuer only
with the consent of the Commission and in accordance with such rules
and regulations which the Commission may prescribe: Provided, That no
party stands to suffer damage thereby. (12a)
Sec. 17. Promotion fees. — If the statement
containing information as to securities to be registered, as provided
for in Section eight of this Act, shall disclose that any such
securities or any securities senior thereto shall have been or shall be
intended to be issued for goodwill, or for organization or promotion
fees or expenses, or that payment in cash shall have been or will be
made for organization or promotion fees or expenses or for goodwill,
the amount and nature thereof shall be fully set forth in the
notification published by the Commission as required in Sec. 8 of
this Act, and in all prospectuses, circulars, or other advertisements
of the issuer, and should also appear upon the face or on the back of
the security itself. (13)
Sec. 18. Substituted service upon the Commission.
— Whenever service of summons or other process shall be made upon the
Commission in actions or legal proceedings against an issuer or any
person liable under this Act who is not domiciled in the Philippines or
is not formed, organized and existing under the laws of the
Philippines, the Commission shall within ten (10) days thereafter,
transmit by registered mail a copy of such summons and the complaint or
other legal process to such issuer or person at his last known address
or principal office. The sending thereof by the Commission, the
expenses for which shall be advanced by the party at whose instance it
is made, shall complete such service. (10a)
CHAPTER III
Brokers, Dealers and Salesmen
Sec. 19. Registration of brokers, dealers and
salesmen. — No broker, dealer or salesman shall engage in business in
the Philippines as such broker, dealer or salesman or sell any
securities, including securities exempted under this Act, except in
exempt transactions, unless he has been registered as a broker, dealer,
or salesman pursuant to the provisions of this Section .
An application for registration in writing shall be filed in the office
of the Commission in such form as the Commission may prescribe, duly
verified under oath, which shall state the principal office of the
applicant, wherever situated and its principal office and all branch
offices in the Philippines, if any; the name or style of doing
business; the corporate or business names; residences and business
addresses of all persons interested in the business as principals,
co-partners, officers and directors, specifying as to each his capacity
and title; and the character of the business and the length of time the
applicant has been engaged in said business. The Commission may also
require such additional information, under oath, as to applicant's
previous history, record and connection with other companies, as it may
deem necessary to establish the good repute in business of the
applicant.
There shall be filed with such application an irrevocable written
consent to the service of process upon the Commission in actions
against such broker or dealer in the manner and form as herein
provided.
If the Commission finds that the applicant is of good repute and has
complied with the provisions of this Act, including the payment of the
fee herein provided, it shall register such applicant as a broker or
dealer upon his filing a bond, or other security in lieu thereof, in
such sum as may be fixed by the Commission which it may deem adequate
for the protection of the public, running to the Government of the
Philippines, and conditioned upon the faithful compliance with the
provisions of this Act by said broker or dealer and by all salesmen
registered by the latter while acting for him. Such bond shall be
executed by a surety company authorized to do business in the
Philippines. In lieu of such bond, he may file bonds of the Government
of the Philippines. If a bond is filed, any person damaged by the
failure of such broker or dealer or of any salesman registered by the
latter while acting for him, to comply with the provisions of this Act,
shall be entitled to sue the sureties under such bond and to recover
the damages so suffered thereunder. If other securities are filed in
lieu thereof, such person may subject such securities to the payment of
such damage.
Upon the written application of a registered dealer or broker and
general satisfactory showing as to good character and the payment of
the fee prescribed in this Act, the Commission shall register as
salesman of such dealer or broker such natural person as the dealer or
broker may request. Such registration shall cease upon the termination
of employment of such salesman by such dealer or broker.
The names and addresses of all persons approved for registration as
brokers, dealers or salesmen and all orders with respect thereto shall
be recorded in a Register of Brokers, Dealers and Salesmen kept in the
office of the Commission which shall be open to public inspection.
Every registration under this Section shall expire on the thirty-first
day of December in each year, but new registration for the succeeding
year shall be issued upon written application and upon payment of the
fee as hereinafter provided, without filing of further statements or
furnishing any further information unless specifically required by the
Commission. Application for renewals must be made not less than thirty
nor more than sixty days before the first day of the ensuing year,
otherwise they shall be treated as original applications. The fee for
such registration and for each annual renewal shall be in such
reasonable amount as may be determined by the Commission.
Changes in registration occasioned by changes in the personnel of a
partnership or in the principals, co-partners, officers or directors of
any broker or dealer may be made from time to time by written
application setting forth the facts with respect to such change.
Every registered broker or dealer who intends to offer any security for
sale shall notify the Commission in writing of his intention to do so.
The notice shall contain the name of the broker or dealer and shall
state the name of the security to be offered for sale. Whenever a
broker or dealer shall have prepared such notice and shall have
forwarded the same by registered mail, postage prepaid and properly
addressed to the Commission, such dealer or broker, as to the contents
of such notice and the filing thereof, shall be deemed to have complied
with the requirements of this paragraph. Any issuer of a security
required to be registered under the provisions of this Act, selling
such securities except in exempt transactions as defined in this Act,
shall be deemed a dealer within the meaning of this Section and
required to comply with all the provisions hereof. (14a)
Sec. 20. Revocation of broker's, dealer's and
salesman's registration. — Registration under this Act may be refused,
or any registration granted may be revoked, by the Commission if, after
reasonable notice and hearing, the Commission determines that such
applicant or registrant so registered:
(1) Has violated any provision of this Act or any
regulation made hereunder; or
(2) Has made a material false statement in the
application for registration; or
(3) Has been guilty of a fraudulent act in connection
with any sale of securities, or has been or is engaged or is about to
engage in making fictitious or pretended sales or purchases of any of
such securities or has been or is engaged or is about to engage in any
practice or sale of securities which is fraudulent or in violation of
the law; or
(4) Has demonstrated his unworthiness to transact the
business of broker, dealer or salesman.
In cases of charges against a salesman, notice thereof shall also be
given the broker or dealer employing such salesman.
Pending the hearing, the Commission shall have the power to order the
suspension of such broker's, dealer's or salesman's registration:
Provided, That such order shall state the cause for such suspension.
Until the entry of a final order, the suspension of such broker's or
dealer's registration, though binding upon the persons notified
thereof, shall be deemed confidential, and shall not be published,
unless it shall appear that the order of suspension has been violated
after notice.
The order of the Commission refusing or revoking a registration as
hereinabove provided, together with its findings, shall be entered in
the Register of Brokers, Dealers and Salesmen. The suspension or
revocation of the registration of a dealer or broker shall also
automatically suspend or revoke the registration of all his salesmen.
It shall be sufficient cause for refusal or cancellation of
registration in case of a partnership or corporation, if any member of
a partnership or any officer or director of the corporation or
association has been guilty of any act or omission which would be cause
for refusing or revoking the registration of an individual dealer,
broker or salesman. (15a)
CHAPTER IV
Trading in Securities
Sec. 21. Use of facilities of unregistered
exchange prohibited. — It shall be unlawful for any broker, dealer,
salesman or exchange, directly or indirectly, to make use of any
facility of an exchange in the Philippines to effect any transaction in
a security or to report such transaction, unless a registration is
effective as to such security or such security is exempted from
registration under the provisions of this Act and such exchange is
registered as a securities exchange under this Act, or is exempted from
such registration upon application by the exchange because, in the
opinion of the Commission, by reason of the limited volume of
transactions effected on the exchange, it is not practicable and not
necessary or appropriate in the public interest or for the protection
of investors to require such registration. (16a)
Sec. 22. Registration of exchange. — (a) Any
exchange may be registered with the Commission as an exchange under the
terms and conditions hereinafter provided in this Section , by filing a
registration statement in such form as the Commission may prescribe,
setting forth the information and accompanied by the following
supporting documents below specified:
(1) An undertaking to comply and enforce compliance
by its members with the provisions of this Act, and any amendment
thereto, and the implementing rules or regulations made or to be made
thereunder;
(2) Such data as to its organization, rules of
procedure, and membership, and such other information as the Commission
may, by rules and regulations, require as being necessary or
appropriate for the public interest or for the protection of investors;
(3) Copies of its constitution, articles of
incorporation with all amendments thereto, and of its existing by-laws
or rules or instruments corresponding thereto whatever be the name,
which are hereinafter collectively referred to as the "rules of the
exchange";
(4) An undertaking to furnish to the Commission
copies of any amendments to the rules of the exchange forthwith upon
their adoption; and
(5) An undertaking that in the event a member firm
becomes insolvent or when the exchange shall have found that the
financial condition of its member firm has so deteriorated that it
cannot readily meet the demands of its customers for the delivery of
securities and/or payment of sales proceeds, the exchange shall, upon
order of the Commission, take over the operation of the insolvent
member firm and immediately proceed to settle the member firm's
liabilities to its customers: Provided, That stock exchanges in
operation upon the effectivity of this Act shall have one year within
which to submit the undertaking;
(b) No registration of an exchange shall be granted
or remain in force unless the rules thereof include provision for the
expulsion, suspension, or disciplining of a member for conduct or
proceeding inconsistent with just and equitable principles of fair
trade.
(c) Nothing in this Act shall be construed to prevent
any exchange from adopting and enforcing any rule not inconsistent with
this Act and with the rules and regulations thereunder, or with any
other law.
(d) If it appears to the Commission that the exchange
applying for registration is so organized as to be able to comply with
the provisions of this Act and the rules and regulations thereunder,
and the rules of the exchange are just and adequate to insure fair
dealing and to protect investors, the Commission shall cause such
exchange to be registered as a securities exchange.
(e) Within ninety days after the filing of the
application the Commission may issue an order either granting or, after
appropriate notice and opportunity for hearing, denying registration as
a securities exchange, unless the exchange applying for registration
shall withdraw its application or shall consent to the Commission's
deferring action on its application for a stated longer period after
the date of filing. The filing with the Commission of an application
for registration by an exchange shall be deemed to have taken place
upon the receipt thereof. Amendments to an application may be made upon
such terms as the Commission may prescribe.
(f) Upon the registration of a securities exchange
pursuant to the provisions of this Act, it shall pay within twelve (12)
months such reasonable fee as the Commission may fix.
(g) Upon appropriate application in accordance with
the rules and regulations of the Commission and upon such terms as the
Commission may deem necessary for the protection of investors, an
exchange may withdraw its registration or suspend its operations or
resume the same. (17a)
Sec. 23. Margin Requirements. — (a) For the
purpose of preventing the excessive use of credit for the purchase or
carrying of securities, the Commission, in accordance with the credit
and monetary policies that may be promulgated from time to time by the
Monetary Board, shall prescribe rules and regulations with respect to
the amount of credit that may be extended on any security other than an
exempted security. For the extension of credit, such rules and
regulations shall be based upon the following standard:
An amount not greater than whichever is the higher of —
(1) Sixty-five (65%) per centum of the current market
price of the security, or
(2) One hundred (100%) per centum of the lowest
market price of the security during the preceding thirty-six calendar
months, but not more than seventy-five (75%) per centum of the current
market price.
However, the Monetary Board, by an affirmative vote of five (5) of its
members, may increase or decrease the above percentages, in order to
achieve the objectives of the Central Bank during an economic crisis or
national emergency.
Such rules and regulations may make appropriate provision with respect
to the carrying of undermargined accounts for limited periods and under
specified conditions; the withdrawal of funds or securities; the
transfer of accounts from one lender to another; special or different
margin requirements for delayed deliveries, short sales, arbitrage
transactions, and securities to which number 2 of the second paragraph
of this subsection does not apply; the bases and the methods to be used
in calculating loans, and margins and market prices; and similar
administrative adjustments and details.
(b) It shall be unlawful for any member of an
exchange or any broker or dealer, directly or indirectly, to extend or
maintain credit or arrange for the extension or maintenance of credit
to or for any customer —
(1) On any security other than an exempted security,
in contravention of the rules and regulations which the Commission
shall prescribe under subsection (a) of this Section ;
(2) Without collateral or on any collateral other
than securities, except (i) to maintain a credit initially extended in
conformity with the rules and regulations of the Commission and (ii) in
cases where the extension or maintenance of credit is not for the
purpose of purchasing or carrying securities or of evading or
circumventing the provisions of subparagraph (1) of this subsection.
(c) It shall be unlawful for any person not subject
to subsection (b) hereof to extend or maintain credit or to arrange for
the extension or maintenance of credit for the purpose of purchasing or
carrying any security, in contravention of such rules and regulations
as the Commission shall prescribe to prevent the excessive use of
credit for the purchasing or carrying of or trading in securities in
circumvention of the other provisions of this Section . Such rules and
regulations may impose upon all loans made for the purpose or
purchasing or carrying securities limitations similar to those imposed
upon members, brokers, or dealers by subsection (b) of this Section and
the rules and regulations thereunder. This subsection and the rules and
regulations thereunder shall not apply (i) to a credit extension made
by a person not in the ordinary course of business, (ii) to a credit
extension on an exempted security, (iii) to a loan to a dealer to aid
in the financing of the distribution of securities to customers not
through the medium of a securities exchange, (iv) to a credit extension
by a bank on a collateral other than an equity security, or (v) to such
other credit extension as the Commission shall, by such rules and
regulations as it may deem necessary or appropriate in the public
interest or for the protection of investors, exempt, either
unconditionally or upon specified terms and conditions or for stated
periods, from the operation of this subsection and the rules and
regulations thereunder. (18a)
Sec. 24. Restrictions on borrowings by members,
brokers, and dealers. — It shall be unlawful for any registered broker
or dealer, member of a securities exchange, or any broker or dealer who
transacts a business in securities through the medium of any member of
a securities exchange, directly or indirectly —
(a) To permit in the ordinary course of business as a
broker his aggregate indebtedness to all persons including customers'
credit balances (but excluding indebtedness secured by exempted
securities), to exceed such percentage of the net capital (exclusive of
fixed assets and value of exchange membership) employed in the
business, but not exceeding in any case two thousand (2,000%) per
centum, as the Commission may by rules and regulations prescribe as
necessary or appropriate in the public interest or for the protection
of investors.
(b) To pledge, mortgage or otherwise encumber or
arrange for the pledge, mortgage or encumbrance of any security carried
for the account of any customer under circumstances — (1) that will
permit the commingling of his securities, without his written consent,
with the securities of any customer; (2) that will permit such
securities to be commingled with the securities of any person other
than a bona fide customer; or (3) that will permit such securities to
be pledged, mortgaged or encumbered, or subjected to any lien or claim
of the pledgee, for a sum in excess of the aggregate indebtedness of
such customers in respect of such securities. However, the Commission,
having due regard to the protection of investors, may, by rules and
regulations, allow certain transactions that may otherwise be
prohibited under this subsection.
(c) To lend or arrange for the lending of any
security carried for the account of any customer without the written
consent of such customer or in contravention of such rules and
regulations as the Commission shall prescribe for the protection of
investors. (19a)
Sec. 25. Enforcement of margin requirements and
restrictions on borrowings. — To prevent indirect violations of the
margin requirements under Sec. 23 hereof, the broker or dealer shall
require the customer in nonmargin transactions to pay the price of the
security purchased for his account within such period as the Commission
may prescribe, which shall in no case exceed three trading days;
otherwise, the broker shall sell the security purchased starting on the
next trading day but not beyond ten trading days following the last day
for the customer to pay such purchase price, unless such sale cannot be
effected within said period for justifiable reasons. The sale shall be
without prejudice to the right of the broker or dealer to recover any
deficiency from the customer. To prevent indirect violation of the
restrictions on borrowings under Sec. 24 of this Act, the broker
shall, unless otherwise directed by the customer, pay the net sales
price of the securities sold for a customer within the same period as
above prescribed by the Commission: Provided, That the customer shall
be required to deliver the instruments evidencing the securities as a
condition for such payment upon demand by the broker. (n)
Sec. 26. Manipulation of security prices. — (a) It
shall be unlawful for any person, directly or indirectly —
(1) For the purpose of creating a false or misleading
appearance of active trading in any security registered on a securities
exchange, or a false or misleading appearance with respect to the
market for any such security:
(i) To effect any transaction in such security which
involves no change in the beneficial ownership thereof, or
(ii) To enter an order or orders for the purchase of
such security with the knowledge that an order or orders of
substantially the same size, time and price, for the sale of any such
security, has or have been or will be entered by or for the same or
different parties, or
(iii) To enter an order or orders for the sale of any
such security with the knowledge that an order or orders of
substantially the same size, time and price for the purchase of any
such security, has or have been or will be entered by or for the same
or different parties.
(2) To effect, alone or with one or more other
persons, a series of transactions in securities that (i) raises their
price for the purpose of inducing the purchase of a security, whether
of the same or a different class, of the same issuer or of a
controlling, controlled, or commonly controlled company by others, (ii)
depresses their price for the purpose of inducing the sale of a
security, whether of the same or a different class, of the same issuer
or of a controlling, controlled, or commonly controlled company by
others, or (iii) creates active trading, actual or apparent, for the
purpose of inducing such a purchase or sale.
(3) If a dealer or broker, or other person selling or
offering for sale, or purchasing or offering to purchase, the security,
to induce the purchase or sale of any security registered on a
securities exchange by the circulation or dissemination in the ordinary
course of business of information to the effect that the price of any
such security will or is likely to rise or fall because of market
operations of anyone or more persons conducted for the purpose of
raising or depressing the price of such security.
(4) If a dealer or broker or other person selling or
offering for sale or purchasing or offering to purchase the security,
to make, regarding any such security registered on a securities
exchange, for the purpose of inducing the purchase or sale of such
security, any statement which was at the time and in the light of the
circumstances under which it was made, false or misleading with respect
to any material fact, and which he knew or had reasonable ground to
believe was so false or misleading.
(5) For a consideration received directly or
indirectly from a dealer or broker or other person selling or offering
for sale or purchasing or offering to purchase the security, to induce
the purchase or sale of any security registered on a securities
exchange by the circulation or dissemination of information to the
effect that the price of any such security will or is likely to rise or
fall because of the market operations of anyone or more persons
conducted for the purpose of raising or depressing the price of such
security.
(6) To effect, either alone or with one or more other
persons, any series of transactions for the purchase and/or sale of any
security registered in a securities exchange for the purpose of
pegging, fixing or stabilizing the price of such security.
(b) It shall be unlawful for any person to effect, by
the use of any facility of a securities exchange —
(1) Any transaction in connection with any security
whereby any party to such transaction acquires any put, call, straddle,
or other option or privilege of buying the security from or selling the
security to another without being bound to do so; or
(2) Any transaction in connection with any security
with relation to which he has, directly or indirectly, any interest in
any such put, call, straddle, option or privilege; or
(3) Any transaction in any security for the account
of any person who he has reason to believe has, and who actually has,
directly or indirectly, any interest in any such put, call, straddle,
option, or privilege with relation to such security.
(c) It shall be unlawful for any member of a
securities exchange, directly or indirectly, to endorse or guarantee
the performance of any put, call, straddle, option or privilege in
relation to any security registered on a securities exchange.
(d) The terms "put", "call", "straddle", "option" or
"privilege" as used in this Section shall not include any registered
warrant, right or convertible security.
(e) Any person who wilfully participates in any act
or transaction in violation of subsections (a), (b) or (c) of this
Section shall be liable to any person who shall purchase or sell any
security at price which was affected by such act or transaction, and
the person so injured may sue in any court of competent jurisdiction to
recover the damages sustained as a result of any such act or
transaction. The court may, in its discretion, require an undertaking
for the payment of the costs of any such suit, and assess reasonable
costs, including reasonable attorney's fees, against either party
litigant. Every person who becomes liable to make payment under this
subsection may recover contribution as in cases of contract from any
person who, if joined in the original suit, would have been liable to
make the same payment. No action shall be maintained to enforce any
liability created under this Section , unless brought within two (2)
years after the discovery of the facts constituting the violation and
within five (5) years after such violation.
(f) The provisions of this Section shall apply to an
exempted security.
(g) The foregoing provisions notwithstanding, the
Commission, having due regard to the public interest and the protection
of investors, may, by rules and regulations, allow certain acts or
transactions that may otherwise be prohibited under this Section . (20a)
Sec. 27. Manipulative and deceptive devices. — It
shall be unlawful for any person, directly or indirectly, by the use of
any facility of any exchange —
(a) To effect a short sale, or to use or employ any
stop-loss order in connection with the purchase or sale of any security
registered on a securities exchange, in contravention of such rules and
regulations as the Commission may prescribed as necessary or
appropriate in the public interest or for the protection of investors.
(b) To use or employ, in connection with the purchase
or sale of any security, any manipulative or deceptive device or
contrivance. (21a)
Sec. 28. Artificial measures of price control. —
It shall be unlawful for any exchange to adopt and enforce artificial
measures of price control of any nature whatsoever without the prior
approval of the Commission which may be given only if it serves public
interest and benefits the investors. (21-a)
Sec. 29. Fraudulent transactions. — (a) It shall
be unlawful for any person, directly or indirectly, in connection with
the purchase or sale of any securities —
(1) To employ any device, scheme, or artifice to
defraud, or
(2) To obtain money or property by means of any
untrue statement of a material fact or any omission to state a material
fact necessary in order to make the statements made, in the light of
the circumstances under which they were made, not misleading, or
(3) To engage in any act, transaction, practice, or
course of business which operates or would operate as a fraud or deceit
upon any person.
(b) It shall be unlawful for any person to describe a
security to a second person, without purporting to offer it, for a
consideration received or to be received directly or indirectly from
the issuer, any other person interested in buying or selling the
security, an underwriter, broker, dealer, or investment adviser, or a
controlling, controlled, or commonly controlled person of any such
person, unless (1) he concurrently discloses the source of the
consideration or the nature of or reason for his employment or (2) if
the second person or his agent in the transaction is identified, that
information is known to the second person.
The above paragraph does not apply to the usual remuneration received
by (1) a newspaper, periodical, or radio or television station for
publishing in good faith advertisement that clearly appears to be the
statement of another person published at his expense, or (2) an
employee or other person who prepares an advertisement or other
description that appears over the name of the person for whom it is
prepared rather than the person preparing it.
The Commission shall promulgate rules that it may deem necessary or
appropriate in the public interest or for the protection of investors
to implement this Section .
(c) This Section shall also apply to exempt
securities and exempt transactions. (n)
Sec. 30. Insider's duty to disclose when trading.
— (a) It shall be unlawful for an insider to sell or buy a security of
the issuer, if he knows a fact of special significance with respect to
the issuer or the security that is not generally available, unless (1)
the insider proves that the fact is generally available or (2) if the
other party to the transaction (or his agent) is identified, (a) the
insider proves that the other party knows it, or (b) that other party
in fact knows it from the insider or otherwise.
(b) "Insider" means (1) the issuer, (2) a director or
officer of, or a person controlling, controlled by, or under common
control with, the issuer, (3) a person whose relationship or former
relationship to the issuer gives or gave him access to a fact of
special significance about the issuer or the security that is not
generally available, or (4) a person who learns such a fact from any of
the foregoing insiders as defined in this subsection, with knowledge
that the person from whom he learns the fact is such an insider.
(c) A fact is "of special significance" if (a) in
addition to being material it would be likely, on being made generally
available, to affect the market price of a security to a significant
extent, or (b) a reasonable person would consider it especially
important under the circumstances in determining his course of action
in the light of such factors as the degree of its specificity, the
extent of its difference from information generally available
previously, and its nature and reliability.
(d) This section shall apply to an insider as defined
in subsection (b) (3) hereof only to the extent that he knows a fact of
special significance by virtue of his being an insider. (n)
Sec. 31. Segregation and limitation of functions
of members, brokers, and dealers. — (a) The Commission shall prescribe
such rules and regulations as it deems necessary or appropriate in the
public interest or for the protection of investors (1) to regulate
floor trading by members of securities exchanges, directly or
indirectly, for their own account or for discretionary accounts, (2) to
prevent such excessive trading on the exchange but off the floor by
members, directly or indirectly, for their own account, as the
Commission may deem detrimental to the maintenance of a fair and
orderly market, and (3) to restrict a broker from directly or
indirectly dealing in securities or otherwise segregate and limit the
function of a broker and dealer. It shall be unlawful for a member to
effect any transaction in a security in contravention of such rules and
regulations, but such rules and regulations may make such exemptions
for arbitrage transactions, for transactions in exempted securities,
and, within the limitations of subsection (b) of this Section , for
transactions by odd-lot dealers and specialists, as the Commission may
deem necessary or appropriate in the public interest or for the
protection of investors.
(b) Unless otherwise prohibited by such rules ad
regulations as the Commission may prescribe as necessary or appropriate
in the public interest or for the protection of investors, the rules of
a securities exchange may permit —
(1) a member to be registered as an odd-lot dealer
and as such to buy and sell for his own account so far as may be
reasonably necessary to carry on such odd-lot transactions, or
(2) a member to be registered as a specialist. If
under the rules and regulations of the Commission, a specialist is
permitted to act as a dealer, or is limited to acting as a dealer, such
rules and regulations shall restrict his dealing so far as practicable
to those reasonably necessary to permit him to maintain a fair and
orderly market, and/or to those necessary to permit him to act as an
odd-lot dealer. It shall be unlawful for a specialist or an official of
the exchange to disclose information in regard to orders placed with
such specialist which is not available to all members of the exchange,
to any person other than an official of the exchange, a representative
of the Commission, or a specialist who may be acting for such
specialist; but the Commission shall have power to require disclosure
to all members of the exchange of all orders placed with specialists,
under such rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest or for the protection
of investors. It shall also be unlawful for a specialist acting as a
broker to effect on the exchange any transaction except upon a market
or limited price order.
(c) If, because of the limited volume of transactions
effected on an exchange, it is impracticable and not necessary or
appropriate in the public interest or for the protection of investors
to apply any of the foregoing provisions of this Section or the rules
and regulations thereunder, the Commission shall have the power, upon
application of the exchange and on a showing that the rules of such
exchange are otherwise adequate for the protection of investors, to
exempt such exchange and its members from any such provision or rules
and regulations.
(d) It shall be unlawful for a member of a securities
exchange who is both a dealer and a broker, or for any person who both
as a broker and a dealer transacts a business in securities through the
medium of a member or otherwise, to effect through the use of any
facility of a securities exchange, or otherwise in the case of a member
—
(1) Any transaction in connection with which,
directly or indirectly, he extends or maintains or arranges for the
extension or maintenance of credit to or for a customer on any security
other than an exempted security which was a part of a new issue in the
distribution of which he participated as a member of a selling
syndicate or group within six months prior to such transaction:
Provided, That credit shall not be deemed extended by reason of a bona
fide delayed delivery of any such security against full payment of the
entire purchase price thereof upon such delivery within thirty-five
days after such purchase, or
(2) Any transaction with respect to any security
other than an exempted security unless, if the transaction is with a
customer, he discloses to such customer in writing at or before the
completion of the transaction whether he is acting as a dealer for his
own account, as a broker for such customer, or as a broker for some
other person. (22a)
Sec. 32. Reports. — (a) (1) Any person who, after
acquiring directly or indirectly the beneficial ownership of any equity
security of a class which is registered pursuant to this Act, is
directly or indirectly the beneficial owner of more than ten (10%) per
centum of such class shall, within ten days after such acquisition or
such reasonable time as fixed by the Commission, submit to the issuer
of the security, to the stock exchanges where the security is traded,
and to the Commission a sworn statement containing the following
information and such other information, as the Commission may require
in the public interest or for the protection of investors:
(i) The background, identity, residence, and
citizenship of, and the nature of such beneficial ownership by, such
person and all other persons by whom or on whose behalf the purchases
are effected; in the event the beneficial owner is a juridical person,
the line of business of the beneficial owner shall also be
reported.
(ii) If the purpose of the purchases or prospective
purchases is to acquire control of the business of the issuer of the
securities, any plans or proposals which such persons may have that
will effect a major change in its business or corporate structure;
(iii) The number of shares of such security which are
beneficially owned, and the number of shares concerning which there is
a right to acquire, directly or indirectly, by (i) such person, and
(ii) by each associate of such person, giving the background, identity,
residence, and citizenship of each such associate; and
(iv) Information as to any contracts, arrangements,
or understanding with any person with respect to any securities of the
issuer, including but not limited to transfers, joint ventures, loan or
option arrangements, puts or calls, guarantees or division of losses or
profits, or proxies naming the persons with whom such contracts,
arrangements, or understanding have been entered into, and giving the
details thereof.
(2) If any material change occurs in the facts set
forth in the statements, an amendment shall be transmitted to the
issuer, the exchange and the Commission in accordance with such rules
and regulations as the Commission may prescribed as necessary or
appropriate in the public interest or for the protection of investors.
(3) The Commission, by rule or regulation or by
order, may permit any person to file in lieu of the statement required
by paragraph (1) of this subsection, a notice stating the name of such
person, the shares or any equity securities subject to paragraph (1)
which are owned by him, the date of their acquisition and such other
information as the Commission may specify, if it appears to the
Commission that such securities were acquired by such person in the
ordinary course of his business and were not acquired for the purpose
of and do not have the effect of changing or influencing the control of
the issuer nor in connection with any transaction having such purpose
or effect.
(b) (1) It shall be unlawful for an issuer which has
a class of equity securities registered pursuant to this Act, to
purchase any equity security issued by it if such purchase is in
contravention of such rules and regulations as the Commission, in the
public interest or for the protection of investors, may adopt (a) to
define acts and practices which are fraudulent, deceptive, or
manipulative, and (b) to prescribe means reasonably designed to prevent
such acts and practices. Such rules and regulations may require such
issuer to provide holders of equity securities of such class with such
information relating to the reasons for such purchase, the source of
funds, the number of shares to be purchased, the price to be paid for
such securities, the method of purchase, and such additional
information as the Commission deems necessary or appropriate in the
public interest or for the protection of investors, or which the
Commission deems to be material to a determination whether such
security should be purchased.
(2) For the purpose of this subsection, a purchase by
or for the issuer or any person controlling, controlled by, or under
common control with the issuer, or a purchase subject to the control of
the issuer or any such person, shall be deemed to be a purchase by the
issuer. The Commission shall have the power to make rules and
regulations implementing this paragraph in the public interest and for
the protection of investors including exemptive rules and regulations
covering situations in which the Commission deems it unnecessary or
inappropriate that a purchase of the type described in this paragraph
shall be deemed to be a purchase by the issuer for the purpose of some
or all of the provisions of paragraph (1) of this subsection. (n)
Sec. 33. Tender offers. — (a) (1) It shall be
unlawful for any person, directly or indirectly, to make a tender offer
for, or a request or invitation for tenders of, any class of any equity
security which is registered pursuant to this Act if, after
consummation thereof, such person would, directly or indirectly, be the
beneficial owner of more than ten (10%) per centum of such class, or
such reasonable percentage as fixed by the Commission, unless, at the
time copies of the offer or request or invitation are first published
or sent or given to security holders, such person has filed with the
Commission and furnished the issuer a statement containing such of the
information required in Sec. 32 of this Act as the Commission may
prescribe. All requests or invitations for tender, or advertisements
making a tender offer or requesting or inviting tenders of such a
security, shall be filed as a part of such statement and shall contain
such of the information contained in such statement as the Commission
may prescribe. Copies of any additional material soliciting or
requesting such tender offers subsequent to the initial solicitation or
request shall contain such information as the Commission may prescribe
as necessary or appropriate in the public interest or for the
protection of investors, and shall be filed with the Commission and
sent to the issuer not later than the time copies of such materials are
first published or sent or given to security holders.
(2) Any solicitation or recommendation to the holders
of such a security to accept or reject a tender offer or request or
invitation for tenders shall be made in accordance with such rules and
regulations as the Commission may prescribe as necessary or appropriate
in the public interest or for the protection of investors.
(3) Securities deposited pursuant to a tender offer
or request or invitation for tenders may be withdrawn by or on behalf
of the depositor at any time until the expiration of seven days after
the time definitive copies of the offer or request or invitation are
first published or sent or given to security holders, and at any time
after sixty days from the date of the original tender offer or request
or invitation, except as the Commission may otherwise prescribed by
rules, regulations, or order as necessary or appropriate in the public
interest or for the protection of investors.
(4) Where any person makes a tender offer, or request
or invitation for tenders, for less than all the outstanding equity
securities of a class, and where a greater number of securities is
deposited pursuant thereto within ten days after copies of the offer or
request or invitation are first published or sent or given to security
holders than such person is bound or willing to take up and pay for,
the securities taken up shall be taken up as nearly as may be pro rata,
disregarding fractions, according to the number of securities deposited
by each depositor. The provisions of this subsection shall also apply
to securities deposited within ten days after notice of an increase in
the consideration offered to security holders, as described in
subparagraph (5) of this subsection, is first published or sent or
given to security holders.
(5) Where any person varies the terms of a tender
offer or request or invitation for tenders before the expiration
thereof by increasing the consideration offered to holders of such
securities, such person shall pay the increased consideration to each
security holder whose securities are taken up and paid for whether or
not such securities have been taken up by such person before the
variation of the tender offer or request or invitation.
(b) The provisions of subsection (a) of Sec. 32
and subsection (a) of this Section shall not apply to any offer for, or
request or invitation for tenders of, any security —
(i) If the acquisition of such security, together
with all other acquisition by the same person of securities of the same
class during the preceding twelve months, would not exceed two (2%) per
centum of that class; or
(ii) Which the Commission, by rules or regulations or
by order, shall exempt as not entered into for the purpose of, and not
having the effect of, changing or influencing the control of the issuer
or otherwise as not comprehended within the purpose of said Section s.
(c) When two or more persons act as a partnership,
limited partnership, syndicate, or other group for the purpose of
acquiring, holding, or disposing of securities of an issuer, such
syndicate or group shall be deemed a "person" for the purposes of
Sec. 32 and subsection (a) of this Section .
(d) In determining, for purposes of Sec. 32 and
subsection (a) of this Section , any percentage of a class of any
security, such class shall be deemed to consist of the amount of the
outstanding securities of such class, exclusive of any securities of
such class held by or for the account of the issuer or a subsidiary of
the issuer.
(e) It shall be unlawful for any person to make any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made, in the light of the
circumstances under which they are made, not misleading, or to engage
in any fraudulent, deceptive, or manipulative acts or practices, in
connection with any tender offer or request or invitation for tenders,
or any solicitation of security holders in opposition to or in favor of
any such offer, request or invitation. The Commission shall, for the
purposes of this subsection, by rules and regulations define, and
prescribe means reasonably designed to prevent, such acts and practices
as are fraudulent, deceptive, or manipulative. (n)
Sec. 34. Proxies. — (a) It shall be unlawful for
any person, in contravention of such rules and regulations as the
Commission may prescribe as necessary or appropriate in the public
interest or for the protection of investors, to solicit or to permit
the use of his name to solicit any proxy or consent or authorization in
respect of any security registered pursuant to this Act.
(b) It shall be unlawful for any member of a
securities exchange, or any broker or dealer, in contravention of such
rules and regulations as the Commission may prescribe as necessary or
appropriate in the public interest or for the protection of investors,
to give, or to refrain from giving a proxy, consent, or authorization
in respect of any security registered pursuant to this Act and carried
for the account of a customer.
(c) Unless proxies, consents, or authorizations in
respect of a security registered pursuant to this Act are solicited by
or on behalf of the management of the issuer from the holders of record
of such security in accordance with the rules and regulations
prescribed under subsection (a) of this Section , such issuer shall,
prior to any annual or other meeting of the holders of such security
and in accordance with rules and regulations prescribed by the
Commission, file with the Commission and transmit to all holders of
record of such security information substantially equivalent to the
information which would be required to be transmitted if a solicitation
were made. (24a)
Sec. 35. Over-the-counter markets. — It shall be
unlawful, in the contravention of such rules and regulations as the
Commission may prescribe as necessary and appropriate in the public
interest or to insure to investors protection comparable to that
provided by and under authority of this Act in the case of securities
exchanges —
(1) For any broker or dealer, singly or with any
other person, to make or create, or enable another to make or create, a
market, otherwise than on a securities exchange, for both the purchase
and sale of any security, other than an exempted security or commercial
paper, banker's acceptances, or commercial bills, or securities which
have not previously been registered or listed with an exchange, or
(2) For any broker or dealer to use any facility of
any such market.
Such rules and regulations may provide for the regulation of all
transactions by brokers and dealers on any such market, for the
registration with the Commission of dealers or brokers making or
creating such a market, and for the registration of the securities for
which they make or create a market, and may make special provision with
respect to securities or specified classes thereof listed, or entitled
to unlisted trading privileges, upon any exchange on the effective date
of this Act, which securities are not registered under the provisions
hereof. (25a)
Sec. 36. Directors, officers and principal
stockholders. — (a) Every person who is directly or indirectly the
beneficial owner of more than ten per centum of any of any equity
security which is registered pursuant to this Act, or who is director
or an officer of the issuer of such security, shall file, at the time
of the registration of such security on a securities exchange or by the
effective date of a registration statement or within ten days after he
becomes such a beneficial owner, director, or officer, a statement with
the Commission and, if such security is registered on a securities
exchange, also with the exchange, of the amount of all equity
securities of such issuer of which he is the beneficial owner, and
within ten days after the close of each calendar month thereafter, if
there has been a change in such ownership during such month, shall file
with the Commission, and if such security is registered on a securities
exchange, shall also file with the exchange, a statement indicating his
ownership at the close of the calendar month and such changes in his
ownership as have occurred during such calendar month.
(b) For the purpose of preventing the unfair use of
information which may have been obtained by such beneficial owner,
director, or officer by reason of his relationship to the issuer, any
profit realized by him from any purchase and sale, or any sale and
purchase, of any equity security of such issuer within any period of
less than six months, unless such security was acquired in good faith
in connection with a debt previously contracted, shall inure to and be
recoverable by the issuer, irrespective of any intention of holding the
security purchased or of not repurchasing the security sold for a
period exceeding six months. Suit to recover such profit may be
instituted in any court of competent jurisdiction by the issuer, or by
the owner of any security of the issuer in the name and in behalf of
the issuer if the issuer shall fail or refuse to bring such suit within
sixty days after request or shall fail diligently to prosecute the same
thereafter; but no such suit shall be brought more than two years after
the date such profit was realized. This subsection shall not be
construed to cover any transaction where such beneficial owner was not
such both at the time of the purchase and sale, or the sale and
purchase, of the security involved, or any transaction or transactions
which the Commission by rules and regulations may exempt as not
comprehended within the purpose of this subsection.
(c) It shall be unlawful for any such beneficial
owner, director, or officer, directly or indirectly, to sell any equity
security of such issuer if the person selling the security or his
principal (1) does not own the security sold, or (2) if owning the
security, does not deliver it against such sale within twenty days
thereafter, or does not within five days after such sale deposit it in
the mails or other usual channels of transportation; but no person
shall be deemed to have violated this subsection if he proves that
notwithstanding the exercise of good faith he was unable to make such
delivery or deposit within such time, or that to do so would cause
undue inconvenience or expense.
(d) The provisions of subsection (b) of this Section shall not apply to any purchase and sale, or sale and purchase, and the
provisions of subsection (c) of this Section shall not apply to any
sale, of an equity security not then or thereafter held by him in an
investment account, by a dealer in the ordinary course of his business
and incident to the establishment or maintenance by him of a primary or
secondary market, otherwise than on an exchange, for such security. The
Commission may, by such rules and regulations as it deems necessary or
appropriate in the public interest, define and prescribe terms and
conditions with respect to securities held in an investment account and
transactions made in the ordinary course of business and incident to
the establishment or maintenance of a primary or secondary market.
(26a)
Sec. 37. Account and records, reports, examination
of exchanges, members, and others. — (a) Every exchange, every member
thereof, every broker or dealer who transacts a business in securities
through the medium of any such member, shall make, keep and preserve
for such periods, such accounts, correspondence, memoranda, papers,
books, and other records, and make such reports, as the Commission by
its rules and regulations may prescribe as necessary or appropriate in
the public interest or for the protection of investors. Such accounts,
correspondence, memoranda, papers, books, and other records shall be
subject at any time or from time to time to such reasonable periodic,
special, or other examinations by examiners or other representatives of
the Commission as the Commission may deem necessary or appropriate in
the public interest or for the protection of investors, provided that
the Commission give notice of the purpose of such examination, and if
such examination is for the purpose of investigating any complaint
filed with the Commission, or any information received by the
Commission, that a copy of such complaint or a statement of such
information be furnished by the Commission to such exchange, member,
broker or dealer at least five days prior to the commencement of such
examination.
(b) Any broker, dealer or other person extending
credit, who is subject to the rules and regulations prescribed by the
Commission pursuant to this Act, shall make such reports to the
Commission as may be necessary or appropriate to enable it to perform
the functions conferred upon it by this Act. (27a)
Sec. 38. Powers with respect to exchanges and
securities. — (a) The Commission is authorized, if in its opinion such
action is necessary or appropriate for the protection of investors:
(1) After appropriate notice and opportunity for
hearing, to suspend for a period not exceeding twelve months or to
withdraw the registration of a securities exchange, if such exchange
has violated any provision of this Act or of the rules and regulations
thereunder, or has failed to enforce compliance therewith by a member
or by an issuer of a security registered thereon.
(2) After appropriate notice and opportunity for
hearing, to suspend for a period not exceeding twelve months or to
expel from a securities exchange any member or officer thereof who has
violated any provision of this Act or the rules and regulations
thereunder, or has effected, directly or indirectly, any transaction
for any person who is violating in respect of such transaction any
provision of this Act or the rules and regulations thereunder.
(3) And if the public interest so requires, summarily
to suspend trading in any registered security on any securities
exchange for a period not exceeding thirty days or, with the approval
of the President of the Philippines, summarily to suspend all trading
on any securities exchange for a period of more than thirty days but
not exceeding ninety days.
(b) The Commission is further authorized, if after
making appropriate request in writing to a securities exchange that
such exchange effect on its own behalf specified changes in its rules
and practices and, after appropriate notice and opportunity for
hearing, it determines that such exchange has not made the changes so
requested, and that such changes are necessary or appropriate for the
protection of investors or to insure fair dealing in securities traded
upon such exchange or to insure fair administration of such exchange,
by rules or regulations or by order, to alter or supplement the rules
of such exchange (insofar as necessary or appropriate to effect such
changes) in respect of such matters as —
(1) Safeguards in respect of the financial
responsibility of members and adequate provision against the evasion of
financial responsibility through the use of corporate forms or special
partnerships;
(2) The limitation or prohibition of the registration
or trading in any security within a specified period after the issuance
or primary distribution thereof;
(3) The listing or striking from listing of any
security;
(4) Hours or trading;
(5) The manner, method, and place of soliciting
business;
(6) Fictitious accounts;
(7) The time and method of making settlements,
payments, and deliveries, and of closing accounts;
(8) The reporting of transactions on the exchange
upon tickets maintained by or with the consent of the exchange,
including the method of reporting short sales, stopped sales, sales of
securities of issuers involving other special circumstances;
(9) The fixing of reasonable rates of commission,
interests, listing, and other charges;
(10) Minimum units of trading;
(11) Odd-lot purchases and sales; and
(12) Minimum deposits on margin accounts.
(c) Wherever two or more exchanges exist, the
Commission may require and enforce uniformity of trading regulations in
and/or between or among said exchanges.
(d) The Commission shall have the authority to
determine the number, size and location of stock exchanges and
commodity exchanges and other similar organizations in the light of
national or regional requirements for such activities with the view to
promote, enhance, protect, conserve or rationalize investment. (28a)
Sec. 39. Clearance and settlement of securities
transactions. — The Commission, having due regard to the public
interest, the protection of investors, the safeguarding of securities
and funds, and maintenance of fair competition among brokers, dealers,
clearing agencies, and transfer agents, shall promulgate rules and
regulations for the prompt and accurate clearance and settlement of
securities transactions. (n)
Sec. 40. Power of the Commission will respect to
securities related organizations. — The Commission shall have the power
to grant license as a condition for, and to regulate, supervise,
examine, suspend to otherwise discontinue, the operation of
organizations whose operations are related to or connected with the
securities market such as but not limited to clearing houses,
securities depositories, transfer agents, registrars, fiscal and paying
agents, computer services, news disseminating services, proxy
solicitors, statistical agencies, securities rating agencies, and
securities information processors which are engaged in the business of:
(1) collecting, processing, or preparing for distribution of
publication, or assisting, participating in, or coordinating the
distribution or publication of, information with respect to transaction
in or quotations for any security or (2) distributing or publishing,
whether by means of a ticker tape, a communications network, a terminal
display device, or otherwise, on a current and continuing basis,
information with respect to such transactions or quotations. (n)
Sec. 41. Securities investors protection funds. —
The Commission may establish or facilitate the establishment of trust
funds which shall be contributed by exchanges, brokers, dealers,
underwriters, transfer agents, salesmen and other persons transacting
in securities, as the Commission may require, for the purpose of
compensating investors for the extraordinary losses or damage they may
suffer due to business failure or fraud or mismanagement of the persons
with whom they transact, under such rules and regulations as the
Commission may from time to time prescribe or approve in the public
interest. The Commission may, having due regard to the public interest
or the protection of investors, regulate, supervise, examine, suspend
or otherwise discontinue such other similar funds under such rules and
regulations which the Commission may promulgate, and which may include
taking custody and management of the fund itself as well as investments
in and disbursements from the fund under such forms of control and
supervision by the Commission as it may from time to time require. The
authority granted to the Commission under this Section shall also apply
to all funds established for the protection of investors, whether
established by the Commission or otherwise. (n)
Sec. 42. Association of securities brokers,
dealers, underwriters, transfer agents and salesmen. — The Commission
may prescribe rules and regulations which are necessary or appropriate
in the public interest or for the protection of investors to govern
associations of brokers, dealers, underwriters, transfer agents and/or
salesmen. (n)
Sec. 43. Certificates. — The Commission may,
having regard to the public interest and the protection of investors,
require the printing by the Central Bank Security Printing Plant, at
the issuer's expense, of the instruments evidencing securities, and
regulate the issuance and release thereof.
CHAPTER V
General Provisions
Sec. 44. Liabilities of controlling persons. — (a)
Every person who, by or through stock ownership, agency, or otherwise,
or in connection with an agreement or understanding with one or more
other persons by or through stock ownership, agency or otherwise,
controls any person liable under this Act, shall also be liable jointly
and severally with and to the same extent as such controlled persons to
any person to whom such controlled person is liable, unless the
controlling person proves that, despite the exercise of due diligence
on his part, he has no knowledge of the existence of the facts by
reason of which the liability of the controlled person is alleged to
exist.
(b) It shall be unlawful for any person, directly or
indirectly, to do any act or thing which it would be unlawful for such
person to do under the provisions of this Act or any rule or regulation
thereunder through or by means of any other person.
(c) It shall be unlawful for any director or officer
of, or any owner of any securities issued by, any issuer of any
security registered in accordance with this Act, without just cause, to
hinder, delay or obstruct the making or filing of any document, report,
or information required to be filed under this Act or any rule or
regulation thereunder. (29a)
Sec. 45. Investigations, injunctions and
prosecution of offenses. — (a) The Commission may, in its discretion,
make such investigations as it deems necessary to determine whether any
person has violated or is about to violate any provision of this Act or
any rule or regulation thereunder, and may require or permit any person
to file with it a statement in writing, under oath or otherwise, as the
Commission shall determine, as to all facts and circumstances
concerning the matter to be investigated. The Commission is authorized,
in its discretion, to publish information concerning any such
violations, and to investigate any fact, condition, practice or matter
which it may deem necessary or proper to aid in the enforcement of the
provisions of this Act, in the prescribing of rules and regulations
thereunder, or in securing information to serve as a basis for
recommending further legislation concerning the matters to which this
Act relates: Provided, however, That no such investigation shall be
conducted unless the person investigated is furnished with a copy of
any complaint which may have been the cause of the initiation of the
investigation or is notified in writing of the purpose of such
investigation: Provided, further, That all criminal complaints for
violations of this Act, and the implementing rules and regulations
enforced or administered by the Commission shall be referred to the
National Prosecution Service of the Ministry of Justice for preliminary
investigation and prosecution before the proper court: and, Provided,
finally, That the investigation, prosecution, and trial of such cases
shall be given priority.
(b) For the purpose of any such investigation, or any
other proceeding under this Act, the Commission or any officer
designated by it is empowered to administer oaths and affirmations,
subpoena witnesses, compel attendance, take evidence, require the
production of any book, paper, correspondence, memorandum, or other
record which the Commission deems relevant or material to the inquiry,
and to perform such other acts necessary in the conduct of such
investigation or proceedings.
(c) Any person who, without just cause, fails or
refuses to comply with any order, decision or subpoena issued by the
Commission, in the proper exercise of its authority and jurisdiction
under subparagraph (b) or subparagraph (c) of this Section or Sec. 47 of this Act, if in the power of such person to do so, shall, after
due notice and hearing, be guilty of contempt of the Commission and
shall be subject to discipline by the Commission as in the case of
contempt of court, either by a fine in such reasonable amount as the
Commission may determine, or when such failure or refusal is a clear
and open defiance of the Commission's order, decision or subpoena, by
detention under an arrest order, as may be issued by the Commission, at
the discretion of the Commission, until such order, decision or
subpoena is complied with.
(d) The powers of the Commission under this Section shall be in addition to any other powers granted under existing laws.
(31a)
Sec. 46. Administrative sanctions. — If, after
proper notice and hearing, the Commission finds that there is a
violation of this Act, its rules, or its orders or that any registrant
has, in a registration statement and its supporting papers and other
reports required by law or rules to be filed with the Commission, made
any untrue statement of a material fact, or omitted to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, or refused to permit any lawful
examination into its affairs, it shall, in its discretion, impose any
or all of the following sanctions:
(a) Suspension, or revocation of its certificate of
registration and permit to offer securities;
(b) A fine of no less than two hundred (P200.00)
pesos nor more than fifty thousand (P50,000.00) pesos plus not more
than five hundred (P500.00) pesos for each day of continuing violation;
(c) Disqualification from being an officer, member of
the board of directors or principal stockholder of an issuer whose
securities are or are about to be registered pursuant to this Act; and
(d) Other penalties within the power of the
Commission under existing laws.
The imposition of the foregoing administrative sanctions shall be
without prejudice to the filing of criminal charges against the
individuals responsible for the violation.
The Commission shall have the power to issue writs of execution to
enforce the provisions of this Section and to enforce payment of the
fees and other dues collectible under this Act. (n)
Sec. 47. Cease and desist order. — The Commission,
after proper investigation or verification, motu propio, or upon
verified complaint by any aggrieved party, may issue a cease and desist
order without the necessity of a prior hearing if in its judgment the
act or practice, unless restrained may cause grave or irreparable
injury or prejudice to the investing public or may amount to fraud or
violation of the disclosure requirements of this Act and the rules and
regulations of the Commission.
Such cease and desist order shall be confidential until after the
sanctions mentioned in the next preceding Section shall have been
imposed and have become final and executory.
Immediately upon the issuance of such order, the Commission shall, with
due notice to the parties involved, schedule a hearing, on a date not
later than fifteen days after service of notice, on whether to lift
such order or to impose the administrative sanctions provided for in
the next preceding Section . (n)
Sec. 48. Special accounting rules. — The
Commission shall have the authority, subject to the approval of the
Minister of Finance to make, amend and rescind such accounting rules
and regulations as may be necessary to carry out the provisions of this
Act, including rules and regulations governing registration statements
and prospectuses for various classes of securities and issuers, and
defining accounting, technical, and trade terms used in this Act. Among
other things, the Commission shall have authority, for the purpose of
this Act, to prescribe, with the approval of the Minister of Finance,
the form or forms in which required information shall be set forth, the
items or details to be shown in the balance sheet and earning
statement, and the methods to be followed in the preparation of
accounts, appraisal or valuation of assets and liabilities,
determination of depreciation and depletion, differentiations of
recurring and nonrecurring income, differentiation of investment and
operating income, and in the preparation, where the Commission deems it
necessary or desirable, of consolidated balance sheets or income
accounts of any person directly or indirectly controlling or controlled
by the issuer, or any person under direct or indirect common control
with the issuer. (n)
Sec. 49. Revelation of information filed with the
Commission. — (a) All information filed with the Commission in
compliance with the requirements of this Act shall be made available to
any member of the general public, upon request, in the premises and
during regular office hours of the Commission, except as set forth in
this Section .
(b) Nothing in this Act shall be construed to
require, or to authorize the Commission to require, the revealing of
trade secrets or processes in any application, report, or document
filed with the Commission.
(c) Any person filing any such application, report or
document may make written objection to the public disclosure of
information contained therein, stating the grounds for such objection,
and the Commission is authorized to hear objections in any such case as
it deems advisable. The Commission may, in such cases, make available
to the public the public the information contained in any such
application, report, or document only when a disclosure of such
information is required in the public interest or for the protection of
investors; and copies of information so made available may be furnished
to any person having a legitimate interest therein at such reasonable
charge and under such reasonable limitations as the Commission may
prescribe.
(d) It shall be unlawful for any member, officer, or
employee of the Commission to disclose to any person other than a
member, officer or employee of the Commission or to use for personal
benefit, any information contained in any application, report, or
document filed with the Commission which is not made available to the
public pursuant to subsection (c) of this Section . (34a)
Sec. 50. Effects of action of Commission and
unlawful representations with respect thereto. — No action or failure
to act by the Commission in the administration of this Act shall be
construed to mean that the Commission has in any way passed upon the
merits of or given approval to any security or any transaction or
transactions therein, nor shall such action or failure to act with
regard to any statement or report filed with or examined by the
Commission pursuant to this Act or the rules and regulations thereunder
to be deemed a finding by the Commission that such statement or report
is true and accurate on its face or that it is not false or misleading.
It shall be unlawful to make, or to cause to be made, to any
prospective purchaser or seller of a security any representation that
any such action or failure to act by the Commission is to be so
construed or has such effect.
Nothing herein contained shall, however, be construed as an exemption
from liability of any employee or officer of the Commission for any
nonfeasance, misfeasance or malfeasance in the discharge of his
officials duties. (36a)
Sec. 51. Effect on existing law. — The rights and
remedies provided by this Act shall be in addition to any and all other
rights and remedies that may now exist. However, except as provided in
Section twelve hereof, no person permitted to maintain a suit for
damages under the provisions of this Act shall recover, through
satisfaction of judgment in one or more actions, a total amount in
excess of his actual damages on account of the act complained of:
Provided, That the court may award exemplary damages in cases of bad
faith, fraud, malevolence or wantonness in the violation of this Act or
the rules and regulations promulgated thereunder. (37a)
Sec. 52. Class actions; consolidation of actions.
— The Commission may promulgate rules and regulations as may be
necessary or appropriate in the public interest or for the protection
of investors which will govern (1) class actions involving any
violation of this Act or the rules promulgated by the Commission, (2)
the consolidation of actions brought pursuant to this Act or rules
promulgated by the Commission, and (3) the compensation of counsel in
class actions. (n)
Sec. 53. Validity of contracts. — (a) Any
conditions, stipulation, provision binding any person to waive
compliance with any provision of this Act or of any rule or regulation
thereunder, or of any rule of an exchange required thereby, as well as
the waiver itself, shall be void.
(b) Every contract made in violation of any provision
of this Act or of any rule or regulation thereunder, and every
contract, including any contract for listing a security on an exchange
heretofore or hereafter made, the performance of which involves the
violation of, or the continuance of any relationship or practice in
violation of, any provision of this Act, or any rule or regulation
thereunder, shall be void:
(1) As regards the rights of any person who, in
violation of any such provision, rule or regulation, shall have made or
engaged in the performance of any such contract, and
(2) As regards the rights of any person who, not
being a party to such contract, shall have acquired any right
thereunder with actual knowledge of the facts by reason of which the
making or performance of such contract was in violation of any such
provision, rule or regulation.
(c) Nothing in this Act shall be construed —
(1) To effect the validity of any loan or extension
of credit made or of any lien created prior or subsequent to the
effectivity of this Act, unless at the time of the making of such loan
or extension of credit or the creating of such lien, the person making
such loan or extension of credit or acquiring such lien shall have
actual knowledge of the facts by reason of which the making of such
loan or extension of credit or the acquisition of such lien is a
violation of the provisions of this Act or any rules or regulations
thereunder, or
(2) To afford a defense to the collection of any
debt, obligation or the enforcement of any lien by any person who shall
have acquired such debt, obligation or lien in good faith, for value
and without actual knowledge of the violation of any provision of this
Act or any rule or regulation thereunder affecting the legality of such
debt, obligation or lien. (38a)
Sec. 54. Additional fees of stock exchanges. — In
addition to the registration fee prescribed in Sec. 22 of this Act,
every securities exchange shall pay to the Commission, on or before
March fifteen of each calendar year, a fee in an amount not more than
one one-hundredth of one per centum of the aggregate amount of the
sales of securities transacted on such securities exchange during the
preceding calendar year, for the privilege of doing business as a
securities exchange, during the preceding calendar year or any part
thereof. (39a)
Sec. 55. Effectivity of rules and regulations. —
The rules and regulations promulgated by the Commission shall be
published in two newspapers of general circulation in the Philippines
or in the Official Gazette, at the option of the Commission, and unless
otherwise prescribed by the Commission, the same shall be effective
fifteen (15) days after the date of last publication. (n)
Sec. 56. Penalties. — Any person who violates any
of the provisions of this Act, or the rules and regulations promulgated
by the Commission under authority thereof, or any person who, in a
registration statement filed under this Act, makes any untrue statement
of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, shall, upon conviction, suffer a fine of not less than five
thousand (P5,000.00) pesos nor more than five hundred thousand
(P500,000.00) pesos or imprisonment of not less than seven (7) years
nor more than twenty one (21) years, or both in the discretion of the
court. If the offender is a corporation, partnership or association or
other juridical entity, the penalty shall be imposed upon the officer
or officers of the corporation, partnership, association or entity
responsible for the violation, and if such officer is an alien, he
shall, in addition to the penalties prescribed, be deported without
further proceedings after service of sentence. (40a)
Sec. 57. Transitory provisions. — The Commission,
reorganized pursuant to Presidential Decrees Numbered 902-A, 1653, 1758
and 1799, shall continue to exist and exercise its powers, functions
and duties until otherwise provided by law.
All securities which at the time of the effectivity of this Act have
been registered with the Commission and have been permitted to be sold
under the provisions of Commonwealth Act No. 83, as amended, shall be
considered as registered and permitted to be sold under this Revised
Securities Act: Provided, however, That any further requirements of
this Act shall be complied with within such reasonable time as the
Commission may determine but not exceeding one year from the approval
of this Act.
Violations committed prior to the effectivity of this Act shall be
punished in accordance with the provisions of the laws then in force.
(n)
Sec. 58. Separability provisions. — If any
provision of this Act shall be held invalid, the remainder of the Act
not otherwise affected shall remain in full force and effect. (41a)
Sec. 59. Repealing clause. — Commonwealth Act No.
Eighty-three, as amended, is hereby repealed in its entirely. All other
laws, orders, rules and regulations, or parts thereof, inconsistent
with any provision of this Act are hereby repealed or modified
accordingly. (42a)
Sec. 60. Effectivity date. — This Act shall take
effect immediately upon its approval. (44a)
Approved: February 23, 1982
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