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Batas Pambansa Bilang 178
THE
REVISED SECURITIES ACT
chan
robles
virtual law library
BATAS
PAMBANSA BILANG 178THE
REVISED SECURITIES ACT
CHAPTER
I
Title
and Definitions
chanrobles virtual law librarySection
1. Title. — This Act shall be
known as the "Revised Securities Act."
Sec.
2. Definitions. — For purposes
of this Act: chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(d) "Buy"
and "purchase" shall include any contract to buy, purchase, or
otherwise
acquire. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
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
Sections
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. chanrobles virtual law library
(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. chanrobles virtual law library
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: chanrobles virtual law library
(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.chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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.chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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 Section 4 and of
Section
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. chanrobles virtual law library
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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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.chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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:chanroblesvirtuallawlibrarychanrobles virtual law library
(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 chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
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; chanrobles virtual law library
(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 chanrobles virtual law library
(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. chanrobles virtual law library
Every
issuer of a security registered with an exchange shall file a duplicate
original of such information, documents, and reports with the
exchange. chanrobles virtual law library
(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. chanrobles virtual law library
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; chanrobles virtual law library
(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; chanrobles virtual law library
(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. chanrobles virtual law library
(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 chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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 chanrobles virtual law library
(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. chanrobles virtual law library
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
Section 12 or Section 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 Section 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
Section
12 of 13(a) (1) more than five years after the security was bona fide
offered
to the public, or under Section 13(a) (2) more than five years after
the
sale.
(b) No
action shall be maintained to enforce any liability created under
Section
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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: chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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 Section 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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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.
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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.
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"; chanrobles virtual law library
(4) An
undertaking to furnish to the Commission copies of any amendments to
the
rules of the exchange forthwith upon their adoption; and chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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.
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: chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
(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; chanrobles virtual law library
(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. chanrobles virtual law library
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: chanrobles virtual law library
(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. chanrobles virtual law library
(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.
Sec.
25. Enforcement of margin
requirements and restrictions on borrowings. — To prevent indirect
violations
of the margin requirements under Section 23 hereof, the broker or
dealer
shall require the customer in non-margin 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 Section 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.
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 chanrobles virtual law library
(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. chanrobles virtual law library
(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:chanroblesvirtuallawlibrarychanrobles virtual law library
(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 chanrobles virtual law library
(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. chanrobles virtual law library
(e) Any
person who willfully 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. chanrobles virtual law library
(f) The
provisions of this Section shall apply to an exempted security. chanrobles virtual law library
(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.
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. chanrobles virtual law library
(b) To
use or employ, in connection with the purchase or sale of any security,
any manipulative or deceptive device or contrivance.
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.
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:chanroblesvirtuallawlibrarychanrobles virtual law library
(1)To
employ any device, scheme, or artifice to defraud, or chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
(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:chanroblesvirtuallawlibrary
(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 chanrobles virtual law library
(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. chanrobles virtual law library
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.chanrobles virtual law library
(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; chanrobles virtual law library
(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 chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
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
Section
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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(b) The
provisions of subsection (a) of Section 32 and subsection (a) of this
Section
shall not apply to any offer for, or request or invitation for tenders
of, any security: chanrobles virtual law library
(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 Sections.
(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 Section 32 and subsection (a) of this Section.
(d) In
determining, for purposes of Section 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. chanrobles virtual law library
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. chanrobles virtual law library
(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.
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: chanrobles virtual law library
(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. chanrobles virtual law library
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.
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. chanrobles virtual law library
(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.
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. chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
(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:chanroblesvirtuallawlibrary
(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; chanrobles virtual law library
(2) The
limitation or prohibition of the registration or trading in any
security
within a specified period after the issuance or primary distribution
thereof; chanrobles virtual law library
(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; chanrobles virtual law library
(10) Minimum
units of trading; chanrobles virtual law library
(11) Odd-lot
purchases and sales; and chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
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.
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.
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
(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. chanrobles virtual law library
(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 Section 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.
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: chanrobles virtual law library
(a) Suspension,
or revocation of its certificate of registration and permit to offer
securities; chanrobles virtual law library
(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; chanrobles virtual law library
(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. chanrobles virtual law library
The
imposition of the foregoing administrative sanctions shall be without
prejudice
to the filing of criminal charges against the individuals responsible
for
the violation. chanrobles virtual law library
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. chanrobles virtual law library
Sec.
47. Cease and desist order.
— The Commission, after proper investigation or verification, motu
propriety,
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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.chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
(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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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 chanrobles virtual law library
(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. chanrobles virtual law library
(c)Nothing
in this Act shall be construed: chanrobles virtual law library
(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 chanrobles virtual law library
(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. chanrobles virtual law library
Sec. 54. Additional
fees of stock exchanges. — In addition to the registration fee
prescribed
in Section 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.
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
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. chanrobles virtual law library
Violations
committed prior to the effectivity of this Act shall be punished in
accordance
with the provisions of the laws then in force.
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. chanrobles virtual law library
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.
Sec.
60. Effectivity date. —
This Act shall take effect immediately upon its approval. chanrobles virtual law library
chanrobles virtual law library
Approved:
February
23, 1982
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