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Republic
Act No. 8799
Securities
Regulation
Code
____________________________________________________________________
REPUBLIC
ACT NO. 8799
SECURITIES
REGULATION CODE
CHAPTER
I
Title
and Definitions
SECTION
1. Title. – This shall be known as “The Securities
Regulation
Code”.
SEC.
2. Declaration of State Policy. – The State shall establish a
socially
conscious, free market that regulates itself, encourage the widest
participation
of ownership in enterprises, enhance the democratization of wealth,
promote
the development of the capital market, protect investors, ensure full
and
fair disclosure about securities, minimize if not totally eliminate
insider
trading and other fraudulent or manipulative devices and practices
which
create distortions in the free market.
To
achieve these ends, this Securities Regulation Code is hereby enacted.
SEC.
3. Definition of Terms. –
3.1.
“Securities” are shares, participation or interests in a
corporation
or in a commercial enterprise or profit-making venture and evidenced by
a certificate, contract, instrument, whether written or electronic in
character.
It includes:
(a)
Shares of stock, bonds, debentures, notes, evidences of indebtedness,
asset-backed
securities;
(b)
Investment contracts, certificates of interest or participation in a
profit
sharing agreement, certificates of deposit for a future subscription;
(c)
Fractional undivided interests in oil, gas or other mineral rights;
(d)
Derivatives like option and warrants;
(e)
Certificates of assignments, certificates of participation, trust
certificates,
voting trust certificates or similar instruments;
(f)
Proprietary or non proprietary membership certificates
incorporations;
and
(g)
Other instruments as may in the future be determined by the Commission.
3.2
“Issuer” is the originator, maker, obligor, or creator of the
security.
3.3
“Broker” is a person engaged in the business of buying and
selling
securities for the account of others.chanrobles virtuallaw libraryred
3.4
“Dealer” means any person who buys and sells securities for
his/her
own account in the ordinary course of business.
3.5.
“Associated person of a broker or dealer” is an employee thereof
who, directly exercises control of supervisory authority, but does not
include a salesman, or an agent or a person whose functions are solely
clerical or ministerial.
3.6.
“Clearing Agency” is any person who acts as intermediary in
making
deliveries upon payment to effect settlement in securities transactions.
3.7.
“Exchange”
is an organized marketplace or facility that brings together buyers and
sellers and executes trades of securities and/or commodities.
3.8.
“Insider” means: (a) the issuer; (b) a director or officer (or
person
performing similar functions) of, or a person controlling the issuer;
(c)
a person whose relationship or former relationship to the issuer gives
or gave him access to material information about the issuer or the
security
that is not generally available to the public; (d) a government
employee,
or director, or officer of an exchange, clearing agency and/or
self-regulatory
organization who has access to material information about an issuer or
a security that is not generally available to the public; or (e) a
person
who learns such information by a communication from any of the
foregoing
insiders.
3.9.
“Pre-Need Plans” are contracts which provide for the performance
of future services or the payment of future monetary considerations at
the time of actual need, for which planholders pay in cash or
installment
at stated prices, with or without interest or insurance coverage and
includes
life, pension, education, interment, and other plans which the
Commission
may from time to time approve.
3.10.
“Promoter” is a person who, acting alone or with others, takes
initiative
in founding and organizing the business or enterprise of the issuer and
receives consideration therefor.
3.11.
“Prospectus” is the document made by or on behalf of an issuer,
underwriter or dealer to sell or offer securities for sale to the
public
through a registration statement filed with the Commission.
3.12.
“Registration statement” is the application for the registration
of securities required to be filed with the Commission.
3.13.
“Salesman” is a natural person, employed as such or as an agent,
by a dealer, issuer or broker to buy and sell securities.
3.14.
“Uncertificated security” is a security evidenced by electronic
or similar records.
3.15.
“Underwriter” is a person who guarantees on a firm commitment
and/or
declared best effort basis the distribution and sale of securities of
any
kind by another company.
CHAPTER
II
Securities
and Exchange Commission
SEC.
4. Administrative Agency. -
4.1.
This Code shall be administered by the Securities and Exchange
Commission
(hereafter the “Commission”) as a collegial body, composed of a
Chairperson and four (4) Commissioners, appointed by the President for
a term of seven (7) years each and who shall serve as such until their
successor shall have been appointed and qualified. A Commissioner
appointed
to fill a vacancy occurring prior to the expiration of the term for
which
his/her predecessor was appointed, shall serve only for the unexpired
portion
of such term. The incumbent Chairperson and Commissioners at the
effectivity
of this Code, shall serve the unexpired portion of their terms under Presidential
Decree No. 902-A. Unless the context indicates otherwise, the
term “Commissioner” includes the Chairperson. chanrobles virtuallaw libraryred
4.2.
The Commissioners must be natural-born citizens of the Philippines, at
least forty (40) years of age for the Chairperson and at least
thirty-five
(35) years of age for the Commissioners, of good moral character, of
unquestionable
integrity, of known probity and patriotism, and with recognized
competence
in social and economic disciplines: Provided, That the
majority
of Commissioners, including the Chairperson, shall be members of the
Philippine
Bar.
4.3.
The Chairperson is the chief executive officer of the Commission. The
Chairperson
shall execute and administer the policies, decisions, orders and
resolutions
approved by the Commission and shall have the general executive
direction
and supervision of the work and operation of the Commission and of its
members, bodies, boards, offices, personnel and all its administrative
business.
4.4.
The salary of the Chairperson and the Commissioners shall be fixed by
the
President of the Philippines based on an objective classification
system,
at a sum comparable to the members of the Monetary Board and
commensurate
to the importance and responsibilities attached to the position.
4.5.
The Commission shall hold meetings at least once a week for the conduct
of business or as often as may be necessary upon call of the
Chairperson
or upon the request of three (3) Commissioners. The notice of the
meeting
shall be given to all Commissioners and the presence of three (3)
Commissioners
shall constitute a quorum. In the absence of the Chairperson, the most
senior Commissioner shall act as presiding officer of the meeting.
4.6.
The Commission may, for purposes of efficiency, delegate any of its
functions
to any department or office of the Commission, an individual
Commissioner
or staff member of the Commission except its review or appellate
authority
and its power to adopt, alter and supplement any rule or regulation.
The
Commission may review upon its own initiative or upon the petition of
any
interested party any action of any department or office, individual
Commissioner,
or staff member of the Commission.
SEC.
5. Powers and Functions of the Commission.- 5.1. The
Commission
shall act with transparency and shall have the powers and functions
provided
by this Code, Presidential
Decree No. 902-A, the Corporation
Code, the Investment
Houses Law, the Financing
Company Act and other existing laws. Pursuant thereto the
Commission
shall have, among others, the following powers and functions:chanroblesvirtualawlibrary
(a)
Have jurisdiction and supervision over all corporations, partnerships
or
associations who are the grantees of primary franchises and/or a
license
or permit issued by the Government;chanrobles virtuallaw libraryred
(b)
Formulate policies and recommendations on issues concerning the
securities
market, advise Congress and other government agencies on all aspects of
the securities market and propose legislation and amendments thereto;
(c)
Approve, reject, suspend, revoke or require amendments to registration
statements, and registration and licensing applications;
(d)
Regulate, investigate or supervise the activities of persons to ensure
compliance;
(e)
Supervise, monitor, suspend or take over the activities of exchanges,
clearing
agencies and other SROs;
(f)
Impose sanctions for the violation of laws and the rules, regulations
and
orders issued pursuant thereto;
(g)
Prepare, approve, amend or repeal rules, regulations and orders, and
issue
opinions and provide guidance on and supervise compliance with such
rules,
regulations and orders;
(h)
Enlist the aid and support of and/or deputize any and all enforcement
agencies
of the Government, civil or military as well as any private
institution,
corporation, firm, association or person in the implementation of its
powers
and functions under this Code;
(i)
Issue cease and desist orders to prevent fraud or injury to the
investing
public;
(j)
Punish for contempt of the Commission, both direct and indirect, in
accordance
with the pertinent provisions of and penalties prescribed by the Rules
of Court;
(k)
Compel the officers of any registered corporation or association to
call
meetings of stockholders or members thereof under its supervision;
(l)
Issue subpoena duces tecum and summon witnesses to appear in
any
proceedings of the Commission and in appropriate cases, order the
examination,
search and seizure of all documents, papers, files and records, tax
returns,
and books of accounts of any entity or person under investigation as
may
be necessary for the proper disposition of the cases before it, subject
to the provisions of existing laws;
(m)
Suspend, or revoke, after proper notice and hearing the franchise or
certificate
of registration of corporations, partnerships or associations, upon any
of the grounds provided by law; and
(n)
Exercise such other powers as may be provided by law as well as those
which
may be implied from, or which are necessary or incidental to the
carrying
out of, the express powers granted the Commission to achieve the
objectives
and purposes of these laws.
5.2.
The Commission’s jurisdiction over all cases enumerated under Section 5
of Presidential
Decree No. 902-A is hereby transferred to the Courts of general
jurisdiction
or the appropriate Regional Trial Court: Provided, that the
Supreme
Court in the exercise of its authority may designate the Regional Trial
Court branches that shall exercise jurisdiction over these cases. The
Commission
shall retain jurisdiction over pending cases involving intra-corporate
disputes submitted for final resolution which should be resolved within
one (1) year from the enactment of this Code. The Commission shall
retain
jurisdiction over pending suspension of payments/rehabilitation cases
filed
as of 30 June 2000 until finally disposed.chanrobles virtuallaw libraryred
SEC.
6. Indemnification and Responsibilities of Commissioners.-
6.1. The Commission shall indemnify each Commissioner and other
officials
of the Commission, including personnel performing supervision and
examination
functions for all costs and expenses reasonably incurred by such
persons
in connection with any civil or criminal actions, suits or proceedings
to which they may be or made a party by reason of the performance of
their
functions or duties, unless they are finally adjudged in such actions
or
proceedings to be liable for gross negligence or misconduct.
In
the event of settlement or compromise, indemnification shall be
provided
only in connection with such matters covered by the settlement as to
which
the Commission is advised by external counsel that the persons to be
indemnified
did not commit any gross negligence or misconduct.
The
costs and expenses incurred in defending the aforementioned action,
suit
or proceeding may be paid by the Commission in advance of the final
disposition
of such action, suit or proceeding upon receipt of an undertaking by or
on behalf of the Commissioner, officer or employee to repay the amount
advanced should it ultimately be determined by the Commission that
he/she
is not entitled to be indemnified as provided in this subsection.
6.2.
The Commissioners, officers and employees of the Commission who
willfully
violate this Code or who are guilty of negligence, abuse or acts of
malfeasance
or fail to exercise extraordinary diligence in the performance of their
duties shall be held liable for any loss or injury suffered by the
Commission
or other institutions as a result of such
violation,
negligence, abuse, malfeasance, or failure to exercise extraordinary
diligence.
Similar responsibility shall apply to the Commissioners, officers and
employees
of the Commission for (1) the disclosure of any information, discussion
or resolution of the Commission of a confidential nature, or about the
confidential operations of the Commission, unless the disclosure is in
connection with the performance of official functions with the
Commission
or with prior authorization of the Commissioners; or (2) the use of
such
information for personal gain or to the detriment of the government,
the
Commission or third parties: Provided, however, That
any
data or information required to be submitted to the President and/or
Congress
or its appropriate committee, or to be published under the provisions
of
this Code shall not be considered confidential.
SEC.
7. Reorganization.- 7.1. To achieve the goals of this Code,
consistent
with Civil Service laws, the Commission is hereby authorized to provide
for its reorganization, to streamline its structure and operations,
upgrade
its human resource component and enable it to more efficiently and
effectively
perform its functions and exercise its powers under this Code.
7.2.
All positions of the Commission shall be governed by a compensation and
position classification systems and qualification standards approved by
the Commission based on a comprehensive job analysis and audit of
actual
duties and responsibilities. The compensation plan shall be comparable
with the prevailing compensation plan in the Bangko
Sentral ng Pilipinas and other government financial
institutions
and shall be subject to periodic review by the Commission no more than
once every two (2) years without prejudice to yearly merit reviews or
increases
based on productivity and efficiency. The Commission shall, therefore,
be exempt from laws, rules, and regulations on compensation, position
classification
and qualification standards. The Commission shall, however, endeavor to
make its system conform as closely as possible with the principles
under
the Compensation and Position Classification Act of 1989 (Republic Act
No. 6758, as amended). CHAPTER
III
Registration
of Securities
SEC.
8. Requirement of Registration of Securities. – 8.1. Securities
shall not be sold or offered for sale or distribution within the
Philippines,
without a registration statement duly filed with and approved by the
Commission.
Prior to such sale, information on the securities, in such form and
with
such substance as the Commission may prescribe, shall be made available
to each prospective purchaser.
8.2.
The Commission may conditionally approve the registration statement
under
such terms as it may deem necessary.
8.3.
The Commission may specify the terms and conditions under which any
written
communication, including any summary prospectus, shall be deemed not to
constitute an offer for sale under this Section.
8.4.
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
public
inspection at reasonable hours on business days.chanrobles virtuallaw libraryred
8.5.
The Commission may audit the financial statements, assets and other
information
of a firm applying for registration of its securities whenever it deems
the same necessary to insure full disclosure or to protect the interest
of the investors and the public in general.
SEC.
9. Exempt Securities. -
9.1.
The requirement of registration under Subsection 8.1 shall not as a
general
rule apply to any of the following classes of securities:
(a)
Any security issued or guaranteed by the Government of the Philippines,
or by any political subdivision or agency thereof, or by any person
controlled
or supervised by, and acting as an instrumentality of said Government.
(b)
Any security issued or guaranteed by the government of any country with
which the Philippines maintains diplomatic relations, or by any state,
province or political subdivision thereof on the basis of reciprocity: Provided,
That the Commission may require compliance with the form and content of
disclosures the Commission may prescribe.
(c)
Certificates issued by a receiver or by a trustee in bankruptcy duly
approved
by the proper adjudicatory body.
(d)
Any security or its derivatives the sale or transfer of which, by law,
is under the supervision and regulation of the Office of the Insurance
Commission, Housing and Land Use Regulatory Board, or the Bureau of
Internal
Revenue.
(e)
Any security issued by a bank except its own shares of stock.
9.2.
The Commission may, by rule or regulation after public hearing, add to
the foregoing any class of securities if it finds that the enforcement
of this Code with respect to such securities is not necessary in the
public
interest and for the protection of investors.
SEC.
10. Exempt Transactions. - 10.1. The requirement of
registration
under Subsection 8.1. shall not apply to the sale of any security in
any
of the following transactions:chanroblesvirtualawlibrary
(a)
At any judicial sale, or sale by an executor, administrator, guardian
or
receiver or trustee in insolvency or bankruptcy.
(b)
By or for the account of a pledge holder, or mortgagee or any other
similar
lien holder selling or offering for sale or delivery in the ordinary
course
of business and not for the purpose of avoiding the provisions of this
Code, to liquidate a bona fide debt, a security pledged in good
faith as security for such debt.
(c)
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.
(d)
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.
(e)
The sale of capital stock of a corporation to its own stockholders
exclusively,
where no commission or other remuneration is paid or given directly or
indirectly in connection with the sale of such capital stock.
(f)
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.
(g)
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 under this Code or
was, when sold, exempt from the provisions of this Code, 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 Code. 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.
(h)
Broker’s transactions, executed upon customer’s orders, on any
registered
Exchange or other trading market.
(i)
Subscriptions for shares of the capital stock of a corporation prior to
the incorporation thereof or in pursuance of an increase in its
authorized
capital stock 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 corporation which
should
be subscribed before it can be registered and duly incorporated, or its
authorized capital increased.
(j)
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.
(k)
The sale of securities by an issuer to fewer than twenty (20) persons
in
the Philippines during any twelve-month period.
(l)
The sale of securities to any number of the following qualified buyers:chanroblesvirtualawlibrary(i)
Bank;chanrobles virtuallaw libraryred
(ii)
Registered investment house;
(iii)
Insurance company;
(iv)
Pension fund or retirement plan maintained by the Government of the
Philippines
or any political subdivision thereof or managed by a bank or other
persons
authorized by the Bangko Sentral to engage in trust functions;
(v)
Investment company; or
(vi)
Such other person as the Commission may by rule determine as qualified
buyers, on the basis of such factors as financial sophistication, net
worth,
knowledge, and experience in financial and business matters, or amount
of assets under management.
10.2.
The Commission may exempt other transactions, if it finds that the
requirements
of registration under this Code is not necessary in the public interest
or for the protection of the investors such as by reason of the small
amount
involved or the limited character of the public offering.
10.3.
Any person applying for an exemption under this Section, shall file
with
the Commission a notice identifying the exemption relied upon on such
form
and at such time as the Commission by rule may prescribe and with such
notice shall pay to the Commission a fee equivalent to one-tenth (1/10)
of one percent (1%) of the maximum aggregate price or issued value of
the
securities.
SEC.
11. Commodity Futures Contracts.- No person shall offer, sell
or
enter into commodity futures contracts except in accordance with rules,
regulations and orders the Commission may prescribe in the public
interest.
The Commission shall promulgate rules and regulations involving
commodity
futures contracts to protect investors to ensure the development of a
fair
and transparent commodities market.
SEC.
12. Procedure for Registration of Securities. -
12.1.
All securities required to be registered under Subsection 8.1 shall be
registered through the filing by the issuer in the main office of the
Commission,
of a sworn registration statement with respect to such securities, in
such
form and containing such information and documents as the Commission
shall
prescribe. The registration statement shall include any prospectus
required
or permitted to be delivered under Subsections 8.2, 8.3 and 8.4.
12.2.
In promulgating rules governing the content of any registration
statement
(including any prospectus made a part thereof or annexed thereto), the
Commission may require the registration statement to contain such
information
or documents as it may, by rule, prescribe. It may dispense with any
such
requirement, or may require additional information or documents,
including
written information from an expert, depending on the necessity thereof
or their applicability to the class of securities sought to be
registered.chanrobles virtuallaw libraryred
12.3.
The information required for the registration of any kind, and all
securities,
shall include, among others, the effect of the securities issue on
ownership,
on the mix of ownership, especially foreign and local ownership.
12.4.
The registration statement shall be signed by the issuer’s executive
officer,
its principal operating officer, its principal financial officer, its
comptroller,
principal accounting officer, its corporate secretary or persons
performing
similar functions accompanied by a duly verified resolution of the
board
of directors of the issuer corporation. 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. Where the
registration
statement includes shares to be sold by selling shareholders, a written
certification by such selling shareholders as to the accuracy of any
part
of the registration statement contributed to by such selling
shareholders
shall also be filed.
12.5.
(a) Upon filing of the registration statement, the issuer shall pay to
the Commission a fee of not more than one-tenth (1/10) of one per
centum
(1%) of the maximum aggregate price at which such securities are
proposed
to be offered. The Commission shall prescribe by rule diminishing fees
in inverse proportion to the value of the aggregate price of the
offering.
(b)
Notice of the filing of the registration statement shall be immediately
published by the issuer, at its own expense, in two (2) newspapers of
general
circulation in the Philippines, once a week for two (2) consecutive
weeks,
or in such other manner as the Commission by rule shall prescribe,
reciting
that a registration statement for the sale of such security has been
filed,
and that the aforesaid registration statement, as well as the papers
attached
thereto are open to inspection at the Commission during business hours,
and copies thereof, photostatic or otherwise, shall be furnished to
interested
parties at such reasonable charge as the Commission may prescribe.
12.6.
Within forty-five (45) days after the date of filing of the
registration
statement, or by such later date to which the issuer has consented, the
Commission shall declare the registration statement effective or
rejected,
unless the applicant is allowed to amend the registration statement as
provided in Section 14 hereof. The Commission shall enter an order
declaring
the registration statement to be effective if it finds that the
registration
statement together with all the other papers and documents attached
thereto,
is on its face complete and that the requirements have been complied
with.
The Commission may impose such terms and conditions as may be necessary
or appropriate for the protection of the investors.
12.7.
Upon effectivity of the registration statement, the issuer shall state
under oath in every prospectus that all registration requirements have
been met and that all information are true and correct as represented
by
the issuer or the one making the statement. Any untrue statement of
fact
or omission to state a material fact required to be stated therein or
necessary
to make the statement therein not misleading shall constitute fraud.
SEC.
13. Rejection and Revocation of Registration of Securities. -
13.1.
The Commission may reject a registration statement and refuse
registration
of the security thereunder, or revoke the effectivity of a registration
statement and the registration of the security thereunder after due
notice
and hearing by issuing an order to such effect, setting forth its
findings
in respect thereto, if it finds that:chanroblesvirtualawlibrary
(a)
The issuer:chanroblesvirtualawlibrary
(i)
Has been judicially declared insolvent;
(ii)
Has violated any of the provisions of this Code, the rules promulgated
pursuant thereto, or any order of the Commission of which the issuer
has
notice in connection with the offering for which a registration
statement
has been filed;
(iii)
Has been or is engaged or is about to engage in fraudulent transactions;
(iv)
Has made any false or misleading representation of material facts in
any
prospectus concerning the issuer or its securities;
(v)
Has failed to comply with any requirement that the Commission may
impose
as a condition for registration of the security for which the
registration
statement has been filed; or
(b)
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
(c)
The issuer, any officer, director or controlling person of the issuer,
or person performing similar functions, or any underwriter has been
convicted,
by a competent judicial or administrative body, upon plea of guilty, or
otherwise, of an offense involving moral turpitude and/or fraud or is
enjoined
or restrained by the Commission or other competent judicial or
administrative
body for violations of securities, commodities, and other related laws.chanrobles virtuallaw libraryred
For
purposes of this subsection, the term “competent judicial or
administrative
body” shall include a foreign court of competent jurisdiction as
provided
for under the Rules
of Court.
13.2.
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.
13.3.
If any issuer shall refuse to permit an examination to be made by the
Commission,
its refusal shall be ground for the refusal or revocation of the
registration
of its securities.
13.4.
If the Commission deems it necessary, it may issue an order suspending
the offer and sale of the 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 offer or sale of such security shall be
made
until the same is lifted or set aside by the Commission. Otherwise,
such
sale shall be void.
13.5.
Notice of issuance of such order shall be given to the issuer and every
dealer and broker who shall have notified the Commission of an
intention
to sell such security.
13.6.
A registration statement may be withdrawn by the issuer only with the
consent
of the Commission.
SEC.
14. Amendments to the Registration Statement. - 14.1. If
a
registration statement is on its face incomplete or inaccurate in any
material
respect, the Commission shall issue an order directing the amendment of
the registration statement. Upon compliance with such order, the
amended
registration statement shall become effective in accordance with the
procedure
mentioned in Subsection 12.6 hereof.
14.2.
An amendment filed prior to the effective date of the registration
statement
shall recommence the forty-five (45) day period within which the
Commission
shall act on a registration statement. An amendment filed after the
effective
date of the registration statement shall become effective only upon
such
date as determined by the Commission.
14.3.
If any change occurs in the facts set forth in a registration
statement,
the issuer shall file an amendment thereto setting forth the change.
14.4.
If, at any time, the Commission finds that a registration statement
contains
any false statement or omits to state any fact required to be stated
therein
or necessary to make the statements therein not misleading, the
Commission
may conduct an examination, and, after due notice and hearing, issue an
Order suspending the effectivity of the registration statement. If the
statement is duly amended, the suspension order may be lifted.
14.5.
In making such examination the Commission or any officer or officers
designated
by it may administer oaths and affirmations and shall have access to,
and
may demand the production of, any books, records or documents relevant
to the examination. Failure of the issuer, underwriter, or any other
person
to cooperate, or his obstruction or refusal to undergo an
examination,
shall be a ground for the issuance of a suspension order.
SEC.
15. Suspension of Registration. - 15.1. If, at any time, the
information
contained in the registration statement filed is or has become
misleading,
incorrect, inadequate or incomplete in any material respect, or the
sale
or offering for sale of the security registered thereunder may work or
tend to work a fraud, the Commission may require from the issuer 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 Code. The Commission may also suspend
the
right to sell and offer for sale such security pending further
investigation,
by entering an order specifying the grounds for such action, and by
notifying
the issuer, underwriter, dealer or broker known as participating in
such
offering.
15.2.
The refusal to furnish information required by the Commission may be a
ground for the issuance of an order of suspension pursuant to
Subsection
15.1. Upon the issuance of any such order and notification to the
issuer,
underwriter, dealer or broker known as participating in such offering,
no further offer or sale of any such security shall be made until the
same
is lifted or set aside by the Commission. Otherwise, such sale shall be
void.
15.3.
Upon issuance of an order of suspension, the Commission shall conduct a
hearing. If the Commission determines that the sale of any security
should
be revoked, it shall issue an order prohibiting sale of such security.
Until
the issuance of a 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, the Commission finds that
the sale of the security will neither be fraudulent nor result in
fraud,
it shall forthwith issue an order revoking the order of suspension, and
such security shall be restored to its status as a registered security
as of the date of such order of suspension.chanrobles virtuallaw libraryred
CHAPTER
IV
Regulation
of Pre-Need Plans
SEC.16.
Pre-Need
Plans. - No person shall sell or offer for sale to the public any
pre-need
plan except in accordance with rules and regulations which the
Commission
shall prescribe. Such rules shall regulate the sale of pre-need plans
by,
among other things, requiring the registration of pre-need plans,
licensing
persons involved in the sale of pre-need plans, requiring disclosures
to
prospective plan holders, prescribing advertising guidelines, providing
for uniform accounting system, reports and record keeping with respect
to such plans, imposing capital, bonding and other financial
responsibility,
and establishing trust funds for the payment of benefits under such
plans.
CHAPTER
V
Reportorial
Requirements
SEC.
17. Periodic and Other Reports of Issuers. -17.1. Every issuer
satisfying
the requirements in Subsection 17.2 hereof shall file with the
Commission:chanroblesvirtualawlibrary
(a)
Within one hundred thirty-five (135) days, after the end of the
issuer’s
fiscal year, or such other time as the Commission may prescribe, an
annual
report which shall include, among others, a balance sheet, profit and
loss
statement and statement of cash flows, for such last fiscal year,
certified
by an independent certified public accountant, and a management
discussion
and analysis of results of operations; and
(b)
Such other periodical reports for interim fiscal periods and current
reports
on significant developments of the issuer as the Commission may
prescribe
as necessary to keep current information on the operation of the
business
and financial condition of the issuer.
17.2.The
reportorial requirements of Subsection 17.1 shall apply to the
following:chanroblesvirtualawlibrary
(a)
An issuer which has sold a class of its securities pursuant to a
registration
under Section 12 hereof: Provided, however, That the obligation
of such issuer to file reports shall be suspended for any fiscal year
after
the year such registration became effective if such issuer, as of the
first
day of any such fiscal year, has less than one hundred (100) holders of
such class of securities or such other number as the Commission shall
prescribe
and it notifies the Commission of such;
(b)
An issuer with a class of securities listed for trading on an Exchange;
and
(c)
An issuer with assets of at least Fifty million pesos (P50,000,000.00)
or such other amount as the Commission shall prescribe, and having Two
hundred (200) or more holders each holding at least One hundred (100)
shares
of a class of its equity securities: Provided, however, That
the
obligation of such issuer to file reports shall be terminated ninety
(90)
days after notification to the Commission by the issuer that the number
of its holders holding at least one hundred (100) shares is reduced to
less than One hundred (100).chanrobles virtuallaw libraryred
17.3.
Every issuer of a security listed for trading on an Exchange shall file
with the Exchange a copy of any report filed with the Commission under
Subsection 17.1 hereof.
17.4.
All reports (including financial statements) required to be filed with
the Commission pursuant to Subsection 17.1 hereof shall be in such
form,
contain such information and be filed at such times as the Commission
shall
prescribe, and shall be in lieu of any periodical or current reports or
financial statements otherwise required to be filed under the Corporation
Code.
17.5.
Every issuer which has a class of equity securities satisfying any of
the
requirements in Subsection 17.2 shall furnish to each holder of such
equity
security an annual report in such form and containing such information
as the Commission shall prescribe.
17.6.
Within such period as the Commission may prescribe preceding the annual
meeting of the holders of any equity security of a class entitled to
vote
at such meeting, the issuer shall transmit to such holders an annual
report
in conformity with Subsection 17.5.
SEC.
18. Reports by Five per centum (5%) Holders of Equity Securities.
- 18.1. In every case in which an issuer satisfies the requirements of
Subsection 17.2 hereof, any person who acquires directly or indirectly
the beneficial ownership of more than five per centum (5%) of
such
class or in excess of such lesser per centum as the Commission by rule
may prescribe, shall, within ten (10) days after such acquisition or
such
reasonable time as fixed by the Commission, submit to the issuer of the
security, to the Exchange where the security is traded, and to the
Commission
a sworn statement containing the following information and such other
information
as the Commission may require in the public interest or for the
protection
of investors:chanroblesvirtualawlibrary
(a)
The personal 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 lines of business of the
beneficial
owner shall also be reported;
(b)
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;
(c)
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) each associate of such
person,
giving the background, identity, residence, and citizenship of each
such
associate; and
(d)
Information as to any contracts, arrangements, or understanding with
any
person with respect to any securities of the issuer including but not
limited
to transfer, 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.
18.2.
If any change occurs in the facts set forth in the statements, an
amendment
shall be transmitted to the issuer, the Exchange and the Commission.
18.3.
The Commission, may permit any person to file in lieu of the statement
required by Subsection 17.1 hereof, a notice stating the name of such
person,
the shares of any equity securities subject to Subsection 17.1 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.
CHAPTER
VI
Protection
of Shareholder Interests
SEC.
19. Tender Offers. –19.1. (a) Any person or group of persons
acting
in concert who intends to acquire at least fifteen per cent (15%) of
any
class of any equity security of a listed corporation or of any class of
any equity security of a corporation with assets of at least Fifty
Million
Pesos (P50,000,000.00) and having two hundred (200) or more
stockholders
with at least one hundred (100) shares each or who intends to acquire
at
least thirty per cent (30%) of such equity over a period of twelve (12)
months shall make a tender offer to stockholders by filing with the
Commission
a declaration to that effect; and furnish the issuer, a statement
containing
such of the information required in Section 17 of this Code as the
Commission
may prescribe. Such person or group of persons shall publish all
requests or invitations for tender, or materials making a tender offer
or requesting or inviting letters of such a security. 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, 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.
(b)
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.
(c)
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
throughout the period that the tender offer remains open and if the
securities
deposited have not been previously accepted for payment, and at any
time
after sixty (60) days from the date of the original tender offer or
request
or invitation, except as the Commission may otherwise prescribe.chanrobles virtuallaw libraryred
(d)
Where the securities offered exceed that which a person or group of
persons
is bound or willing to take up and pay for, the securities that are
subject
of the tender offer 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 (10) days after notice of an increase in the consideration
offered
to security holders, as described in paragraph (e) of this subsection,
is first published or sent or given to security holders.
(e)
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.
19.2.
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, define and prescribe means
reasonably
designed to prevent, such acts and practices as are fraudulent,
deceptive,
or manipulative.
SEC.
20. Proxy Solicitations. – 20.1. Proxies must be issued
and
proxy solicitation must be made in accordance with rules and
regulations
to be issued by the Commission;
20.2.
Proxies must be in writing, signed by the stockholder or his duly
authorized
representative and filed before the scheduled meeting with the
corporate
secretary.
20.3.
Unless otherwise provided in the proxy, it shall be valid only for the
meeting for which it is intended. No proxy shall be valid and effective
for a period longer than five (5) years at one time.
20.4.
No broker or dealer shall give any proxy, consent or authorization, in
respect of any security carried for the account of a customer, to a
person
other than the customer, without the express written authorization of
such
customer.
20.5.
A broker or dealer who holds or acquires the proxy for at least ten per
centum (10%) or such percentage as the Commission may prescribe of
the outstanding share of the issuer, shall submit a report identifying
the beneficial owner within ten (10) days after such acquisition, for
its
own account or customer, to the issuer of the security, to the Exchange
where the security is traded and to the Commission.
SEC.
21. Fees for Tender Offers and Certain Proxy Solicitations. -
At
the time of filing with the Commission of any statement required under
Section 19 for any tender offer or Section 72.2 for issuer repurchases,
or Section 20 for proxy or consent solicitation, the Commission may
require
that the person making such filing pay a fee of not more than one-tenth
(1/10) of one percentum (1%) of:chanroblesvirtualawlibrary
21.1.
The proposed aggregate purchase price in the case of a transaction
under
Sections 20 or 72.2; orchanrobles virtuallaw libraryred
21.2.
The proposed payment in cash, and the value of any securities or
property
to be transferred in the acquisition, merger or consolidation, or the
cash
and value of any securities proposed to be received upon the sale or
disposition
of such assets in the case of a solicitation under Section 20. The
Commission
shall prescribe by rule diminishing fees in inverse proportion to the
value
of the aggregate price of the offering.
SEC.
22. Internal Record Keeping and Accounting Controls. - Every
issuer
which has a class of securities that satisfies the requirements of
Subsection
17.2 shall:chanroblesvirtualawlibrary
22.1.
Make and keep books, records, and accounts which, in reasonable detail
accurately and fairly reflect the transactions and dispositions of
assets
of the issuer;
22.2.
Devise and maintain a system of internal accounting controls sufficient
to provide reasonable assurances that: (a) Transactions and access to
assets
are pursuant to management authorization; (b) Financial statements are
prepared in conformity with generally accepted accounting principles
that
are adopted by the Accounting Standards Council and the rules
promulgated
by the Commission with regard to the preparation of financial
statements;
and (c) Recorded assets are compared with existing assets at reasonable
intervals and differences are reconciled.
SEC.
23. Transactions of Directors, Officers and Principal Stockholders.
- 23.1. Every person who is directly or indirectly the beneficial owner
of more than ten per centum (10%) of any class of any equity
security
which satisfies the requirements of Subsection 17.2, or who is a
director
or an officer of the issuer of such security, shall file, at the time
either
such requirement is first satisfied or within ten days after he becomes
such a beneficial owner, director, or officer, a statement with the
Commission
and, if such security is listed for trading on an 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 (10) 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 listed for trading on an 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.
23.2.
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 (6) 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 (6) months. Suit to
recover
such profit may be instituted before the Regional Trial Court 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 (60) days after request or shall fail diligently to prosecute the
same thereafter, but no such suit shall be brought more than two (2)
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.
23.3.
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: (a) Does not own the
security
sold; or (b) If owning the security, does not deliver it against such
sale
within twenty (20) days thereafter, or does not within five (5) 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.
23.4.
The provisions of Subsection 23.2 shall not apply to any purchase and
sale,
or sale and purchase, and the provisions of Subsection 23.3 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.
CHAPTER
VII
Prohibitions
on Fraud, Manipulation and Insider Trading
SEC.
24. Manipulation of Security Prices; Devices and Practices. -
24.1
It shall be unlawful for any person acting for himself or through a
dealer
or broker, directly or indirectly:chanroblesvirtualawlibrary
(a)
To create a false or misleading appearance of active trading in any
listed
security traded in an Exchange or any other trading market (hereafter
referred
to purposes of this Chapter as “Exchange”):
(i)
By effecting any transaction in such security which involves no change
in the beneficial ownership thereof;
(ii)
By entering an order or orders for the purchase or sale of such
security
with the knowledge that a simultaneous order or orders of substantially
the same size, time and price, for the sale or purchase of any such
security,
has or will be entered by or for the same or different parties; or
(iii)
By performing similar act where there is no change in beneficial
ownership.
(b)
To effect, alone or with others, a series of transactions in securities
that:
(i)
Raises their price to induce 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 to induce 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 to induce such a purchase or sale through
manipulative
devices such as marking the close, painting the tape, squeezing the
float,
hype and dump, boiler room operations and such other similar devices.chanrobles virtuallaw libraryred
(c)
To circulate or disseminate information that the price of any security
listed in an Exchange will or is likely to rise or fall because of
manipulative
market operations of any one or more persons conducted for the purpose
of raising or depressing the price of the security for the purpose of
inducing
the purchase or sale of such security.
(d)
To make false or misleading statement with respect to any material
fact,
which he knew or had reasonable ground to believe was so false or
misleading,
for the purpose of inducing the purchase or sale of any security listed
or traded in an Exchange.
(e)
To effect, either alone or others, any series of transactions for the
purchase
and/or sale of any security traded in an Exchange for the purpose of
pegging,
fixing or stabilizing the price of such security, unless otherwise
allowed
by this Code or by rules of the Commission.
24.2.
No person shall use or employ, in connection with the purchase or sale
of any security any manipulative or deceptive device or contrivance.
Neither
shall any short sale be effected nor any stop-loss order be executed in
connection with the purchase or sale of any security except 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.
24.3.
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.
25. Regulation of Option Trading. – No member of an Exchange
shall,
directly or indirectly endorse or guarantee the performance of any put,
call, straddle, option or privilege in relation to any security
registered
on a securities exchange.
The
terms “put”, “call”, “straddle”, “option”, or “privilege” shall
not include any registered warrant, right or convertible security.
SEC.
26. Fraudulent Transactions. - It shall be unlawful for any
person,
directly or indirectly, in connection with the purchase or sale of any
securities to:chanroblesvirtualawlibrary
26.1.
Employ any device, scheme, or artifice to defraud;
26.2.
Obtain money or property by means of any untrue statement of a material
fact of 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
26.3.
Engage in any act, transaction, practice or course of business which
operates
or would operate as a fraud or deceit upon any person.
SEC.
27. Insider’s Duty to Disclose When Trading. -
27.1.
It shall be unlawful for an insider to sell or buy a security of the
issuer,
while in possession of material information with respect to the issuer
or the security that is not generally available to the public, unless:
(a) The insider proves that the information was not gained from such
relationship;
or (b) If the other party selling to or buying from the insider (or his
agent) is identified, the insider proves: (i) that he disclosed the
information
to the other party, or (ii) that he had reason to believe that the
other
party otherwise is also in possession of the information. A
purchase
or sale of a security of the issuer made by an insider defined in
Subsection
3.8, or such insider’s spouse or relatives by affinity or consanguinity
within the second degree, legitimate or common-law, shall be presumed
to
have been effected while in possession of material non-public
information
if transacted after such information came into existence but prior to
dissemination
of such information to the public and the lapse of a reasonable time
for
the market to absorb such information: Provided, however, That
this
presumption shall be rebutted upon a showing by the purchaser or seller
that he was not aware of the material non-public information at the
time
of the purchase or sale.
27.2.
For purposes of this Section, information is “material non-public”
if: (a) It has not been generally disclosed to the public and would
likely
affect the market price of the security after being disseminated to the
public and the lapse of a reasonable time for the market to absorb the
information; or (b) would be considered by a reasonable person
important
under the circumstances in determining his course of action whether to
buy, sell or hold a security.
27.3.
It shall be unlawful for any insider to communicate material non-public
information about the issuer or the security to any person who, by
virtue
of the communication, becomes an insider as defined in Subsection 3.8,
where the insider communicating the information knows or has reason to
believe that such person will likely buy or sell a security of the
issuer
while in possession of such information.
27.4.
(a) It shall be unlawful where a tender offer has commenced or is about
to commence for:chanroblesvirtualawlibrary
(i)
Any person (other than the tender offeror) who is in possession of
material
non-public information relating to such tender offer, to buy or sell
the
securities of the issuer that are sought or to be sought by such tender
offer if such person knows or has reason to believe that the
information
is non-public and has been acquired directly or indirectly from the
tender
offeror, those acting on its behalf, the issuer of the securities
sought
or to be sought by such tender offer, or any insider of such issuer; and
(ii)
Any tender offeror, those acting on its behalf, the issuer of the
securities
sought or to be sought by such tender offer, and any insider of such
issuer
to communicate material non-public information relating to the tender
offer
to any other person where such communication is likely to result in a
violation
of Subsection 27.4 (a)(i).
(b)
For purposes of this subsection the term “securities of the issuer
sought
or to be sought by such tender offer” shall include any securities
convertible or exchangeable into such securities or any options or
rights
in any of the foregoing securities.
CHAPTER
VIII
Regulation
of Securities Market Professionals
SEC.
28. Registration of Brokers, Dealers, Salesmen and Associated
Persons. - 28.1. No person shall engage in the business of
buying
or selling securities in the Philippines as a broker or dealer, or act
as a salesman, or an associated person of any broker or dealer unless
registered
as such with the Commission.
28.2.
No registered broker or dealer shall employ any salesman or any
associated
person, and no issuer shall employ any salesman, who is not registered
as such with the Commission.
28.3.
The Commission, by rule or order, may conditionally or unconditionally
exempt from Subsections 28.1 and 28.2 any broker, dealer, salesman,
associated
person of any broker or dealer, or any class of the foregoing, as it
deems
consistent with the public interest and the protection of investors.
28.4.
The Commission shall promulgate rules and regulations prescribing the
qualifications
for registration of each category of applicant, which shall, among
other
things, require as a condition for registration that:chanroblesvirtualawlibrary
(a)
If a natural person, the applicant satisfactorily pass a written
examination
as to his proficiency and knowledge in the area of activity for which
registration
is sought;chanrobles virtuallaw libraryred
(b)
In the case of a broker or dealer, the applicant satisfy a minimum net
capital as prescribed by the Commission, and provide a bond or other
security
as the Commission may prescribe to secure compliance with the
provisions
of this Code; and
(c)
If located outside of the Philippines, the applicant files a written
consent
to service of process upon the Commission pursuant to Section 65 hereof.
28.5.
A broker or dealer may apply for registration by filing with the
Commission
a written application in such form and containing such information and
documents concerning such broker or dealer as the Commission by rule
shall
prescribe.
28.6.
Registration of a salesman or of an associated person of a registered
broker
or dealer may be made upon written application filed with the
Commission
by such salesman or associated person. The application shall be
separately
signed and certified by the registered broker or dealer to which such
salesman
or associated person is to become affiliated, or by the issuer in the
case
of a salesman employed, appointed or authorized solely by such issuer.
The application shall be in such form and contain such information and
documents concerning the salesman or associated person as the
Commission
by rule shall prescribe. For purposes of this Section, a salesman shall
not include any employee of an issuer whose compensation is not
determined
directly or indirectly on sales of securities of the issuer.
28.7.
Applications filed pursuant to Subsections 28.5 and 28.6 shall be
accompanied
by a registration fee in such reasonable amount prescribed by the
Commission.
28.8.
Within thirty (30) days after the filing of any application under this
Section, the Commission shall by order: (a) Grant registration if it
determines
that the requirements of this Section and the qualifications for
registration
set forth in its rules and regulations have been satisfied; or (b) Deny
said registration.
28.9.
The names and addresses of all persons approved for registration as
brokers,
dealers, associated persons or salesmen and all orders of the
Commission
with respect thereto shall be recorded in a Register of Securities
Market
Professionals kept in the office of the Commission which shall be open
to public inspection.
28.10.
Every person registered pursuant to this Section shall file with the
Commission,
in such form as the Commission shall prescribe, information necessary
to
keep the application for registration current and accurate, including
in
the case of a broker or dealer changes in salesmen, associated persons
and owners thereof.
28.11.
Every person registered pursuant to this Section shall pay to the
Commission
an annual fee at such time and in such reasonable amount as the
Commission
shall prescribe. Upon notice by the Commission that such annual fee has
not been paid as required, the registration of such person shall be
suspended
until payment has been made.
28.12.
The registration of a salesman or associated person shall be
automatically
terminated upon the cessation of his affiliation with said registered
broker
or dealer, or with an issuer in the case of a salesman employed,
appointed
or authorized by such issuer. Promptly following any such cessation of
affiliation, the registered broker or dealer, or issuer, as the case
may
be, shall file with the Commission a notice of separation of such
salesman
or associated person.
SEC.
29. Revocation, Refusal or Suspension of Registration of Brokers,
Dealers,
Salesmen and Associated Persons. – 29.1. Registration under
Section
28 of this Code may be refused, or any registration granted thereunder
may be revoked, suspended, or limitations placed thereon, by the
Commission
if, after due notice and hearing, the Commission determines the
applicant
or registrant:chanroblesvirtualawlibrary
(a)
Has willfully violated any provision of this Code, any rule, regulation
or order made hereunder, or any other law administered by the
Commission,
or in the case of a registered broker, dealer or associated person has
failed to supervise, with a view to preventing such violation, another
person who commits such violation;chanrobles virtuallaw libraryred
(b)
Has willfully made or caused to be made a materially false or
misleading
statement in any application for registration or report filed with the
Commission or a self-regulatory organization, or has willfully omitted
to state any material fact that is required to be stated therein;
(c)
Has failed to satisfy the qualifications or requirements for
registration
prescribed under Section 28 and the rules and regulations of the
Commission
promulgated thereunder;
(d)
Has been convicted, by a competent judicial or administrative body of
an
offense involving moral turpitude, fraud, embezzlement, counterfeiting,
theft, estafa, misappropriation, forgery, bribery, false oath, or
perjury,
or of a violation of securities, commodities, banking, real estate or
insurance
laws;
(e)
Is enjoined or restrained by a competent judicial or administrative
body
from engaging in securities, commodities, banking, real estate or
insurance
activities or from willfully violating laws governing such activities;
(f)
Is subject to an order of a competent judicial or administrative body
refusing,
revoking or suspending any registration, license or other permit under
this Code, the rules and regulations promulgated thereunder, any other
law administered by the Commission;
(g)
Is subject to an order of a self-regulatory organization suspending or
expelling him from membership or participation therein or from
association
with a member or participant thereof;
(h)
Has been found by a competent judicial or administrative body to have
willfully
violated any provisions of securities, commodities, banking, real
estate
or insurance laws, or has willfully aided, abetted, counseled,
commanded,
induced or procured such violation; or
(i)
Has been judicially declared insolvent.
For
purposes of this subsection, the term “competent judicial or
administrative
body” shall include a foreign court of competent jurisdiction and
a
foreign financial regulator.
29.2.
(a) In cases of charges against a salesman or associated person, notice
thereof shall also be given the broker, dealer or issuer employing such
salesman or associated person.
(b)
Pending the hearing, the Commission shall have the power to order the
suspension
of such broker’s, dealer’s, associated person’s or salesman’s
registration:
Provided,
That such order shall state the cause for such suspension. Until
the entry of a final order, the suspension of such 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.chanrobles virtuallaw libraryred
29.3.
The order of the Commission refusing, revoking, suspending or placing
limitations
on a registration as herein above provided, together with its findings,
shall be entered in the Register of Securities Market
Professionals.
The suspension or revocation of the registration of a dealer or broker
shall also automatically suspend the registration of all salesmen and
associated
persons affiliated with such broker or dealer.
29.4.
It shall be sufficient cause for refusal, revocation or suspension of a
broker's or dealer’s registration, if any associated person thereof or
any juridical entity controlled by such associated person has committed
any act or omission or is subject to any disability enumerated in
paragraphs
(a) through (i) of Subsection 29.1 hereof.
SEC.
30. Transactions and Responsibility of Brokers and Dealers. -
30.1.
No broker or dealer shall deal in or otherwise buy or sell, for its own
account or for the account of customers, securities listed on an
Exchange
issued by any corporation where any stockholder, director, associated
person
or salesman, or authorized clerk of said broker or dealer and all the
relatives
of the foregoing within the fourth civil degree of consanguinity or
affinity,
is at the time holding office in said issuer corporation as a director,
president, vice-president, manager, treasurer, comptroller, secretary
or
any office of trust and responsibility, or is a controlling person of
the
issuer.
30.2.
No broker or dealer shall effect any transaction in securities or
induce
or attempt to induce the purchase or sale of any security except in
compliance
with such rules and regulations as the Commission shall prescribe to
ensure
fair and honest dealings in securities and provide financial safeguards
and other standards for the operation of brokers and dealers, including
the establishment of minimum net capital requirements, the acceptance
of
custody and use of securities of customers, and the carrying and use of
deposits and credit balances of customers.
SEC.
31. Development of Securities Market Professionals. - The
Commission,
in joint undertaking with self regulatory organizations, organizations
and associations of finance professionals as well as private
educational
and research institutions shall undertake or facilitate/organize
continuing
training, conferences/ seminars, updating programs, research and
development
as well as technology transfer at the latest and advanced trends in
issuance
and trading of securities, derivatives, commodity trades and other
financial
instruments, as well as securities markets of other countries.
CHAPTER
IX
Exchanges
and Other Securities Trading Markets
SEC.
32. Prohibition on Use of Unregistered Exchange; Regulation
of
Over-the-Counter Markets. – 32.1. No broker, dealer,
salesman,
associated person of a broker or dealer, or Exchange, directly or
indirectly,
shall make use of any facility of an Exchange in the Philippines to
effect
any transaction in a security, or to report such transaction, unless
such
Exchange is registered as such under Section 33 of this Code.
32.2.
(a) No broker, dealer, salesman or associated person of a broker or
dealer,
singly or in concert with any other person, shall make, create or
operate,
or enable another to make, create or operate, any trading market,
otherwise
than on a registered Exchange, for the buying and selling of any
security,
except in accordance with rules and regulations the Commission may
prescribe.
(b)
The Commission may promulgate rules and regulations governing
transactions
by brokers, dealers, salesmen or associated persons of a broker or
dealer,
over any facilities of such trading market and may require such market
to be administered by a self-regulatory organization determined by the
Commission as capable of insuring the protection of investors
comparable
to that provided in the case of a registered Exchange. Such
self-regulatory
organization must provide a centralized marketplace for trading and
must
satisfy requirements comparable to those prescribed for registration of
Exchanges in Section 33 of this Code.
SEC.
33. Registration of Exchanges. - 33.1. Any Exchange may be
registered
as such with the Commission under the terms and conditions hereinafter
provided in this Section and Section 40 hereof, by filing an
application
for registration in such form and containing such information and
supporting
documents as the Commission by rule shall prescribe, including the
following:chanroblesvirtualawlibrary
(a)
An undertaking to comply and enforce compliance by its members with the
provisions of this Code, its implementing rules or regulations and the
rules of the Exchange;
(b)
The organizational charts of the Exchange, rules of procedure, and a
list
of its officers and members;
(c)
Copies of the rules of the Exchange; and
(d)
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.
33.2.
Registration of an Exchange shall be granted upon compliance with the
following
provisions:chanroblesvirtualawlibrary
(a)
That the applicant is organized as a stock corporation: Provided,
That any registered Exchange existing prior to the effectivity of this
Code shall within one (1) year reorganize as a stock corporation
pursuant
to a demutualization plan approved by the Commission;
(b)
That the applicant is engaged solely in the business of operating an
exchange: Provided,
however, That the Commission may adopt rules, regulations or issue
an order, upon application, exempting an Exchange organized as a stock
corporation and owned and controlled by another juridical person from
this
restriction;
c)
Where the Exchange is organized as a stock corporation, that no person
may beneficially own or control, directly or indirectly, more than five
percent (5%) of the voting rights of the Exchange and no industry or
business
group may beneficially own or control, directly or indirectly, more
than
twenty percent (20%) of the voting rights of the Exchange: Provided,
however, That the Commission may adopt rules, regulations or issue
an order, upon application, exempting an applicant from this
prohibition
where it finds that such ownership or control will not negatively
impact
on the exchange’s ability to effectively operate in the public interest;
(d)
The expulsion, suspension, or disciplining of a member and persons
associated
with a member for conduct or proceeding inconsistent with just and
equitable
principles of fair trade, and for violations of provisions of this
Code,
or any other Act administered by the Commission, the rules, regulations
and orders thereunder, or the rules of the Exchange;
(e)
A fair procedure for the disciplining of members and persons associated
with members, the denial of membership to any person seeking to be a
member,
the barring of any person from association with a member, and the
prohibition
or limitation of any person from access to services offered by the
Exchange;
(f)
That the brokers in the board of the Exchange shall comprise of not
more
than forty-nine percent (49%) of such board and shall proportionately
represent
the Exchange membership in terms of volume/value of trade and paid up
capital,
and that any natural person associated with a juridical entity that is
a member shall himself be deemed to be a member for this purpose:
Provided, That
any registered Exchange existing prior to the effectivity of this Code
shall immediately comply with this requirement;
(g)
For the board of the Exchange to include in its composition (i) the
president
of the Exchange, and (ii) no less than fifty one percent (51%) of the
remaining
members of the board to be comprised of three (3) independent directors
and persons who represent the interests of issuers, investors, and
other
market participants, who are not associated with any broker or dealer
or
member of the Exchange for a period of two (2) years prior to his/her
appointment.
No officer or employee of a member, its subsidiaries or affiliates or
related
interests shall become an independent director: Provided, however,
That the Commission may by rule, regulation, or order upon application,
permit the exchange organized as a stock corporation to use a different
governance structure: Provided, further, That the Commission is
satisfied that the Exchange is acting in the public interest and is
able
to effectively operate as a self-regulatory organization under this
Code: Provided,
finally, That any registered exchange existing prior to the
effectivity of this Code shall immediately comply with this requirement.
(h)
The president and other management of the Exchange to consist only of
persons
who are not members and are not associated in any capacity, directly or
indirectly with any broker or dealer or member or listed company of the
Exchange: Provided, That the Exchange may only appoint, and a
person
may only serve, as an officer of the exchange if such person has not
been
a member or affiliated with any broker, dealer, or member of the
Exchange
for a period of at least two (2) years prior to such appointment;
(i)
The transparency of transactions on the Exchange;
(j)
The equitable allocation of reasonable dues, fees, and other charges
among
members and issuers and other persons using any facility or system
which
the Exchange operates or controls;
(k)
Prevention of fraudulent and manipulative acts and practices, promotion
of just and equitable principles of trade, and, in general, protection
of investors and the public interest; and
(l)
The transparent, prompt and accurate clearance and settlement of
transactions
effected on the Exchange.
33.3.
If the Commission finds that the applicant Exchange is capable of
complying
and enforcing compliance by its members, and persons associated with
such
members, with the provisions of this Code, its rules and regulations,
and
the rules of the Exchange, and that the rules of the Exchange are fair,
just and adequate, the Commission shall cause such Exchange to be
registered.
If, after notice due and hearing, the Commission finds otherwise, the
application
shall be denied.
33.4.
Within ninety (90) days after the filing of the application the
Commission
may issue an order either granting or denying registration as an
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.
33.5.
Upon the registration of an Exchange, it shall pay a fee in such amount
and within such period as the Commission may fix.
33.6.
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.
34. Segregation and Limitation of Functions of Members,
Brokers
and Dealers. - 34.1. It shall be unlawful for any member-broker of
an Exchange to effect any transaction on such Exchange for its own
account,
the account of an associated person, or an account with respect to
which
it or an associated person thereof exercises investment discretion: Provided,
however, That this section shall not make unlawful -
(a)
Any transaction by a member-broker acting in the capacity of a market
maker;
(b)
Any transaction reasonably necessary to carry on an odd-lot
transactions;
(c)
Any transaction to offset a transaction made in error; and
(d)
Any other transaction of a similar nature as may be defined by the
Commission.
34.2.
In all instances where the member-broker effects a transaction on an
Exchange
for its own account or the account of an associated person or an
account
with respect to which it exercises investment discretion, it shall
disclose
to such customer at or before the completion of the transaction it is
acting
for its own account: Provided, further, That this fact shall
be
reflected in the order ticket and the confirmation slip.
34.3.
Any member-broker who violates the provisions of this Section shall be
subject to the administrative sanctions provided in Section 54 of this
Code.
SEC.
35. Additional Fees of Exchanges. - In addition to the
registration
fee prescribed in Section 33 of this Code, every Exchange shall pay to
the Commission, on a semestral basis on or before the tenth day of the
end of every semester of the calendar year, a fee in such an amount as
the Commission shall prescribe, but not more than one-hundredth of one
per
centum (1%) of the aggregate amount of the sales of securities
transacted
on such Exchange during the preceding calendar year, for the privilege
of doing business, during the preceding calendar year or any part
thereof.
SEC.
36. Powers with Respect to Exchanges and Other Trading Market.
- 36.1. The Commission is authorized, if in its opinion such action is
necessary or appropriate for the protection of investors and the public
interest so requires, summarily to suspend trading in any listed
security
on any Exchange or other trading market for a period not exceeding
thirty
(30) days or, with the approval of the President of the Philippines,
summarily
to suspend all trading on any securities Exchange or other trading
market
for a period of more than thirty (30) but not exceeding ninety (90)
days:
Provided,
however, That the Commission, promptly following the issuance of
the
order of suspension, shall notify the affected issuer of the reasons
for
such suspension and provide such issuer with an opportunity for hearing
to determine whether the suspension should be lifted.chanrobles virtuallaw libraryred
36.2.
Wherever two or more Exchanges or other trading markets exist, the
Commission
may require and enforce uniformity of trading regulations in and/or
between
or among said Exchanges or other trading markets.
36.3.
In addition to the existing Philippine Stock Exchange, the Commission
shall
have the authority to determine the number, size and location of stock
Exchanges, other trading markets 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.
36.4.
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.
36.5.
(a) 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.
(b)
The Commission may, having due regard to the public interest or the
protection
of investors, regulate, supervise, examine, suspend or otherwise
discontinue
such and 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
funds 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 subsection shall also apply to all funds established for the
protection of investors, whether established by the Commission or
otherwise.chanrobles virtuallaw libraryred
SEC.
37. Registration of Innovative and Other Trading Markets. -
The
Commission, having due regard for national economic development, shall
encourage competitiveness in the market by promulgating within six (6)
months upon the enactment of this Code, rules for the registration and
licensing of innovative and other trading markets or Exchanges
covering,
but not limited to, the issuance and trading of innovative securities,
securities of small, medium, growth and venture enterprises, and
technology-based
ventures pursuant to Section 33 of this Code.
SEC.
38. Independent Directors. - Any corporation with a class of
equity
securities listed for trading on an Exchange or with assets in excess
of
Fifty million pesos (P50,000,000.00) and having two hundred (200) or
more
holders, at least of two hundred (200) of which are holding at least
one
hundred (100) shares of a class of its equity securities or which has
sold
a class of equity securities to the public pursuant to an effective
registration
statement in compliance with Section 12 hereof shall have at least two
(2) independent directors or such independent directors shall
constitute
at least twenty percent (20%) of the members of such board, whichever
is
the lesser. For this purpose, an “independent director” shall mean a
person
other than an officer or employee of the corporation, its parent or
subsidiaries,
or any other individual having a relationship with the corporation,
which
would interfere with the exercise of independent judgment in carrying
out
the responsibilities of a director.
CHAPTER
X
Registration,
Responsibilities and
Oversight
of Self-Regulatory Organizations
SEC.
39. Associations of Securities Brokers, and Dealers, and Other
Securities
Related Organizations. -39.1. The Commission shall have the power
to
register as a self-regulatory organization, or otherwise grant
licenses,
and to regulate, supervise, examine, suspend or otherwise discontinue,
as a condition for the operation of organizations whose operations are
related to or connected with the securities market such as but not
limited
to associations of brokers and dealers, transfer agents, custodians,
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: (a)
Collecting,
processing, or preparing for distribution or publication, or assisting,
participating in, or coordinating the distribution or publication of,
information
with respect to transactions in or quotations for any security; or (b)
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. The
Commission may prescribe rules and regulations which are necessary or
appropriate
in the public interest or for the protection of investors to govern
self-regulatory
organizations and other organizations licensed or regulated pursuant to
the authority granted in Subsection 39.1 including the requirement of
cooperation
within and among, and electronic integration of the records of, all
participants
in the securities market to ensure transparency and facilitate exchange
of information.
39.2.
An association of brokers and dealers may be registered as a securities
association pursuant to Subsection 39.3 by filing with the Commission
an
application for registration in such form as the Commission, by rule,
may
prescribe containing the rules of the association and such other
information
and documents as the Commission, by rule, may prescribe as necessary or
appropriate in the public interest or for the protection of investors.
39.3.
An association of brokers and dealers shall not be registered as a
securities
association unless the Commission determines that:chanroblesvirtualawlibrary
(a)
The association is so organized and has the capacity to be able to
carry
out the purposes of this Code and to comply with, and to enforce
compliance
by its members and persons associated with its members, with the
provisions
of this Code, the rules and regulations thereunder, and the rules of
the
association.
(b)
The rules of the association, notwithstanding anything in the
Corporation
Code to the contrary, provide that:chanroblesvirtualawlibrary(i)
Any registered broker or dealer may become a member of the association;
(ii)
There exist a fair representation of its members to serve on the Board
of Directors of the association and in the administration of its
affairs,
and that any natural person associated with a juridical entity that is
a member shall himself be deemed to be a member for this purpose;
(iii)
The Board of Directors of the association includes in its composition:
(a) The president of the association and (b) Persons who represent the
interests of issuers and public investors and are not associated with
any
broker or dealer or member of the association; that the president and
other
management of the association not be a member or associated with any
broker,
dealer or member of the association;
(iv)
For the equitable allocation of reasonable dues, fees, and other
charges
among members and issuers and other persons using any facility or
system
which the association operates or controls;
(v)
For the prevention of fraudulent and manipulative acts and practices,
the
promotion of just and equitable principles of trade, and, in general,
the
protection of investors and the public interest;
(vi)
That its members and persons associated with its members shall be
appropriately
disciplined for violation of any provision of this Code, the rules or
regulations
thereunder, or the rules of the association;
(vii)
That a fair procedure for the disciplining of members and persons
associated
with members, the denial of membership to any person seeking membership
therein, the barring of any person from becoming associated with a
member
thereof, and the prohibition or limitation by the association of any
person
with respect to access to services offered by the association or a
member
thereof.
39.4.
(a) A registered securities association shall deny membership to any
person
who is not a registered broker or dealer.
(b)
A registered securities association may deny membership to, or
condition
the membership of, a registered broker or dealer if such broker or
dealer:chanroblesvirtualawlibrary
(i)
Does not meet the standards of financial responsibility, operational
capability,
training, experience, or competence that are prescribed by the rules of
the association; or
(ii)
Has engaged, and there is a reasonable likelihood it will again engage,
in acts or practices inconsistent with just and equitable principles of
fair trade.
(c)
A registered securities association may deny membership to a registered
broker or dealer not engaged in a type of business in which the rules
of
the association require members to be engaged: Provided, however,
That no registered securities association may deny membership to a
registered
broker or dealer by reason of the amount of business done by the broker
or dealer.
A
registered securities association may examine and verify the
qualifications
of an applicant to become a member in accordance with procedures
established
by the rules of the association.
(d)
A registered securities association may bar a salesman or person
associated
with a broker or dealer from being employed by a member or set
conditions
for the employment of a salesman or associated if such person:chanroblesvirtualawlibrary
(i)
Does not meet the standards of training, experience, or competence that
are prescribed by the rules of the association; or
(ii)
Has engaged, and there is a reasonable likelihood he will again engage,
in acts or practices inconsistent with just and equitable principles of
fair trade.
A
registered securities association may examine and verify the
qualifications
of an applicant to become a salesman or associated person employed by a
member in accordance with procedures established by the rules of the
association.
A registered association also may require a salesman or associated
person
employed by a member to be registered with the association in
accordance
with procedures prescribed in the rules of the association.
39.5.
In any proceeding by a registered securities association to determine
whether
a person shall be denied membership, or barred from association with a
member, the association shall provide notice to the person under review
of the specific grounds being considered for denial, afford him an
opportunity
to defend against the allegations, and keep a record of the
proceedings.
A determination by the association to deny membership shall be
supported
by a statement setting forth the specific grounds on which the denial
is
based.
SEC.
40. Powers with Respect to Self-Regulatory Organizations. -
40.1.
Upon the filing of an application for registration as an Exchange under
Section 33, a registered securities association under Section 39, a
registered
clearing agency under Section 42, or other self-regulatory organization
under this Section, the Commission shall have ninety (90) days within
which
to either grant registration or institute a proceeding to determine
whether
registration should be denied. In the event proceedings are instituted,
the Commission shall have two hundred seventy (270) days within which
to
conclude such proceedings at which time it shall, by order, grant or
deny
such registration.
40.2.
Every self-regulatory organization shall comply with the provisions of
this Code, the rules and regulations thereunder, and its own rules, and
enforce compliance therewith, notwithstanding any provision of the
Corporation
Code to the contrary, by its members, persons associated with its
members
or its participants.
40.3.
(a) Each self-regulatory organization shall submit to the Commission
for
prior approval any proposed rule or amendment thereto, together with a
concise statement of the reason and effect of the proposed amendment.
(b)
Within sixty (60) days after submission of a proposed amendment, the
Commission
shall, by order, approve the proposed amendment. Otherwise, the same
may
be made effective by the self-regulatory organization.
(c)
In the event of an emergency requiring action for the protection of
investors,
the maintenance of fair and orderly markets, or the safeguarding of
securities
and funds, a self-regulatory organization may put a proposed amendment
into effect summarily: Provided, however, That a copy of the
same
shall be immediately submitted to the Commission.
40.4.
The Commission is further authorized, if after making appropriate
request
in writing to a self-regulatory organization that such organization
effect
on its own behalf specified changes in its rules and practices and,
after
due notice and hearing it determines that such changes have not been
effected,
and that such changes are necessary, by rule or regulation or by order,
may alter, abrogate or supplement the rules of such self-regulatory
organization
in so far as necessary or appropriate to effect such changes in respect
of such matters as:chanroblesvirtualawlibrary
(a)
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;
(b)
The supervision of trading practices;
(c)
The listing or striking from listing of any security;
(d)
Hours of trading;
(e)
The manner, method, and place of soliciting business;
(f)
Fictitious accounts;
(g)
The time and method of making settlements, payments, and deliveries,
and
of closing accounts;
(h)
The transparency of securities transactions and prices;
(i)
The fixing of reasonable rates of fees, interest, listing and other
charges,
but not rates of commission;
(j)
Minimum units of trading;
(k)
Odd-lot purchases and sales;
(l)
Minimum deposits on margin accounts; and
(m)
The supervision, auditing and disciplining of members or participants.
40.5.
The Commission, after due notice and hearing, is authorized, in the
public
interest and to protect investors:chanroblesvirtualawlibrary
(a)
To suspend for a period not exceeding twelve (12) months or to revoke
the
registration of a self-regulatory organization, or to censure or impose
limitations on the activities, functions, and operations of such
self-regulatory
organization, if the Commission finds that such a self-regulatory
organization
has willfully violated or is unable to comply with any provision of
this
Code or of the rules and regulations thereunder, or its own rules, or
has
failed to enforce compliance therewith by a member of, person
associated
with a member, or a participant in such self-regulatory organization;
(b)
To expel from a self-regulatory organization any member thereof or any
participant therein who is subject to an order of the Commission under
Section 29 of this Code or is found to have willfully violated any
provision
of this Code or suspend for a period not exceeding twelve (12) months
for
violation of any provision of this Code or any other laws administered
by the Commission, or the rules and regulations thereunder, or
effected,
directly or indirectly, any transaction for any person who, such member
or participant had reason to believe, was violating in respect of such
transaction any of such provisions; and
(c)
To remove from office or censure any officer or director of a
self-regulatory
organization if it finds that such officer or director has violated any
provision of this Code, any other law administered by the Commission,
the
rules or regulations thereunder, or the rules of such self-regulatory
organization,
abused his authority, or without reasonable justification or excuse has
failed to enforce compliance with any of such provisions.chanrobles virtuallaw libraryred
40.6.
(a) A self-regulatory organization is authorized to discipline a member
of or participant in such self-regulatory organization, or any person
associated
with a member, including the suspension or expulsion of such member or
participant, and the suspension or bar from being associated with a
member,
if such person has engaged in acts or practices inconsistent with just
and equitable principles of fair trade or in willful violation of any
provision
of the Code, any other law administered by the Commission, the rules or
regulations thereunder, or the rules of the self-regulatory
organization.
In any disciplinary proceeding by a self-regulatory organization (other
than a summary proceeding pursuant to paragraph (b) of this subsection)
the self-regulatory organization shall bring specific charges, provide
notice to the person charged, afford the person charged with an
opportunity
to defend against the charges, and keep a record of the
proceedings.
A determination to impose a disciplinary sanction shall be supported by
a written statement of the offense, a summary of the evidence presented
and a statement of the sanction imposed.
(b)
A self-regulatory organization may summarily: (i) Suspend a member,
participant
or person associated with a member who has been or is expelled or
suspended
from any other self-regulatory organization; or (ii) Suspend a member
who
the self-regulatory organization finds to be in such financial or
operating
difficulty that the member or participant cannot be permitted to
continue
to do business as a member with safety to investors, creditors, other
members,
participants or the self-regulatory organization: Provided,
That
the self-regulatory organization immediately notifies the Commission of
the action taken. Any person aggrieved by a summary action pursuant to
this paragraph shall be promptly afforded an opportunity for a hearing
by the association in accordance with the provisions of paragraph (a)
of
this subsection. The Commission, by order, may stay a summary
action
on its own motion or upon application by any person aggrieved thereby,
if the Commission determines summarily or after due notice and hearing
(which hearing may consist solely of the submission of affidavits or
presentation
of oral arguments) that a stay is consistent with the public interest
and
the protection of investors.
40.7.
A self-regulatory organization shall promptly notify the Commission of
any disciplinary sanction on any member thereof or participant therein,
any denial of membership or participation in such organization, or the
imposition of any disciplinary sanction on a person associated with a
member
or a bar of such person from becoming so associated. Within
thirty
(30) days after such notice, any aggrieved person may appeal to the
Commission
from, or the Commission on its own motion within such period, may
institute
review of, the decision of the self-regulatory organization, at the
conclusion
of which, after due notice and hearing (which may consist solely of
review
of the record before the self-regulatory organization), the Commission
shall affirm, modify or set aside the sanction. In such
proceeding
the Commission shall determine whether the aggrieved person has engaged
or omitted to engage in the acts and practices as found by the
self-regulatory
organization, whether such acts and practices constitute willful
violations
of this Code, any other law administered by the Commission, the rules
or
regulations thereunder, or the rules of the self-regulatory
organization
as specified by such organization, whether such provisions were applied
in a manner consistent with the purposes of this Code, and whether,
with
due regard for the public interest and the protection of investors the
sanction is excessive or oppressive.
40.8.
The powers of the Commission under this section shall apply to
organized
exchanges and registered clearing agencies. CHAPTER
XI
Acquisition
and Transfer of Securities and
Settlement
of Transactions in Securities
SEC.
41. Prohibition on Use of Unregistered Clearing Agency. - It
shall
be unlawful for any broker, dealer, salesman, associated person of a
broker
or dealer, or clearing agency, directly or indirectly, to make use of
any
facility of a clearing agency in the Philippines to make deliveries in
connection with transactions in securities or to reduce the number of
settlements
of securities transactions or to allocate securities settlement
responsibilities
or to provide for the central handling of securities so that transfers,
loans and pledges and similar transactions can be made by bookkeeping
entry
or otherwise to facilitate the settlement of securities transactions
without
physical delivery of securities certificates, unless such clearing
agency
is registered as such under Section 42 of this Code or is exempted from
such registration upon application by the clearing agency because, in
the
opinion of the Commission, by reason of the limited volume of
transactions
which are settled using the clearing agency, it is not practicable and
not necessary or appropriate in the public interest or for the
protection
of investors to require such registration.
SEC.
42. Registration of Clearing Agencies. – 42.1. Any
clearing
agency may be registered as such with the Commission under the terms
and
conditions hereinafter provided in this Section, by filing an
application
for registration in such form and containing such information and
supporting
documents as the Commission by rule shall prescribe, including the
following:chanroblesvirtualawlibrary
(a)
An undertaking to comply and enforce compliance by its participants
with
the provisions of this Code, and any amendment thereto, and the
implementing
rules or regulations made or to be made thereunder, and the clearing
agency’s
rules;
(b)
The organizational charts of the Exchange, its rules of procedure, and
a list of its officers and participants;
(c)
Copies of the clearing agency’s rules.
42.2.
No registration of a clearing agency shall be granted unless the rules
of the clearing agency include provision for:chanroblesvirtualawlibrary
(a)
The expulsion, suspension, or disciplining of a participant for
violations
of this Code, or any other Act administered by the Commission, the
rules,
regulations, and orders thereunder, or the clearing agency’s rules;
(b)
A fair procedure for the disciplining of participants, the denial of
participation
rights to any person seeking to be a participant, and the prohibition
or
limitation of any person from access to services offered by the
clearing
agency;
(c)
The equitable allocation of reasonable dues, fees, and other charges
among
participants;
(d)
Prevention of fraudulent and manipulative acts and practices, promotion
of just and equitable principles of trade, and, in general, protection
of investors and the public interest; and
(e)
The transparent, prompt and accurate clearance and settlement of
transactions
in securities handled by the clearing agency. (f)
The establishment and oversight of a fund to guarantee the prompt and
accurate
clearance and settlement of transactions executed on an exchange,
including
a requirement that members each contribute an amount based on their
volume
and a relevant percentage of the daily exposure of the four (4) largest
trading brokers which adequately reflects trading risks undertaken or
pursuant
to another formula set forth in Commission rules or regulations or
order,
upon application: Provided, however, That a clearing agency
engaged
in the business of a securities depository shall be exempt from this
requirement.chanrobles virtuallaw libraryred
42.3.
In the case of an application filed pursuant to this Section, the
Commission
shall grant registration if it finds that the requirements of this Code
and the rules and regulations thereunder with respect to the applicant
have been satisfied, and shall deny registration if it does not make
such
finding.
42.4.
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, a clearing agency may withdraw its
registration
or suspend its operation or resume the same.
42.5.
Section 32 of this Code shall apply to every registered clearing agency.
SEC.
43. Uncertificated Securities. - Notwithstanding Section
63
of the Corporation Code of the Philippines:chanroblesvirtualawlibrary
43.1.
A corporation whose securities are registered pursuant to this Code or
listed on a securities Exchange may:chanroblesvirtualawlibrary
(a)
If so resolved by its Board of Directors and agreed by a shareholder,
investor
or securities intermediary, issue shares to, or record the transfer of
some or all of its shares into the name of said shareholders, investors
or, securities intermediary in the form of uncertificated
securities.
The use of uncertificated securities in these circumstances shall be
without
prejudice to the rights of the securities intermediary subsequently to
require the corporation to issue a certificate in respect of any shares
recorded in its name; and
(b)
If so provided in its articles of incorporation and by-laws, issue all
of the shares of a particular class in the form of uncertificated
securities
and subject to a condition that investors may not require the
corporation
to issue a certificate in respect of any shares recorded in their name.chanrobles virtuallaw libraryred
43.2.
The Commission by rule may allow other corporations to provide in their
articles of incorporation and by-laws for the use of uncertificated
securities.
43.3.
Transfers of securities, including an uncertificated securities, may be
validly made and consummated by appropriate book-entries in the
securities
accounts maintained by securities intermediaries, or in the stock and
transfer
book held by the corporation or the stock transfer agent and such
bookkeeping
entries shall be binding on the parties to the transfer. A transfer
under
this subsection has the effect of the delivery of a security in bearer
form or duly indorsed in blank representing the quantity or amount of
security
or right transferred, including the unrestricted negotiability of that
security by reason of such delivery. However, transfer of
uncertificated
shares shall only be valid, so far as the corporation is concerned,
when
a transfer is recorded in the books of the corporation so as to show
the
names of the parties to the transfer and the number of shares
transferred.
However,
nothing in this Code shall preclude compliance by banking and other
institutions
under the supervision of the Bangko Sentral ng Pilipinas and
their
stockholders with the applicable ceilings on shareholdings prescribed
under
pertinent banking laws and regulations.
SEC.
44. Evidentiary Value of Clearing Agency Record. - The official
records and book entries of a clearing agency shall constitute the best
evidence of such transactions between clearing agency and its
participants
and members, without prejudice to the right of participants’ or
members’
clients to prove their rights, title and entitlement with respect to
the
book-entry security holdings of the participants or members held on
behalf
of the clients. However, the corporation shall not be bound by the
foregoing
transactions unless the corporate secretary is duly notified in such
manner
as the Commission may provide.
SEC.
45. Pledging a Security or Interest Therein. - In addition to
other
methods recognized by law, a pledge of, or release of a pledge of, a
security,
including an uncertificated security, is properly constituted and the
instrument
proving the right pledged shall be considered delivered to the creditor
under Articles 2093 and 2095 of the Civil Code if a securities
intermediary
indicates by book-entry that such security has been credited to a
specially
designated pledge account in favor of the pledgee. A pledge under this
subsection has the effect of the delivery of a security in bearer form
or duly indorsed in blank representing the quantity or amount of such
security
or right pledged. In the case of a registered clearing agency, the
procedures
by which, and the exact time at which, such book-entries are created
shall
be governed by the registered clearing agency’s rules. However, the
corporation
shall not be bound by the foregoing transactions unless the corporate
secretary
is duly notified in such manner as the Commission may provide.chanrobles virtuallaw libraryred
SEC.
46. Issuer’s Responsibility for Wrongful Transfer to Registered
Clearing
Agency. - The registration of a transfer of a security into the
name
of and by a registered clearing agency or its nominee shall be final
and
conclusive unless the clearing agency had notice of an adverse claim
before
the registration was made. The above provision shall be without
prejudice
to any rights which the claimant may have against the issuer for
wrongful
registration in such circumstances.
SEC.
47. Power of the Commission With Respect to Securities
Ownership.
- The Commission is authorized, having due regard to the public
interest
and the protection of investors, to promulgate rules and regulations
which:
47.1.
Validate the transfer of securities by book-entries rather than the
delivery
of physical certificates;
47.2.
Establish when a person acquires a security or an interest therein and
when delivery of a security to a purchaser occurs;
47.3.Establish
which records constitute the best evidence of a person’s interests in a
security and the effect of any errors in electronic records of
ownership;
47.4.
Codify the rights of investors who choose to hold their securities
indirectly
through a registered clearing agency and/or other securities
intermediaries;
47.5.
Codify the duties of securities intermediaries (including clearing
agencies)
who hold securities on behalf of investors; and
47.6.
Give first priority to any claims of a registered clearing agency
against
a participant arising from a failure by the participant to meet its
obligations
under the clearing agency’s rules in respect of the clearing and
settlement
of transactions in securities, in a dissolution of the participant, and
any such rules and regulations shall bind the issuers of the
securities,
investors in the securities, any third parties with interests in the
securities,
and the creditors of a participant of a registered clearing agency.
CHAPTER
XII
Margin
and Credit
SEC.
48. Margin Requirements. - 48.1. 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 of the Bangko
Sentral ng Pilipinas, shall prescribe rules and regulations
with
respect to the amount of credit that may be extended on any security.
For
the extension of credit, such rules and regulations shall be based upon
the following standard:chanroblesvirtualawlibrary
An
amount not greater than whichever is the higher of -
(a)
Sixty-five per centum (65%) of the current market price of the
security;
or
(b)
One hundred per centum (100%) of the lowest market price of the
security during the preceding thirty-six (36) calendar months, but not
more than seventy-five per centum (75%) of the current market
price.
However,
the Monetary Board may increase or decrease the above percentages, in
order
to achieve the objectives of the Government with due regard for
promotion
of the economy and prevention of the use of excessive credit.
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 letter (b) 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.
48.2.
No member of an Exchange or broker or dealer shall, directly or
indirectly,
extend or maintain credit or arrange for the extension or maintenance
of
credit to or for any customer:chanrobles virtuallaw libraryred
(a)
On any security unless such credit is extended and maintained in
accordance
with the rules and regulations which the Commission shall prescribe
under
this Section including rules setting credit in relation to net capital
of such member, broker or dealer;
(b)
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 paragraph
(a)
of this subsection.
48.3.
Any person not subject to Subsection 48.2 hereof shall extend or
maintain
credit or arrange for the extension or maintenance of credit for the
purpose
of purchasing or carrying any security, only in accordance with 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 of
purchasing
or carrying securities limitations similar to those imposed upon
members,
brokers, or dealers by Subsection 48.2 and the rules and regulations
thereunder.
This subsection and the rules and regulations thereunder shall not
apply:
(a) To a credit extension made by a person not in the ordinary course
of
business; (b) To a loan to a dealer to aid in the financing of the
distribution
of securities to customers not through the medium of an Exchange; or
(c)
To such other credit extension as the Commission shall exempt from the
operation of this subsection and the rules and regulations thereunder
upon
specified terms and conditions or for stated period.
SEC.
49. Restrictions on Borrowings by Members, Brokers, and Dealers.
- It shall be unlawful for any registered broker or dealer, or member
of
an Exchange, directly or indirectly:chanroblesvirtualawlibrary
49.1.
To permit in the ordinary course of business as a broker or dealer his
aggregate indebtedness including customers’ credit balances, 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 per centum (2,000%), as the Commission
may
by rules and regulations prescribe as necessary or appropriate in the
public
interest or for the protection of investors.
49.2.
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: (a) That will permit the commingling of his
securities,
without his written consent, with the securities of any customer; (b)
That
will permit such securities to be commingled with the securities of any
person other than a bona fide customer; or (c) 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.
49.3.
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.
SEC.
50. Enforcement of Margin Requirements and Restrictions on
Borrowing.
- To prevent indirect violations of the margin requirements under
Section
48, 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
the
prescribed settlement date. Otherwise, the broker shall sell the
security
purchased starting on the next trading day but not beyond ten (10)
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 49, 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.chanrobles virtuallaw libraryred
CHAPTER
XIII
General
Provisions
SEC.
51. Liabilities of Controlling Persons, Aider and Abettor and Other
Secondary Liability. – 51.1. 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, controls any person
liable
under this Code or the rules or regulations of the Commission
thereunder,
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.
51.2.
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 Code or any rule or regulation thereunder.chanrobles virtuallaw libraryred
51.3.
It shall be unlawful for any director or officer of, or any owner of
any
securities issued by, any issuer required to file any document, report
or other information under this Code or any rule or regulation of the
Commission
thereunder, without just cause, to hinder, delay or obstruct the making
or filing of any such document, report, or information.
51.4.
It shall be unlawful for any person to aid, abet, counsel, command,
induce
or procure any violation of this Code, or any rule, regulation or order
of the Commission thereunder.
51.5.
Every person who substantially assists the act or omission of any
person
primarily liable under Sections 57, 58, 59 and 60 of this Code, with
knowledge
or in reckless disregard that such act or omission is wrongful, shall
be
jointly and severally liable as an aider and abettor for damages
resulting
from the conduct of the person primarily liable: Provided, however,
That an aider and abettor shall be liable only to the extent of his
relative
contribution in causing such damages in comparison to that of the
person
primarily liable, or the extent to which the aider and abettor was
unjustly
enriched thereby, whichever is greater.
SEC.
52. Accounts and Records, Reports, Examination of Exchanges,
Members,
and Others. - 52.1. Every registered Exchange, broker or dealer,
transfer
agent, clearing agency, securities association, and other
self-regulatory
organization, and every other person required to register under this
Code,
shall make, keep and preserve for such periods, records, furnish such
copies
thereof, and make such reports, as the Commission by its rules and
regulations
may prescribe. Such accounts, correspondence, memoranda, papers, books,
and other records shall be subject at any time to such reasonable
periodic,
special or other examinations by representatives of the Commission as
the
Commission may deem necessary or appropriate in the public interest or
for the protection of investors.
52.2.
Any broker, dealer or other person extending credit, who is subject to
the rules and regulations prescribed by the Commission pursuant to this
Code, 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 Code.
52.3.
For purposes of this Section, the term “records” refers to accounts,
correspondence,
memoranda, tapes, discs, papers, books and other documents or
transcribed
information of any type, whether written or electronic in character.
SEC.
53. Investigations, Injunctions and Prosecution of Offenses .
- 53.1. 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 Code, any rule, regulation or
order
thereunder, or any rule of an Exchange, registered securities
association,
clearing agency, other self-regulatory organization, 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 may 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 Code, 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
Code relates: Provided, however, That any person requested or
subpoenaed
to produce documents or testify in any investigation shall
simultaneously
be notified in writing of the purpose of such investigation: Provided,
further, That all criminal complaints for violations of this Code,
and the implementing rules and regulations enforced or administered by
the Commission shall be referred to the Department of Justice for
preliminary
investigation and prosecution before the proper court: Provided,
furthermore,
That in instances where the law allows independent civil or criminal
proceedings
of violations arising from the same act, the Commission shall take
appropriate
action to implement the same: Provided, finally, That the
investigation,
prosecution, and trial of such cases shall be given priority.
53.2.
For the purpose of any such investigation, or any other proceeding
under
this Code, 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.
53.3.
Whenever it shall appear to the Commission that any person has engaged
or is about to engage in any act or practice constituting a violation
of
any provision of this Code, any rule, regulation or order thereunder,
or
any rule of an Exchange, registered securities association, clearing
agency
or other self-regulatory organization, it may issue an order to such
person
to desist from committing such act or practice: Provided, however,
That the Commission shall not charge any person with violation of the
rules
of an Exchange or other self regulatory organization unless it appears
to the Commission that such Exchange or other self-regulatory
organization
is unable or unwilling to take action against such person. After
finding that such person has engaged in any such act or practice and
that
there is a reasonable likelihood of continuing, further or future
violations
by such person, the Commission may issue ex-parte a cease and
desist
order for a maximum period of ten (10) days, enjoining the violation
and
compelling compliance with such provision. The Commission may
transmit
such evidence as may be available concerning any violation of any
provision
of this Code, or any rule, regulation or order thereunder, to the
Department
of Justice, which may institute the appropriate criminal proceedings
under
this Code.
53.4.
Any person who, within his power but without cause, fails or refuses to
comply with any lawful order, decision or subpoena issued by
the
Commission under Subsection 53.2 or Subsection 53.3 or Section 64 of
this
Code, shall after due notice and hearing, be guilty of contempt of the
Commission. Such person shall be fined 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,
shall
be detained under an arrest order issued by the Commission, until such
order, decision or subpoena is complied with.chanrobles virtuallaw libraryred
SEC.
54. Administrative Sanctions. - 54.1. If, after due notice and
hearing,
the Commission finds that: (a) There is a violation of this Code, its
rules,
or its orders; (b) Any registered broker or dealer, associated person
thereof
has failed reasonably to supervise, with a view to preventing
violations,
another person subject to supervision who commits any such violation;
(c)
Any registrant or other person has, in a registration statement or in
other
reports, applications, accounts, records or documents 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, in the
case of an underwriter, has failed to conduct an inquiry with
reasonable
diligence to insure that a registration statement is accurate and
complete
in all material respects; or (d) Any person has refused to permit any
lawful
examinations into its affairs, it shall, in its discretion, and subject
only to the limitations hereinafter prescribed, impose any or all of
the
following sanctions as may be appropriate in light of the facts and
circumstances:chanroblesvirtualawlibrary
(i)
Suspension, or revocation of any registration for the offering of
securities;
(ii)
A fine of no less than Ten thousand pesos (P10,000.00) nor more than
One
million pesos (P1,000,000.00) plus not more than Two thousand pesos
(P2,000.00)
for each day of continuing violation;
(iii)
In the case of a violation of Sections 19.2, 20, 24, 26 and 27,
disqualification
from being an officer, member of the Board of Directors, or person
performing
similar functions, of an issuer required to file reports under Section
17 of this Code or any other act, rule or regulation administered by
the
Commission;
(iv)
In the case of a violation of Section 34, a fine of no more than three
(3) times the profit gained or loss avoided as a result of the
purchase,
sale or communication proscribed by such Section; and
(v)
Other penalties within the power of the Commission to impose.
54.2.
The imposition of the foregoing administrative sanctions shall be
without
prejudice to the filing of criminal charges against the individuals
responsible
for the violation.
54.3.
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 Code.
SEC.
55. Settlement Offers. – 55.1. At any time, during an
investigation
or proceeding under this Code, parties being investigated and/or
charged
may propose in writing an offer of settlement with the Commission.
55.2.
Upon receipt of such offer of settlement, the Commission may consider
the
offer based on timing, the nature of the investigation or proceeding,
and
the public interest.
55.3.
The Commission may only agree to a settlement offer based on its
findings
that such settlement is in the public interest. Any agreement to settle
shall have no legal effect until publicly disclosed. Such decision may
be made without a determination of guilt on the part of the person
making
the offer.
55.4.
The Commission shall adopt rules and procedures governing the filing,
review,
withdrawal, form of rejection and acceptance of such offers.
SEC.
56. Civil Liabilities on Account of False Registration Statement.
- 56.1. 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, may sue and recover damages from the following enumerated
persons,
unless it is proved that at the time of such acquisition he knew of
such
untrue statement or omission:chanrobles virtuallaw libraryred
(a)
The issuer and every person who signed the registration statement;
(b)
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;
(c)
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;
(d)
Every auditor or auditing firm named as having certified any financial
statements used in connection with the registration statement or
prospectus.
(e)
Every person 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, report, or valuation, which
purports
to have been prepared or certified by him.
(f)
Every selling shareholder who contributed to and certified as to the
accuracy
of a portion of the registration statement, with respect to that
portion
of the registration statement which purports to have been contributed
by
him.
(g)
Every underwriter with respect to such security.
56.2.
If the person who acquired the security did so after the issuer has
made
generally available to its security holders an income statement
covering
a period of at least twelve months beginning from the effective date of
the registration statement, then the right of recovery under this
subsection
shall be conditioned on proof that such person acquired the security
relying
upon such untrue statement in the registration statement or relying
upon
the registration statement and not knowing of such income statement,
but
such reliance may be established without proof of the reading of the
registration
statement by such person.
SEC.
57. Civil Liabilities Arising in Connection With Prospectus,
Communications
and Reports. - 57.1. Any person who:chanroblesvirtualawlibrary
(a)
Offers to sell or sells a security in violation of Chapter III; or
(b)
Offers to sell or sells a security, whether or not exempted by the
provisions
of this Code, by the use of any means or instruments of transportation
or communication, by means of a prospectus or other written 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 know, 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 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.
57.2.
Any person who shall make or cause to be made any statement in any
report,
or document filed pursuant to this Code 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 statements 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.chanrobles virtuallaw libraryred
SEC.
58. Civil Liability For Fraud in Connection With Securities
Transactions.
- Any person who engages in any act or transaction in violation of
Sections
19.2, 20 or 26, or any rule or regulation of the Commission thereunder,
shall be liable to any other person who purchases or sells any
security,
grants or refuses to grant any proxy, consent or authorization, or
accepts
or declines an invitation for tender of a security, as the case may be,
for the damages sustained by such other person as a result of such act
or transaction.
SEC.
59. Civil Liability For Manipulation of Security Prices.
-
Any person who willfully participates in any act or transaction in
violation
of Section 24 shall be liable to any person who shall purchase or sell
any security at a price which was affected by such act or transaction,
and the person so injured may sue to recover the damages sustained as a
result of such act or transaction.
SEC.
60. Civil Liability With Respect to Commodity Futures Contracts and
Pre-need Plans. - 60.1. Any person who engages in any act or
transaction
in willful violation of any rule or regulation promulgated by the
Commission
under Section 11 or 16, which the Commission denominates at the time of
issuance as intended to prohibit fraud in the offer and sale of
pre-need
plans or to prohibit fraud, manipulation, fictitious transactions,
undue
speculation, or other unfair or abusive practices with respect to
commodity
future contracts, shall be liable to any other person sustaining damage
as a result of such act or transaction.
60.2.
As to each such rule or regulation so denominated, the Commission by
rule
shall prescribe the elements of proof required for recovery and any
limitations
on the amount of damages that may be imposed.
SEC.
61. Civil Liability on Account of Insider Trading. - 61.1. Any
insider
who violates Subsection 27.1 and any person in the case of a tender
offer
who violates Subsection 27.4 (a)(i), or any rule or regulation
thereunder,
by purchasing or selling a security while in possession of material
information
not generally available to the public, shall be liable in a suit
brought
by any investor who, contemporaneously with the purchase or sale of
securities
that is the subject of the violation, purchased or sold securities of
the
same class unless such insider, or such person in the case of a tender
offer, proves that such investor knew the information or would have
purchased
or sold at the same price regardless of disclosure of the information
to
him.
61.2.
An insider who violates Subsection 27.3 or any person in the case of a
tender offer who violates Subsection 27.4 (a), or any rule or
regulation
thereunder, by communicating material non-public information, shall be
jointly and severally liable under Subsection 61.1 with, and to the
same
extent as, the insider, or person in the case of a tender offer, to
whom
the communication was directed and who is liable under Subsection 61.1
by reason of his purchase or sale of a security.
SEC.
62. Limitation of Actions. - 62.1. No action shall be
maintained
to enforce any liability created under Section 56 or 57 of this Code
unless
brought within two (2) years after the discovery of the untrue
statement
or the omission, or, if the action is to enforce a liability created
under
Subsection 57.1(a), unless brought within two (2) 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 56 or Subsection 57.1 (a)
more
than five (5) years after the security was bona fide offered to
the public, or under Subsection 57.1 (b) more than five (5) years after
the sale.
62.2.
No action shall be maintained to enforce any liability created under
any
other provision of this Code unless brought within two (2) years after
the discovery of the facts constituting the cause of action and within
five (5) years after such cause of action accrued.
SEC.
63. Amount of Damages to be Awarded. - 63.1. All suits to
recover
damages pursuant to Sections 56, 57, 58, 59, 60 and 61 shall be brought
before the Regional Trial Court, which shall have exclusive
jurisdiction
to hear and decide such suits. The Court is hereby authorized to award
damages in an amount not exceeding triple the amount of the transaction
plus actual damages.
Exemplary
damages may also be awarded in cases of bad faith, fraud, malevolence
or
wantonness in the violation of this Code or the rules and regulations
promulgated
thereunder.
The
Court is also authorized to award attorney’s fees not exceeding thirty
percentum
(30%) of the award.
63.2.
The persons specified in Sections 56, 57, 58, 59, 60 and 61 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.
63.3.
Notwithstanding any provision of law to the contrary, all persons,
including
the issuer, held liable under the provisions of Sections 56, 57, 58,
59,
60 and 61 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.
SEC.
64. Cease and Desist Order. – 64.1. The Commission, after
proper investigation or verification, motu proprio, 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, will operate as a fraud on investors or is otherwise
likely to cause grave or irreparable injury or prejudice to the
investing
public.
64.2.
Until the Commission issues a cease and desist order, the fact that an
investigation has been initiated or that a complaint has been filed,
including
the contents of the complaint, shall be confidential. Upon issuance of
a cease and desist order, the Commission shall make public such order
and
a copy thereof shall be immediately furnished to each person subject to
the order.
64.3.
Any person against whom a cease and desist order was issued may, within
five (5) days from receipt of the order, file a formal request for a
lifting
thereof. Said request shall be set for hearing by the Commission
not later than fifteen (15) days from its filing and the resolution
thereof
shall be made not later than ten (10) days from the termination of the
hearing. If the Commission fails to resolve the request within the time
herein prescribed, the cease and desist order shall automatically be
lifted.
SEC.
65. Substituted Service Upon the Commission. - 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
Code
who is not domiciled in the Philippines. Upon receipt by the Commission
of such summons, 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.
SEC.
66. Revelation of Information Filed with the Commission.
–
66.1. All information filed with the Commission in compliance with the
requirements of this Code 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.
66.2.
Nothing in this Code 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.
66.3.
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 may hear objections
as it deems necessary. The Commission may, in such cases, make
available
to 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.
66.4.
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 66.3.
66.5.
Notwithstanding anything in Subsection 66.4 to the contrary, on request
from a foreign enforcement authority of any country whose laws grant
reciprocal
assistance as herein provided, the Commission may provide assistance in
accordance with this subsection, including the disclosure of any
information
filed with or transmitted to the Commission, if the requesting
authority
states that it is conducting an investigation which it deems necessary
to determine whether any person has violated, is violating, or is about
to violate any laws relating to securities or commodities matters that
the requesting authority administers or enforces. Such assistance may
be
provided without regard to whether the facts stated in the request
would
also constitute a violation of law of the Philippines.
SEC.
67. Effect of Action of Commission and Unlawful
Representations
with Respect Thereto. - 67.1. No action or failure to act by the
Commission
in the administration of this Code 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 Code or the rules and
regulations
thereunder to be deemed a finding by the Commission that such
statements
or report is true and accurate on its face or that it is not false or
misleading.
It shall be unlawful to make, or 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.
67.2.
Nothing contained in Subsection 67.1 shall, however, be construed as an
exemption from liability of an employee or officer of the Commission
for
any nonfeasance, misfeasance or malfeasance in the discharge of his
official
duties.
SEC.
68. Special Accounting Rules. – The Commission shall have the
authority
to make, amend, and rescind such accounting rules and regulations as
may
be necessary to carry out the provisions of this Code, 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 Code. Among other things, the Commission
may
prescribe the form or forms in which required information shall be set
forth, the items or details to be shown in the balance sheet and income
statement, and the methods to be followed in the preparation of
accounts,
appraisal or valuation of assets and liabilities, determination of
depreciation
and depletion, differentiation of recurring and non-recurring 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.
SEC.
69. Effect on Existing Law. - The rights and remedies provided
by
this Code shall be in addition to any and all other rights and remedies
that may now exist. However, except as provided in Sections 56 and 63
hereof,
no person permitted to maintain a suit for damages under the provisions
of this Code 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 exemplary damages may
be
awarded in cases of bad faith, fraud, malevolence or wantonness in the
violation of this Code or the rules and regulations promulgated
thereunder.
SEC.
70. Judicial Review of Commission Orders. - Any person
aggrieved
by an order of the Commission may appeal the order to the Court of
Appeals
by petition for review in accordance with the pertinent provisions of
the
Rules of Court.
SEC.
71. Validity of Contracts. - 71.1. Any condition,
stipulation,
provision binding any person to waive compliance with any provision of
this Code 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.
71.2.
Every contract made in violation of any provision of this Code 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 Code,
or
any rule or regulation thereunder, shall be void:
(a)
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
(b)
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.
71.3.
Nothing in this Code shall be construed:chanroblesvirtualawlibrary
(a)
To affect the validity of any loan or extension of credit made or of
any
lien created prior or subsequent to the effectivity of this Code,
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 Code or any rules or
regulations
thereunder; or
(b)
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 Code or any rule or regulation thereunder
affecting
the legality of such debt, obligation or lien.
SEC.
72. Rules and Regulations; Effectivity. - 72.1. This Code shall
be self-executory. To effect the provisions and purposes of this Code,
the Commission may issue, amend, and rescind such rules and regulations
and orders necessary or appropriate, including rules and regulations
defining
accounting, technical, and trade terms used in this Code, and
prescribing
the form or forms in which information required in registration
statements,
applications, and reports to the Commission shall be set forth. For
purposes
of its rules or regulations, the Commission may classify persons,
securities,
and other matters within its jurisdiction, prescribe different
requirements
for different classes of persons, securities, or matters, and by rule
or
order, conditionally or unconditionally exempt any person, security, or
transaction, or class or classes of persons, securities or
transactions,
from any or all provisions of this Code.
Failure
on the part of the Commission to issue rules and regulations shall not
in any manner affect the self-executory nature of this Code.
72.2.
The Commission shall promulgate rules and regulations providing for
reporting,
disclosure and the prevention of fraudulent, deceptive or manipulative
practices in connection with the purchase by an issuer, by tender offer
or otherwise, of and equity security of a class issued by it that
satisfies
the requirements of Subsection 17.2. Such rules and regulations may
require
such issuer to provide holders of equity securities of such dates 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 by holders whether such security should be
sold.
72.3.
For the purpose of Subsection 72.2, 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 purchased by the issuer. The Commission
shall have the power to make rules and regulations implementing this
subsection,
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 subsection shall be deemed to be a purchase
by the issuer for the purpose of some or all of the provisions of
Subsection
72.2.
72.4.
The rules and regulations promulgated by the Commission shall be
published
in two (2) newspapers of general circulation in the Philippines, and
unless
otherwise prescribed by the Commission, the same shall be effective
fifteen
(15) days after the date of the last publication.
SEC.
73. Penalties. - Any person who violates any of the provisions
of
this Code, or the rules and regulations promulgated by the Commission
under
authority thereof, or any person who, in a registration statement filed
under this Code, 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 Fifty thousand pesos (P50,000.00) nor more than
Five million pesos (P5,000,000.00) 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 may in the discretion of the
court
be imposed upon such juridical entity and 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.
SEC.
74. Transitory Provisions. - The Commission, as organized under
existing laws, shall continue to exist and exercise its powers,
functions
and duties under such laws and this Code: Provided, That until
otherwise
mandated by a subsequent law, the Commission shall continue to regulate
and supervise commodity futures contracts as provided in Section 11 and
pre-need plans and the pre-need industry as provided in Section 16 of
this
Code.
All
further requirements herein shall be complied with upon approval of
this
Code: Provided, however, That compliance may be deferred for
such
reasonable time as the Commission may determine but not to exceed one
(1)
year from approval of this Code: Provided, further, That
securities
which are being offered at the time of effectivity of this Code
pursuant
to an effective registration and permit, may continue to be offered and
sold in accordance with the provisions of the Revised Securities Act in
effect immediately prior to approval of this Code.
All
unexpended funds for the calendar year, properties, equipment and
records
of the Securities and Exchange Commission are hereby retained by the
Commission
as reorganized under this Code and the amount of Two hundred million
(P200,000,000.00)
or such amount necessary to carry out the reorganization provided in
this
Code is hereby appropriated.
All
employees of the Commission who voluntarily retire or are separated
from
the service with the Commission and whose retirement or separation has
been approved by the Commission, shall be paid retirement or separation
benefits and other entitlements granted under existing laws.
SEC.
75. Partial Use Of Income. - To carry out the
purposes
of this Code, the Commission is hereby authorized, in addition to its
annual
budget, to retain and utilize an amount equal to one hundred million
pesos
(P100,000,000.00) from its income.
The
use of such additional amount shall be subject to the auditing
requirements,
standards and procedures under existing laws.
SEC.
76. Repealing Clause. - TheRevised Securities Act (Batas
Pambansa
Blg. 178), as amended, in its entirety, and Sections 2, 4 and 8 of Presidential
Decree 902-A as amended, are hereby repealed. All other laws,
orders,
rules and regulations, or parts thereof, inconsistent with any
provision
of this Code are hereby repealed or modified accordingly.
SEC.
77. Separability Clause. - If any portion or provision of this
Code
is declared unconstitutional or invalid, the other portions or
provisions
hereof, which are not affected thereby shall continue in full force and
effect.
SEC.
78. Effectivity. - This Code shall take effect fifteen (15)
days
after its publication in the Official Gazette or in two (2)
newspapers
of general circulation.
Approved:
July 19, 2000 JOSEPH
E. ESTRADAPresident
of the Philippines
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