These Rules shall be referred to as the “Amended Implementing Rules and Regulations of the Securities Regulation Code” or Amended SRC Rules.
chan robles virtual law library SRC Rule 2 – Interpretation of Rules
chan robles virtual law library Any doubt in the interpretation of these Rules shall be resolved by the Commission in a manner which would establish a socially conscious free market that regulates itself, encourage the widest participation of ownership in an enterprise, enhance the democratization of wealth, promote the development of the capital market, protect investors, ensure full and timely disclosure of material information, and/or minimize, if not eliminate, insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market.
chan robles virtual law library SRC Rule 3 – Definition of Terms Used in the Rules and Regulations
chan robles virtual law library 1. As used in the rules and regulations adopted by the Commission under the Code, unless the context otherwise requires:

A.  Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote, or to direct the voting of such security; and/or investment returns or power, which includes the power to dispose of, or to direct the disposition of such security; provided, however, that a person shall be deemed to have an indirect beneficial ownership interest in any security which is:

i. held by members of his immediate family sharing the same household;
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ii. held by a partnership in which he is a general partner;
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iii. held by a corporation of which he is a controlling shareholder; or
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iv. subject to any contract, arrangement or understanding which gives him voting power or investment power with respect to such securities; provided however, that the following persons or institutions shall not be deemed to be beneficial owners of securities held by them for the benefit of third parties or in customer or fiduciary accounts in the ordinary course of business, so long as such shares were acquired by such persons or institutions without the purpose or effect of changing or influencing control of the issuer:

a. a broker dealer;
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b. an investment house registered under the Investment Houses Law;
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c. a bank authorized to operate as such by the Bangko Sentral ng Pilipinas;
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d. an insurance company subject to the supervision of the Office of the Insurance Commission;
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e. an investment company registered under the Investment Company Act;
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f. a pension plan subject to regulation and supervision by the Bureau of Internal Revenue and/or the Office of the Insurance Commission or relevant authority; and
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g. a group in which all of the members are persons specified above.

All securities of the same class beneficially owned by a person, regardless of the form such beneficial ownership takes, shall be aggregated in calculating the number of shares beneficially owned by such person.
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A person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial ownership, within thirty (30) days, including, but not limited to, any right to acquire, through the exercise of any option, warrant or right; through the conversion of any security; pursuant to the power to revoke a trust, discretionary account or similar arrangement; or pursuant to automatic termination of a trust, discretionary account or similar arrangement.

B. Bill of Exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
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C.  Code means the Securities Regulation Code.
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D.  Commission means the Securities and Exchange Commission.
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E.  Control is the power to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. Control is presumed to exist when the parent owns, directly or indirectly through subsidiaries, more than one half of the voting power of an enterprise unless, in exceptional circumstances, it can be clearly demonstrated that such ownership does not constitute control. Control also exists even when the parent owns one half or less of the voting power of an enterprise when there is:

i. Power over more than one half of the voting rights by virtue of an agreement with other investors;
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ii. Power to govern the financial and operating policies of the enterprise under a statute or an agreement;
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iii. Power to appoint or remove the majority of the members of the board of directors or equivalent governing body; or
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iv. Power to cast the majority of votes at meetings of the board of directors or equivalent governing body.

F.  Derivative is a financial instrument whose value changes in response to the change in a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, a credit rating or credit index, or similar variable or underlying factor. It requires no initial or little net investment relative to other types of contracts that have similar responses to changes in market conditions. It is settled at a future date. This term shall include, but not limited, to the following:

1.  Options are contracts that give the buyer the right, but not the obligation, to buy or sell an underlying security at a predetermined price, called the exercise or strike price, on or before a predetermined date, called the expiry date, which can only be extended by the Commission upon stockholders’ approval.
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2.  Call options are rights to buy.
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3.  Put options are rights to sell.
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4.  Warrants are rights to subscribe or purchase new shares or existing shares in a company on or before a predetermined date, called the expiry date, which can only be extended in accordance with the Commission rules and regulations and/or the Exchange rules. Warrants generally have a longer exercise period than options and are evidenced by warrant certificates.

G.  An investment contract means a contract, transaction or scheme (collectively “contract”) whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others.

1. An investment contract is presumed to exist whenever a person seeks to use the money or property of others on the promise of profits.
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2. A common enterprise is deemed created when two (2) or more investors “pool” their resources, creating a common enterprise, even if the promoter receives nothing more than a broker’s commission.

H. Long term commercial paper means an evidence of indebtedness of any person with a maturity of more than three hundred sixty-five (365) days. The term shall include, but not limited to, bonds and notes.
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I.  Material Fact/Information means any fact/information that could result in a change in the market price or value of any of the issuer’s securities, or would potentially affect the investment decision of an investor.  See Rule 14 (1) for a non-exclusive enumeration of what constitutes material fact or information.
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J. Member of an Exchange means any broker dealer who has the right, pursuant to Exchange rules, to trade on that Exchange.
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K.  Non-proprietary share or certificate is an evidence  of interest or privilege over a certain property of a corporation in view of   the  amount  paid  by   the  holder for the said share/certificate.  While the holder is entitled to the use of the property, he has no right over dividends or of the assets of the company upon liquidation thereof.
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L.  Proprietary share or certificate is an evidence of interest or participation or privilege in a corporation which not only entitles the holder to enjoy the use of a specific property but also to dividends or earnings of said company. Upon liquidation of the company, a holder of a proprietary share shall have proportionate ownership right over its assets.
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M.  Public Company means any corporation with a class of equity securities listed 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 two hundred (200) of which are holding at least one hundred (100) shares of a class of its equity securities.
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N.  Public Offering means a random or indiscriminate offering of securities in general to anyone who will buy, whether solicited or unsolicited. Any solicitation or presentation of securities for sale through any of the following modes shall be presumed to be a public offering:

i. Publication in any newspaper, magazine or printed reading material which is distributed within the Philippines or any part thereof ;
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ii.  Presentation in any public or commercial place;
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iii.  Advertisement or announcement in any radio or  television, or in any online or e-mail system; or
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iv. Distribution and/or making available flyers, brochures or any offering material in a public or commercial place, or mailing the same to prospective purchasers.

O.  Reporting company means a corporation which has sold a class of its securities pursuant to a registration under Section 12 of the SRC, or a public company as defined under subparagraph (M) above.
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P. Rules and regulations refers to all rules and regulations adopted by the Commission pursuant to the Code, including the forms for registration, reports and accompanying instructions thereto.
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Q.  Section refers to a section of the Code.
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R.  Self-Regulatory Organization or SRO means an organized Exchange, registered clearing agency or any organization or association registered as an SRO under Section 39 of the Code to enforce compliance with relevant provisions of the Code and rules and regulations adopted thereunder, and mandated to make and enforce its own rules, which have been approved by the Commission, by their members and/or participants. It is an organization that enforces fair, ethical and efficient practices in the securities and commodity futures industries, including securities and commodities exchanges.
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S. Short-term commercial paper means an evidence of indebtedness of any person with a maturity of three hundred and sixty five (365) days or less.
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T.  Transfer agent means any person who engages on behalf of an issuer of securities, or itself as an issuer of securities, in:

i. countersigning stock certificates upon issuance;
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ii. monitoring the issuance of such securities with a view toward preventing unauthorized issuance, a function commonly performed by a person called a registrar;
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iii. registering the transfer of such securities;
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iv. exchanging or converting such securities; and/or
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v. transferring record ownership of securities by bookkeeping entry without physical issuance of securities certificates.

2. Unless otherwise specifically stated, the terms used in the rules and regulations shall have the meaning defined in the Code.
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3. A rule or regulation which defines a term without express reference to the Code or to the rules and regulations, or to a portion thereof, defines such term for all purposes as used in the Code and in the rules and regulations, unless the context specifically requires otherwise.
chan robles virtual law library SRC Rule 3.6 – Definition of Clearing Agency
chan robles virtual law library 1. Clearing agency means any person that provides a facility to a Broker dealer, salesman, associated person of a Broker dealer or another clearing agency and whose facility performs any or all of the following activities:

A. makes deliveries in connection with transactions in securities;
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B. reduces the number of settlements of securities transactions or allocates securities settlement responsibilities; and
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C. provides for the central handling of securities so that transfers, loans, 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.

2. As used in this Rule, “facility” includes a clearing agency’s systems, processes or services and all the tangible or intangible properties necessary to operate such system, processes or services, whether within or without its specific physical location, for purposes of performing any or all activities set forth in paragraph 1 of this Rule.
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3. A registered clearing agency may perform only the activity or activities that the Commission has previously approved.
chan robles virtual law library SRC Rule 3.7 – Definition of Facility of an Exchange
chan robles virtual law library Facility of an Exchange includes systems, processes or services, tangible or intangible property, whether or not in a specific physical location or in an Exchange, for the purpose of effecting transactions between buyers and sellers in a securities trading market, and conveying any information required by the participants to effect such transactions.
chan robles virtual law library SRC Rule 4 – Securities and Exchange Commission chan robles virtual law library
These Rules shall be implemented by the Commission as a collegial body composed of a Chairperson and four (4) Commissioners.

1. The Commission has five (5) principal departments, each to be headed by a director. Its core function of capital market regulation shall be performed by the Market Regulation Department, Corporation Finance Department, and Non-traditional Securities and Instruments Department. Its company registration and enforcement functions shall be performed by the Company Registration and Monitoring Department and Compliance and Enforcement Department, respectively.

A. The Market Regulation Department develops the registration criteria for all market participants and supervises them to ensure compliance with registration requirements and endorses infractions of the Code and rules and regulations to the Compliance and Enforcement Department.
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B. The Corporation Finance Department registers securities before they are offered for sale or sold to the public and ensures that adequate information is available about the said securities.  It also ensures that investors have access to all material disclosures regarding the said offering and the securities of public companies. The department also monitors compliance by issuers with the Code and rules and regulations adopted thereunder and endorses infractions thereof to the Compliance and Enforcement Department.
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C. The Non-traditional Securities and Instruments Department registers and licenses nontraditional securities and instruments including, but not limited to, pre-need plans, commodity futures contracts, proprietary or non-proprietary membership certificates and other similar instruments. It monitors compliance with related rules and endorses infractions thereof to the Compliance and Enforcement Department.
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D. The Company Registration and Monitoring Department registers domestic corporations, partnerships and associations, including representative offices and foreign corporations intending to do business in the Philippines. It also supervises and monitors such entities relative to their compliance with laws, rules and regulations administered by the Commission.
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E. The Compliance and Enforcement Department ensures compliance by all market participants, issuers and individuals, and takes appropriate enforcement action against them for legal infraction of the Code and other relevant laws, rules and regulations implemented by the Commission.

2. The Commission shall have support services departments, namely Human Resource and Administrative Department, Economic Research and Information Department and Financial Management Department.

A. The Human Resource and Administrative Department is responsible for all activities relating to personnel and human resource management, including benefits, training and development.  It also handles the central receiving, records management, general administrative and maintenance services of the Commission.
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B. The Economic Research and Information Department provides investment and economic research, analysis and advice to the Commission. It is also the lead technical support group of the Commission for software development, database management, hardware procurement, and establishment and maintenance of a communication network.
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C. The Financial Management Department manages the internal finances of the Commission which includes budgeting, accounting and cash management.

3. The Commission shall have special offices, namely the Office of the General Counsel and the Office of the General Accountant.

A. The Office of the General Counsel, headed by the General Counsel, shall serve as the lead legal adviser to the Commission. It also serves as legal liaison for the Commission with other government agencies, self-regulatory organizations and foreign government regulators and agencies. It oversees non-enforcement litigations and appeals to the Commission en banc. It likewise oversees the office of the Commission Secretary.
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B. The Office of the General Accountant, headed by the General Accountant, advises the Commission and the private sector in the area of accounting standards and on issues of accounting treatment for public offerings and disclosures. It also coordinates with any board or council in the development of accounting standards for the Philippines and its capital market.

4. The Commission shall have Extension Offices in key cities, each to be headed by a Director. The Extension Offices shall perform company registration, supervision, monitoring and other delegated functions of the Commission within its geographical jurisdiction.  The Directors shall execute the programs of the Commission in their respective geographical jurisdictions, subject to the supervision of the Commission.
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5. The Commission shall hold regular meetings at least once a week on a day and time fixed by it. Special meetings may also be called as often as may be necessary by the Chairperson or upon the request of three (3) Commissioners.  In such cases, the Commissioners shall be given notice of the meeting, and the presence of three (3) Commissioners shall constitute a quorum. In the absence of the Chairperson, the most senior Commissioner present shall act as the presiding officer of the meeting.
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6. The Commission may, for purposes of efficiency, delegate any of its functions to an individual Commissioner, any department or office of the Commission or any staff member of the Commission except its review or appellate authority and its power to adopt, alter and supplement any rule or regulation.
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7. The Commission, motu proprio or upon a petition filed by an interested party, may review any order, resolution, decision or action of any of its departments, offices, individual Commissioner, or staff member of the Commission.
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The petition for review shall be filed with the Office of the General Counsel within fifteen (15) days from receipt of the order, resolution, decision or any document evidencing the action taken which is the subject of the review.  The petition shall contain, among other things, its factual and legal basis and shall be signed by the petitioner or counsel.

SRC Rule 5.1(a) –  Supervision Over Registered Corporations
chan robles virtual law library As used in this Rule, the word “supervision” is interpreted to mean as follows:

1. The business operations of corporations which are grantees of secondary licenses or franchises by this Commission, such as but not limited to financing companies, investment companies, investment houses, pre-need companies, broker/dealers and exchanges, as well as public companies, shall be under the direct supervision of this Commission, i.e.:

a. submission of reports (monthly, quarterly, operational, annual, etc.) required in the different laws governing the type of activity engaged in by these corporations; and
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b. compliance with provisions of the Corporation Code including those provisions requiring submission of documents to effect compliance.

Additionally, the Commission exercises regulatory authority over said companies except unregistered/unlisted public companies.  For corporations with registered/listed issues, compliance with registration requirements and the conditions imposed by the Commission for their registration shall likewise be under its direct supervision.

2. For all other business operations of companies with certificates of registration with the Commission as corporations but not requiring a secondary license from the Commission, the extent of its supervision and monitoring shall be limited to their compliance with the Corporation Code, i.e.:

a. submission of financial statements;
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b. submission of General Information Sheets (GIS);
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c. compliance with provisions in their by-laws on:

 i. number of directors
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 ii. qualifications, compensation of directors
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iii. holding of meetings, etc.

d. declaration of dividends;
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e. inspection of books; and
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f. other provisions of the Code requiring submission of documents to effect compliance.

 3. The business operations of corporations which are grantees of secondary licenses of franchises of other government agencies such as but not limited to banking and quasi-banking institutions, building and loan associations, trust companies and other financial intermediaries, insurance companies, public utilities, educational institutions, and other corporations governed by special laws, shall not be under the direct supervision of this Commission, but under the direct supervision of the concerned government agency granting such secondary license or franchise. The extent of the Commission’s supervisory powers over such corporations shall be limited to those mentioned in Item No. 2 hereof, except if it is a reporting company under Sec. 17.2 of the Code.
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4. Notwithstanding the foregoing, the Commission, as provided in Section 5 of the Code and the effective provision of PD 902-A, shall have the power to do any and all acts to carry out the effective implementation of the laws it is mandated to enforce, i.e., constitute a Management Committee; appoint receivers; issue Cease and Desist Orders to prevent fraud or injury to the public; and such other measures necessary to carry out its role as a regulator.
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5. All complaints regarding the operations of a company shall be directed to its primary regulator. However, in cases where the Commission and another agency are both primary regulators, e.g. investment houses with quasi-banking function, any complaint can be lodged with either agency. Both regulators shall coordinate their action.

SRC Rule 5.1(e) – Clarification of Commission Powers to Take-Over an Exchange chan robles virtual law library
Procedures for implementing the Commission’s power to suspend or take-over an Exchange are set forth in SRC Rule 40.5, Paragraph 1.
chan robles virtual law library SRC Rule 6.2 – Rules of Conduct for Commissioners, Officers and Employees chan robles virtual law library
1. The Commissioners, including the Chairperson, officers and employees of the Commission (hereinafter collectively referred to as officers or officer), in the execution of their duties owe their undivided loyalty to the Commission. They shall observe the highest standards of honesty, integrity and good faith in the performance of their duties.

A. Officers shall not pursue private activities in any manner which may conflict with their duties.  They shall subordinate those activities which, although not in conflict with their duties, will require time and effort to the prejudice of their duties at the Commission.
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B. Every officer who has discretionary authority shall be free from any conflicting interest or influence of such nature and importance which would make it difficult for him to provide his best efforts and loyalty to the Commission.

2. The interest of officers shall include the interest of his or her spouse, children under the age of eighteen (18) and trusts for the benefit of himself, his or her spouse or children.
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3. Officers shall provide the Commission with complete information with respect to any actual or conflicting interest by completing SEC Form 6 and submitting such form to the Commission Secretary no later than thirty (30) days from the effective date of this Rule. New officers shall fill up this form and submit the same to the Commission Secretary thirty (30) days prior to the first day of their employment.
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4. Even if not specifically required to be disclosed in SEC Form 6, officers shall report any other circumstances which, in their judgment, are regarded as being of possible concern to the Commission. It is to such officer’s advantage, as well as the Commission’s, that any unclear situation be reported in order that a policy judgment can be made. Questions of conflict will be referred to the Office of the General Counsel. If the Office of the General Counsel determines that such officer can not properly retain his outside interest or relationship while employed by the Commission, the Office of the General Counsel (after advising those to whom the officer reports to of the circumstances) shall require action to eliminate the conflict, such as the disposition by the officer of his conflicting interest or relationship, or the narrowing of responsibilities of the officer.
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5. SEC Form 6 shall be kept current and accurate.  Any change in the information contained therein shall be reported and filed with the Commission Secretary on SEC Form 6-A no later than ten (10) days from the date of such change.
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6. Set forth below is a description of some types of activities which may give rise to a conflict of interest in violation of this Rule:

A. All officerships, directorships, trusteeships or partnership interests in any organization or association, whether registered with the Commission or not, except in charitable or civic organizations;
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B. Meaningful interest in any security or investment in any corporation, partnership or association registered under the Code, except in sports club, social, charitable or civic organization;
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C. The receipt of compensation, wages, bonuses, benefits or privileges with monetary value from any corporation, partnership, or association registered with the Commission or from any person or enterprise which, though not registered with the Commission, does business with the Commission as a supplier, contractor or the like;
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D. During their term of office or employment with the Commission and for a period of one year after resignation, retirement or separation from such office or employment:

i. accept employment as an officer, employee, consultant, counsel, broker, agent, trustee or nominee by any person or in any enterprise regulated by the Commission under the Code;
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ii. engage in private practice of their profession where such practice conflicts or tends to conflict with their official function (e.g. when such practice is in connection with any matter before the office of the Commission where such officer works or used to work);
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iii. recommend any person to any position in a private enterprise which has a regular or pending official transaction with the office where such officer works or used to work.

E. Solicitation or acceptance of any gift, loan, or other benefit from any corporation, partnership or association registered, applying or contemplating registration with the Commission, including any person or firm, though not so registered, applying or contemplating registration and/or having current or prospective dealings with the Commission as a supplier or contractor or the like, if the acceptance would influence or would create the appearance of influencing him to act other than solely in the best interest of the Commission.

i. Any gift having more than a nominal value, even if given on occasions of rejoicing or celebration such as birthdays, anniversaries or Christmas, shall not be permitted.
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ii. Each officer should not borrow money from subordinates and from those entities which he directly regulates, except from financial institutions at prevailing market rates.
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iii. No entertainment should be accepted by any officer of a kind or amount which would influence or would create the appearance of influencing him to act other than solely in the best interest of the Commission.

SRC Rule 7.2 – Periodic Review of Commission Structure chan robles virtual law library
The Commission shall conduct, once every two (2) years, a review of its organization and structure to achieve the goals of the Code and more efficiently and effectively exercise its powers and functions thereunder, without prejudice to its power to conduct yearly merit reviews and provide increases in compensation based on productivity and efficiency.
chan robles virtual law library SRC Rule 8.1 – Requirement to File Registration Statement (RS)
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1. Filing of Registration Statement and Effectivity of Offering

A. No securities, except of a class exempt under Section 9 of the Code or unless sold in any transaction exempt under Section 10 thereof and the rules thereunder, shall be sold or distributed by any person or entity within the Philippines unless such securities are duly registered with the Commission on SEC Form 12-1 and the registration statement has been declared effective by the Commission.  No information relating to an offering of securities shall be disseminated unless a registration statement has been filed with the Commission and the written communication proposed to be released contains the required information under SRC Rule 8.3, Paragraph 1.
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B. If the securities which are the subject of the RS are intended to be listed in an Exchange, a copy of the RS and all other pertinent documents including all amendments thereto shall be filed with that Exchange. Two (2) copies of the application for listing shall also be filed with the Commission.
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C. The sale of the securities subject of the RS shall be commenced within two (2) business days from the date of the effectivity of the RS and shall be continued until the end of the offering period or until the sale has been terminated by action of the issuer. The registrant may be granted exemption from this requirement upon sufficient justification that compliance therewith will defeat its offering objective.
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D. A written notification of completion or termination of the offering shall be filed with the Commission within three (3) business days from such completion or termination, indicating therein the number of securities sold.

2.  Shelf Registration

If the remaining registered but unsold securities shall be offered after the completion or termination mentioned under paragraph (1)(D) above, an updated RS shall be filed with the Commission prior to said offering or sale.

3. Prospectus Delivery Requirements

A. A preliminary prospectus is submitted by a registrant to the Commission as part of a registration statement that is not yet rendered effective under the Securities Regulation Code. A final prospectus is submitted to the Commission as part of a registration statement that has been rendered effective or that has been recommended to be rendered effective under the Code.
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B. Securities required to be registered pursuant to Sections 8 and 12 of the Code shall not be offered for sale or sold unless a prospectus or any information material, which has been filed with the registration statement in the form and containing the information hereinafter described, is widely disseminated and sufficient copies thereof have been made available so that all who desire to have a copy may obtain one.
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C. In addition to the requirements of this Rule, a prospectus, including a preliminary prospectus, shall contain information as required by SRC Rule 12.1 and SEC Form 121 and shall be prepared in accordance with the requirements of SRC Rule 72.1. The information contained therein shall be worded in plain language which is understandable by an ordinary person.
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D. A preliminary prospectus, which has been filed with the registration statement required by Sections 8 and 12 of the Code, may be circulated to potential investors prior to the effectiveness of the registration statement if the following requirements have been met:

i. it meets all the requirements for a prospectus contained in paragraph B hereof above;
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ii. it contains the following statement in bold face print, at least 12 point type prominently displayed:

A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BUT HAS NOT YET BEEN DECLARED EFFECTIVE.  NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE THEREBY, AND ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME PRIOR TO THE NOTICE OF ITS ACCEPTANCE. AN INDICATION OF INTEREST IN RESPONSE HERETO INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND.  THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR BE CONSIDERED A SOLICITATION OF AN OFFER TO BUY.

iii. it is the only selling document utilized in the pre-offering period, with the exception that the information contained in SRC Rule 8.3 may be disseminated in whole or in part to summarize the offering;
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iv. its use is such that wide dissemination is assured;
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v. sufficient copies are made available so that all who desire to have a copy may obtain one; and
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vi. it contains a statement whether the security is being offered in connection with a distribution by the issuer or by a security holder, or both, and whether the issue represents new financing or refinancing, or both.

E. A preliminary or final prospectus shall be presumed to have been widely disseminated if copies have been distributed initially and additional copies have been furnished promptly, upon request, to at least the following:

i. each participant in the distribution (e.g., underwriters and brokers);
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ii. the main and extension offices of the Commission;
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iii.  an Exchange, if the securities will be listed thereon;
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iv. twenty (20) or more persons who are not qualified buyers under Section 10.1(l) of the Code.

F. Notice of Availability of Prospectus and Preliminary Prospectus

i. All participants in the distribution of an offering of securities to the public shall, when inquiries are made as to the offering, inform interested persons of the availability of preliminary prospectuses and final prospectuses and provide them with copies if requested.
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ii. A notice shall be placed on the front of the subscription agreement distributed in connection with the offering informing interested persons that they are entitled to receive a copy of a preliminary and/or final prospectus if they so desire and how and where one can be obtained.
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iii.  Information required in paragraphs (i) and (ii) above concerning where the preliminary and final prospectuses may be obtained shall include at least the following: addresses of extension and main offices of the Commission, any Exchange wherein the securities may be listed, the issuer company, the telephone number and the address of the contact person.  A statement shall also be made that preliminary and final prospectuses are available from all underwriters and brokers participating in the distribution.

G. The use of selling documents other than the final prospectus during the offering period is prohibited, except that the information contained in SRC Rule 8.3 may be disseminated in whole or in part to summarize the offering.
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H. A preliminary or final prospectus shall not be used unless all information contained therein are up to date and accurately reflect the terms of the offering and the condition of the company.  Thus, until such time as appropriate amendments are made thereto and have been filed with the Commission under SRC Rule 14, the use of a preliminary or final prospectus and the right to sell and offer for sale may be suspended under Section 15 of the Code when any of the following events occurs:

i. there is a material change in any information contained therein (including but not limited to, the occurrence of a material event which would be required to be reported on SEC Form 17-C);
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ii. the financial statements contained therein are over two hundred twenty five (225) days old.

I. Format of Prospectus

i. The information required in the prospectus need not follow the order of the items or other requirements in Part I of SEC Form 12-1 with the exception of Items 1 and 2. However, the information shall be complete and shall not be presented in a manner that may mislead the reader thereof or render the required information incomprehensible.
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ii. All information included in the prospectus must be properly captioned or headed in order to reasonably indicate covered subject matter.  The information shall be divided into reasonably short paragraphs or sections (with the exception of financial statements and tabular data).
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iii. Except as to information required in tabular form and financial statements, the information included in the prospectus shall not be expressed in condensed or summarized form. Reference may be made to information in other parts of the prospectus instead of repeating the same information in the prospectus.
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iv. Each prospectus used after the effective date of the registration statement shall be dated as of the effectivity of the prospectus.  An amended or revised prospectus used thereafter shall bear the date of its issuance.
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v. All information that is required to be included in the prospectus shall be clearly understandable without the need to refer to SEC Form 12-1 or to the general rules and regulations. The goal of registration (disclosure for the benefit of investors) involves, among other things, the use of language that can be understood by the persons to whom it is addressed.  Failure to use language that is clear and understandable to the investor may defeat the purpose of the prospectus.

SRC Rule 8.3 – Written Communication Not Deemed an Offer for Sale chan robles virtual law library
1.     A notice, circular, advertisement, letter, or other communication does not constitute an offer for sale in violation of Section 8 of the Code if it is published or transmitted to any person after a registration statement has been filed and contains any or all of the following information:

A. the name of the issuer of the security;
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B. the full title of the security and the amount being offered;
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C. a brief indication of the general type of business of the issuer;
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D. the price of the security or, if the price is not known, the method of its determination or the probable price range as specified by the issuer or the managing underwriter;
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E. in the case of a debt security with a fixed (non contingent) interest provision, the yield or, if the yield is not known, the probable yield range, as specified by the issuer or the managing underwriter;
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F. the name and address of the sender of the communication and the fact that he is participating, or expects to participate, in the distribution of the security;
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G. the names of the underwriters;
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H. the approximate date upon which the proposed sale to the public is anticipated to commence;
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I. whether the security is being offered through rights issued to existing security holders, and, if so, the class of securities the holders of which will be entitled to subscribe, the subscription ratio, the actual or proposed record date, the date upon which the rights were issued or are expected to be issued, the actual or anticipated date upon which they will expire, and the approximate subscription price, or any of the foregoing;
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J. with respect to any class of debt securities, any class of convertible debt securities or any class of preferred stock, the security rating or ratings assigned to the class of securities by any credit rating agency recognized or accredited by the Commission and the name of such rating agency/ies which assigned such rating/s.

2.        Every communication used pursuant to this Rule shall contain the following:

A. If a registration statement has not yet become effective, the following statement in bold face prominent type:

A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BUT HAS NOT YET BECOME EFFECTIVE. THESE SECURITIES MAY NOT BE SOLD NOR OFFERS TO BUY THE SAME BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS COMMUNICATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR BE CONSIDERED A SOLICITATION OF AN OFFER TO BUY.

B. A statement whether the security is being offered in connection with a distribution by the issuer or by a security holder, or both, and whether the issue represents new financing or refinancing or both;
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C. The name/s and addresses of a person/s from whom a written prospectus, which accordingly meets the requirements of Section 12 of the Code, may be obtained.

SRC Rule 9.2 – Exempt Securities chan robles virtual law library
1. Any evidence of indebtedness issued by a financial institution itself that has been duly licensed by the Bangko Sentral ng Pilipinas to engage in banking/quasi-banking activity shall be exempt from registration under Section 8.1 of the Code; provided that the purchase and sale of such security shall not be considered exempt from the coverage of the provisions of the Code on antifraud, civil liability or others.
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2. The registration requirements shall not likewise apply to any of the following:

A. Evidence of indebtedness issued to the Bangko Sentral ng Pilipinas (BSP) under its open market and/or rediscounting operations;
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B. Evidence of indebtedness issued to the following primary institutional lenders:  banks, including their trust accounts wherein the bank-trustee is granted discretionary powers in the investment disposition of the trust funds, investment houses including their trust accounts wherein the investment house-trustee is granted discretionary powers in the investment disposition of the trust funds, trust companies, financing companies, investment companies, pre-need companies, non-stock savings and loan associations, building and loan associations, venture capital corporations, insurance companies, government financial institutions, pawnshops, pension and retirement funds approved by the BIR, educational assistance funds established by the national government, and other entities that may be classified as primary institutional lenders by the BSP, in consultation with the SEC; provided all such evidence of indebtedness shall only be negotiated or assigned to any of the aforementioned primary institutional lenders or the Development Bank of the Philippines with respect to private development banks in relation with their rediscounting privileges; provided further that in case of non-banks without underwriting licenses, such negotiation or assignment shall be through banks or non-banks licensed to be an underwriter or a securities dealer; provided finally, that in no case shall said instrument be negotiated or assigned to non-qualified investors;
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C. Bills of exchange arising from a bona fide sale of goods and services which are distributed and/or traded by banks or investment houses duly licensed by SEC and BSP through an organized market properly conventioned and governed by rules approved by the appropriate regulatory body;
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D. Evidence of indebtedness e.g. short or long-term commercial papers, meeting the following conditions:

i. Issued to not more than nineteen (19) non-institutional lenders;
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ii. Payable to a specific person;
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iii. Neither negotiable nor assignable and shall be held on to maturity; and
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iv. In an amount not exceeding Fifty Million Pesos (P50,000,000.00) or such higher amount as the Commission may prescribe by resolution.

SRC Rule 10.1 – Exempt Transactions
[formerly, SRC Rule 10-1]
chan robles virtual law library 1. Disclosure to Investors

Any person claiming exemption under Section 10.1 of the Code shall provide to any person to whom it offers for sale or sells securities in reliance on such exemption a written disclosure containing the following information:

i. The provision of Section 10.1 of the Code under which exemption from registration is claimed;
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ii. Whether the Commission’s confirmation that such offer or sale qualifies as an exempt transaction has been obtained; and
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iii. The following statement in bold face, prominent type:

THE SECURITIES BEING OFFERED OR SOLD HEREIN HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE. ANY FUTURE OFFER OR SALE THEREOF IS SUBJECT TO REGISTRATION REQUIREMENTS UNDER THE CODE UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION.

2. Exempt Transactions Not Requiring Notice

No notice of exemption or fee shall be required for any transaction covered by Section 10.1 of the Code except those covered by subparagraphs (k) and (l) or sale to not more than nineteen (19) persons and to qualified buyers, respectively.

3. Exempt Transactions Requiring Notice

A. Notice of exemption on SEC Form 10-1 shall be required in an offering or distribution of securities under Section 10.1(k) and (l) of the Code.
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B. The issuer shall file with the Commission a notice of exemption from the registration requirements under Section 8 of the Code on SEC Form 10-1, including, as an exhibit thereto, all pertinent information required to be furnished to the investors pursuant to this paragraph, within ten (10) days after the sale of the securities which are subject thereto. No filing fee shall be required for the said notice.
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C. Private Placements under Section 10.1(k) of the Code

i. A prima facie presumption of circumvention of Sections 8 and 12 of the Code shall arise when the number of non-qualified investors shall exceed nineteen (19) within one (1) year.  The issuer shall be liable for penalty in accordance with the Scale of Fines of the Commission, without prejudice to other actions which may be taken against the issuer.
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ii. If the initial purchaser/s shall resell said securities to more than nineteen (19) non-qualified investors, Sections 8 and 12 of the SRC shall apply, notwithstanding the exemption of their issuances, unless such succeeding sale shall qualify as an exempt transaction.
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iii.  Exemptive relief under Section 10.1(k) (Private Placement) shall be subject to the following terms and conditions:

a. The issuer claiming such relief shall not engage in any form of general solicitation or advertising in connection therewith;
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b. Securities sold in any such transaction may only be sold to persons purchasing for their own account;
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c. Sale may be made to no more than nineteen (19) “non-qualified” buyers.  A corporation, partnership or other entity shall be counted as one buyer; provided, however, that if the entity is organized for the specific purpose of acquiring the securities offered and is not a qualified buyer under Section 10.1(l) of the Code, then each beneficial owner of equity securities in the entity shall count as a separate buyer under this Rule;
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d. The issuer provides any person to whom they offer for sale or sell securities pursuant thereto with the following information:

1) exact name of the issuer and its predecessor, if any;
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2) address of its principal executive office;
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3) place of incorporation;
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4) exact title and class of the security;
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5) par or issue value of the security;
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6) number of shares or total amount of securities outstanding as of the end of the issuer’s most recent fiscal year;
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7) name and address of the transfer agent;
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8) nature of the issuer’s business;
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9) nature of products or services offered;
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10) nature and extent of the issuer’s facilities;
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11) name of the chief executive officers and members of the board
of directors;
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12) issuer’s most recent financial statements for each of the two preceding fiscal years or such shorter period as the issuer (including its predecessor) has been in existence;
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13) whether the person offering or selling the securities is affiliated, directly or indirectly, with the issuer;
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14) whether the offering is being made directly or indirectly on behalf of the issuer, or any director, officer or person who owns directly or indirectly more than ten percent (10%) of the outstanding shares of any equity security of the issuer and, if so, the name of such person; and
15) information required under paragraph 1 of this Rule.
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Provided, however, that where the issuer is a reporting company under Section 17 of the Code, a copy of its most recent annual report (SEC Form 17-A) may be used to provide any of the required information.

D.      Offer or Sale of Securities to Qualified Buyers under Section 10.1(l) of the Code

If the initial qualified buyer/s shall resell their securities to more than nineteen (19) non-qualified buyers/investors, Sections 8 and 12 of the Code shall apply.

4. Application for Confirmation or Declaration of Exemption

A. If a confirmation of exemption shall be obtained from the Commission, a duly accomplished SEC Form 10-1 shall be filed with the corresponding filing fee.
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B. In cases which involve distribution of securities by way of stock dividend, the Commission shall determine the sufficiency of the retained earnings of the issuer company prior to issuing a confirmation thereto.
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C. Where the consideration for the offered securities is other than actual cash, a request for confirmation of exemption from registration under Section 10 of the Code shall deem to include an application for approval of valuation required under Section 62 of the Corporation Code of the Philippines, or vice versa.

5. Exempt Commercial Paper Transactions

An issuer of commercial papers under an exempt transaction shall:

A. File a Notice or Application for Confirmation of Exemption (SEC Form 10-1) prior to issuance thereof.  Said application shall be accompanied by the prescribed filing fees and include a disclosure of the following financial ratios:

Current Ratio =   Current Assets
                              Current Liabilities
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Acid Test Ratio =   Cash, receivables and marketable securities
                                                Current Liabilities
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Net Profit Margin =   Net income after income tax
                                          Net Sales or revenues
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Return on Equity =           Net income after income tax
                                   Total Stockholders' Equity Interest Service
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Charge Ratio = Net income before interest expense
                                      Interest Expense
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Debt to equity ratio =   Total Liabilities
                                      Stockholders’ Equity

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B. Indicate in bold letters on the face of the instrument the words:

“NON-NEGOTIABLE/NON-ASSIGNABLE”

C. That any issuer with outstanding long term commercial papers shall likewise file the prescribed disclosure statement and quarterly reports on such borrowings.

6. Other Requirements and Limitations

A. Exemptive relief under Section 10.1(c) (Isolated Transaction) of the Code shall not be available to an issuer of securities which shall not be considered as an “owner” thereof.
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B. In connection with a transaction under Section 10.1(i) of the Code, any fee paid pursuant to the requirements of the Corporation Code may be applied in satisfaction of fees owed in relation to an application for confirmation of exemption.
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C. The Commission shall not be precluded from taking whatever action it may deem appropriate on any application for confirmation even if filed after the offer or sale of the securities without prejudice to the imposition of penalties when warranted by the situation.

7. Burden of Proof that Such Exemption is Available

A. Unless confirmation of the availability of such exemption is applied for under paragraph 4 of this Rule, any person claiming an exemption under Section 10 has the burden, if challenged, to establish that the exemption is available. The Commission may challenge such exemption at any time.
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B. A presumption that an exemption is not available may arise from the failure to file a notice as required by paragraph 3 of this Rule. Failure to file such notice shall also subject a person claiming an exemption under Section 10 to sanctions under the Code.

8. The sale or offer for sale of a security in any transaction exempt under Section 10 shall not be exempt from antifraud, civil liability or other provisions of the Code.
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9. In view of the objective of full and fair disclosure under the Code, exemptive relief under Section 10 of the Code shall not be available to any issuer or other persons for any transaction or chain of transactions that, although in technical compliance with the Code and this Rule, shall be a part of a plan or scheme to evade the registration provisions of the Code. In such cases, registration under the Code shall be required.

SRC Rule 11 – Definition of Commodity Futures Contracts chan robles virtual law library
1. Commodity futures contract means a contract providing for the making or taking delivery at a prescribed time in the future of a specific quantity and quality of a commodity or the cash value thereof, which is customarily offset prior to the delivery date, and includes standardized contracts having the indicia of commodities futures, commodity options and commodity leverage, or margin contracts.
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2. Commodity means any goods, articles, services, rights and interests, including any group or index of any of the foregoing, in which commodity interests contracts are presently or in the future dealt in.
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3. Forward means a contract between a buyer and a seller whereby the buyer is obligated to take delivery and the seller is obliged to deliver a fixed amount of an underlying commodity at a predetermined price and date. Payment in full is due at the time of delivery.
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4. Without prejudice to applicable Bangko Sentral ng Pilipinas rules and circulars, the public trading of commodities futures contracts and pertinent Commission rules shall remain suspended until further ordered otherwise by the Commission.

SRC Rule 12.1 – Requirements for Filings Pursuant to the Securities Regulation Code and the Corporation Code of the Philippines
[formerly, SRC Rule 12]

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1. This Rule sets forth the requirements applicable to the contents of an issuer’s non-financial statement portions of the following:

A. Registration statements for the sale and/or distribution of securities pursuant to the provisions of Sections 8 and 12 of the Code and SRC Rule 8.1 thereunder. Registration Statements under Section 12 of the Code shall be filed on SEC Form 121;
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B. Prospectuses to be used in connection with the public distribution of securities pursuant to Section 8 of the Code and SRC Rule 8.1 paragraph 3 thereunder;
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C. Periodic and other reports required to be filed with the Commission under Section 17 of the Code as provided in SRC Rule 17 which shall be made on SEC Forms 17-Q, 17-A, 17-C, 17-EX or 17-L, as appropriate, unless exempt from the provisions thereof; and
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D. Information Statement (SEC Form 20-IS) required under Section 20 of the Code and SRC Rule 20.

2. Reports filed on SEC Form 17-A and SEC Form 17-C shall be deemed to satisfy Section 141 and Section 26 of the Corporation Code of the Philippines, respectively; reports provided to security holders pursuant to SRC Rule 20 shall be deemed sufficient compliance with Section 75 of the Corporation Code of the Philippines.
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3. In addition to the requirements of this Rule, the filing of forms with the Commission is governed by the provisions of SRC Rule 72.1 under title "General Rules and Regulations For Filing of SEC Forms With the Securities and Exchange Commission."  The definitions contained in that Rule and SRC Rule 38, to the extent that they are not defined in “Annex B” shall assume the same meaning of similar terms as used herein.
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4. Information required to be