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REPUBLIC
ACT NO. 8799
SRC Rule 1 – Title of Rules
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:2. Unless otherwise specifically stated, the terms used in the rules and regulations shall have the meaning defined in the Code.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.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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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.
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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;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:
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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.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.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.
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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.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 ;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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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.
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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.
A. makes deliveries in connection with transactions in securities;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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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.
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.2. The Commission shall have support services departments, namely Human Resource and Administrative Department, Economic Research and Information Department and Financial Management 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.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.3. The Commission shall have special offices, namely the Office of the General Counsel and the Office of the General Accountant.
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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.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.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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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.
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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.
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;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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b. submission of General Information Sheets (GIS);
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c. compliance with provisions in their by-laws on:i. number of directorsd. declaration of dividends;
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ii. qualifications, compensation of directors
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iii. holding of meetings, etc.
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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.
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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.
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.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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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.
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;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.
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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.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.
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 1.2. Shelf Registration
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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.
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;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:
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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.i. each participant in the distribution (e.g., underwriters and brokers);F. Notice of Availability of Prospectus and Preliminary Prospectus
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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.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.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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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.
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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);I. Format of Prospectus
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ii. the financial statements contained therein are over two hundred twenty five (225) days old.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.
A. the name of the issuer of the security;2. Every communication used pursuant to this Rule shall contain the following:
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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.
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.
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.
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:2. Exempt Transactions Not Requiring Noticei. 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.
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 Codei. 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.4. Application for Confirmation or Declaration of Exemption
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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:D. Offer or Sale of Securities to Qualified Buyers under Section 10.1(l) of the Code1) 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.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.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.5. Exempt Commercial Paper Transactions
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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.An issuer of commercial papers under an exempt transaction shall:6. Other Requirements and LimitationsA. 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 Assetschan robles virtual law library
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
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.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.7. Burden of Proof that Such Exemption is Available
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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.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.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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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.
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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 12.1 – Requirements for Filings Pursuant to the Securities
Regulation Code and the Corporation
Code of the Philippines
[formerly,
SRC Rule 12]
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;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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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.
A. This rule shall apply to commercial papers issued by corporations to the public, the offer or sale of which is required to be registered under the Code.7. Requirements for Registration of Derivatives
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B. For purposes of this rule, a credit rating agency (CRA) means any corporation principally and regularly engaged in the business of performing credit evaluation of corporations and business projects or of debt issues with the intention of assessing the overall creditworthiness or of ascertaining the willingness and ability of the issuer to pay its financial obligations as they fall due, and which assessment is translated by credit ratings periodically and publicly announced.
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C. The conditions for registration of commercial papers are the following:i. Filing of a registration statement under SEC Form 12-1, in accordance with SRC Rules 8.1 and 12.1.D. The issuer shall comply with such other terms and conditions that the Commission may impose from time to time in the exercise of its mandate to protect the investors.
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ii. The issuer shall enter into a firm commitment underwriting agreement for the commercial paper with a universal bank or an investment house or any other financial institution which is duly licensed under the Investment Houses Law; provided that if the underwriter is part of a group composed of such institutions, they shall agree on a syndicate manager who shall act on behalf of and be responsible to the group and whose actions shall be binding thereto.
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iii. Except for issuance amounting to not more than twenty five percent (25%) of the issuer’s networth or where there is an irrevocable committed credit line with a bank covering one hundred percent (100%) of the proposed issuance, a commercial paper issue shall be rated by a rating agency accredited by the Commission, in accordance with the following rules:a. Confidentiality of informationAll information received by a credit rating agency (CRA) from an issuer shall be kept confidential, except for those which:b. Monitoring of Issuers Whose Securities Have Been Rated1) Are publicly disclosed by the Ratee or Issuer itself prior to or subsequent to the receipt of such information by the CRA; 2) Have become generally known in the trade or by the public through no fault or negligence or fault of the CRA; 3) Have been lawfully disclosed to the CRA by a third party.
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If any officer, director or staff of a CRA comes into possession of non-public material information about the issuer whose securities are being rated, he (and all other staff members, officers/directors) shall be disallowed to trade in that issuer’s securities, or may not disclose such information nor withhold any rating recommendation on the relevant issuer until the reason for the rating is satisfied.To ensure that a rating is accurate and with best objectivity, a CRA shall monitor on a continuing basis each issuer, if an issuer rating was given, or each issue, for an issue rating. The CRA shall raise or lower ratings to reflect significant changes in the creditworthiness of the issuer or in the credit quality of the issue.c. Change, suspension or withdrawal of rating1) A rating may be changed, suspended or withdrawn as a result of changes in, unavailability or non-submission of, information, misleading statements or actions of the issuer, or for other relevant or material circumstances which may be determined by the Commission.d. Rating criteria
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2) A credit rating agency shall advise an issuer in advance of any proposed change in the rating; provided, however, that a credit rating agency may withdraw a rating without prior notice based on lack of information and/or receipt of material adverse information and/or if there is a compelling reason to make any change in rating for the information and protection of investors and/or based on other relevant or material circumstances as the Commission may determine.
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3) The credit rating agency need not get the approval of the issuer to downgrade its rating on the issuer or an issue.
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4) Issuers shall not suppress, curtail or otherwise prevent a rating change under pain of sanctions under the Code.Ratings shall be based on the following considerations:e. Application for accreditation1) nature and provisions of the debt obligation;
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2) likelihood of default by an issuer;
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3) protection afforded by, and relative position of, the obligation in the event of a bankruptcy, reorganization or other arrangement under the bankruptcy
law, and other factors affecting creditors’ rights;
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4) economic risk;
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5) industry risk;
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6) market position of the issuer;
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7) business diversification of the issuer;
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8) management and strategy;
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9) financial risks;
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10) capital structure/leverage;
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11) financial flexibility, and
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12) compliance with leading practices and principles on corporate governance.To apply for accreditation, a credit rating agency shall:1) Be a stock corporation.
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2) Have a minimum paid-up capital of at least Ten Million Pesos (P10,000,000.00).
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3) Submit to the Commission the following:i. list of shareholders and their corporate affiliations;4) An applicant may request confidentiality of the foregoing information except its operating procedures, rating policies and rating criteria.
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ii. list of other business activities, if any;
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iii. copies of the company’s Articles of Incorporation and By-Laws;
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iv. a statement pertaining to ownership structure and possible conflict/s of interest;
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v. names, professional qualification and independence of staff involved in the rating decision (“rating specialists”);vi. a written code of conduct which insures the independence of the rating specialists and the rating agency from the issuers it is rating;
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vii. disclosure of affiliations, training, assistance or support it receives from international rating agencies, if any;
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viii. rating scales, criteria, measurements, symbols and the like, which it has in use;
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ix. operating procedures, rating policies, rating criteria and other rationale used in arriving at a rating;
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x. copy of model written agreement with issuers; and
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xi. Manual on Corporate Governance.
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5) Within sixty (60) days from receipt of a written application for accreditation on the prescribed SEC Form, the SEC shall either approve registration outright or schedule a hearing to resolve issues which may result in such registration being denied based on concern/s that the Commission may deem important.
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6) All applications for accreditation shall be accompanied by an initial filing fee of Fifty Thousand Pesos (P50,000.00) or such amount as the Commission may determine.
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7) The accreditation thus granted shall continue to be effective until revoked by the Commission. However, an annual fee of Ten Thousand Pesos (P10,000.00) or such amount as the Commission may determine, shall be paid yearly at least forty five (45) days prior to the anniversary date of its accreditation. If such annual fee is not paid, the registration of such person shall be suspended until payment is made, provided that if the same is not paid prior to the thirtieth (30th) day after the required payment date, such accreditation shall be automatically terminated and any issuer which has been rated by such rating agency shall be required to obtain a new credit rating within thirty (30) days after notification by such agency of such termination.
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8) All accredited credit rating agencies shall ensure that the information set forth in their application form, and all documents appended thereto, are current, true and correct. Any change to such information shall be filed with the Commission no later than ten (10) business days from the occurrence of such change.
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9) Failure to provide an informed and objective assessment of an issuer’s credit quality or any violation of the foregoing rules shall be a sufficient ground, after due notice and hearing, for the revocation or suspension of the accreditation of a rating agency.
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10) No person or entity shall under pain of sanctions under the Code hold itself out as an accredited credit rating agency or otherwise regulated in providing credit rating services unless it has been accredited by this Commission under this rule.
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E. The issuer shall comply with the conditions imposed for the registration of its commercial papers during the effectivity of the registration statement covering said securities. Non-compliance therewith shall be a sufficient ground, after notice and hearing, for the revocation or suspension of said registration.
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F. Term of Registration and Reissuancei. Registration of short term commercial papers shall be valid for one (1) year or any lesser period and may be renewed annually with respect to the unissued balance of the authorized amount upon showing that the issuer has strictly complied with the SRC and applicable rules, including this rule, and has paid all required fees; Provided, however, that any application for renewal of registration shall be filed at least forty five (45) days prior to the expiry date.G. Pre-termination
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ii. Registration of long-term commercial papers shall be a closed-end process whereby the issued portion of the authorized amount may no longer be subject of reissuance to the public unless re-applied for registration in accordance with this Rule.i. Long-term commercial papers, except bonds, which have maturity period of five (5) years or more shall not be pre-terminated by the issuer or the lender within seven hundred thirty (730) days from issue date.H. Default
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ii. Pre-termination shall include optional redemption, partial installments and amortization payments; however, installments and amortization payments may be allowed if so stipulated in the loan agreement.i. If an issuer of short-term commercial papers fails to pay in full any interest due thereon, or the principal upon demand at maturity date appearing thereon, said issuer shall, within the next business day after such failure, notify in writing its underwriter/selling agent and the Commission of such failure and the latter shall forthwith issue a formal Cease and Desist Order enjoining both the issuer and the underwriter/selling agent from further offering for sale the subject commercial papers.I. Registration Fees
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ii. If an issuer of long-term commercial papers fails to pay in full any interest due thereon, or the principal upon demand at maturity date stated thereon, said issuer shall, within the next business day after such failure, notify in writing its underwriter/selling agent and the Commission of such failure. In the event that the failure occurs within the one-year effectivity of the permit, the Commission shall issue a formal Cease and Desist Order enjoining both the issuer and the underwriter/selling agent from further offering for sale the subject commercial papers.
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iii. In both cases, an issuer of commercial papers which is a publicly listed company shall, within the next business day after the aforementioned failure, inform in writing the Exchange of such failure.The filing fee shall be based on the total amount of commercial papers proposed to be issued and shall be subject to a diminishing fee in inverse proportion in accordance with the table presented in SEC Form 12-1.J. Compliance with Quasi-Banking RequirementsNothing in these rules shall be construed as an exemption from or a waiver of applicable BSP requirements governing the performance of quasi-banking functions of financial intermediaries duly authorized to engage in such activities. As such, all applications covering the registration of commercial papers that shall be issued for relending purposes shall be endorsed by the Commission to the BSP. Otherwise, only Commission approval shall be necessary.
A. Warrants8. Additional registration requirements for Proprietary and Non-Proprietary Shares/Certificatesi. DefinitionsB. Optionsa. “Warrant Certificate” – means the certificate representing the right to a Warrant, which may be detachable or not, duly issued by the Issuer to the Warrantholder.ii. Registration
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b. “Warrant Instrument” – means the written document or deed containing the terms and conditions of the issue and exercise of a Warrant, which terms and conditions shall include:1. the maximum underlying shares that can be purchased upon exercise;c. “Detachable Warrant” – means a Warrant that may be sold, transferred or assigned to any person by the Warrantholder separate from, and independent of, the corresponding Beneficiary Securities.
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2. the exercise period;
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3. such other terms and conditions as the Commission may require.
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d. “Nondetachable Warrant” – means a Warrant that may not be sold, transferred or assigned to any person by the Warrantholder separate from, and independent of, the Beneficiary Securities.
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e. “Beneficiary Securities” – means the shares of stock and other securities of the Issuer which form the basis of the entitlement in a Warrant.
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f. “Underlying Shares” – means the unissued shares of a corporation which may be purchased by the Warrantholder upon the exercise of the right granted under the Warrant.a. Upon proper registration of its warrants under Sections 8 and 12 of the Code and SRC Rules 8.1 and 12.1, a corporation may offer and issue such securities to the public.iii. Form and Content and Other Requirements of Warrant Certificates
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b. The registration of the Warrants shall include its underlying shares.
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c. The issuer shall disclose in its registration statement the terms and conditions of the warrant plan including computational data relative thereto.
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d. A person proposing to offer Warrants to the public shall file SEC Form 12-1 with the prescribed filing fee. Notwithstanding the Warrants having no issue value, the filing fee for the same shall be Fifty Thousand Pesos (P50,000.00) in addition to the fees which may be due on the underlying shares.a. All Warrants authorized for issuance by the Commission shall be evidenced by Warrant Certificates which shall be signed by the President (or such other officer as may be duly authorized by the Board of Directors) and the Corporate Secretary of the Issuer.iv. Exercise Period
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b. In case of Detachable Warrants, the Warrant Certificate shall state the following on its face: “The Warrant contained herein does not by itself represent any share of stock, but a right to purchase shares of stock of the Issuer under the terms and conditions herein contained”.
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c. In case of Non-detachable Warrants, the right granted under the Warrant shall be described in the stock transfer or instrument evidencing the Beneficial Securities. A Warrant Certificate or the stock certificate or instrument evidencing the Beneficial Securities where the non-detachable Warrant is described shall also state the following (whether on its face or on its reverse side):1) The warrant certificate number;
2) The par or issue value, class and number of the corresponding underlying shares;
3) The exercise price, or the formula for computing the same, or adjustments thereto;
4) The exercise period and the expiry date of the Warrant;
5) The procedure for the exercise;
6) The summary of the provisions contained in the Warrant Instrument; and
7) Exchange ratio or the number of underlying shares which may be purchased by each Warrantholder.Warrantholders may exercise the right granted under a Warrant within the period set by the company and disclosed in its registration statement. No extension of said period shall be allowed.v. Exercise Pricea. The Exercise Price shall be at a price fixed at the time of registration, or computed using the stated formula, and disclosed by the company in its registration statement.
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b. The Exercise Price shall be paid in full upon exercise, and shall not be less than the par value of the underlying shares or not less than Five Pesos (P5.00) per share, if the underlying shares are without par value.
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c. The Exercise Price shall be adjusted only if the Warrant Instrument provides for (i) the conditions under which adjustments in Exercise Price can be made and (ii) the formula under which the adjusted Exercise Price can be determined. The Exercise Price may be adjusted only in any of the following circumstances occurring after the issuance of the Warrant:vi. Warrants Registry Book1) a change in the par value of the underlying shares;
2) a declaration of stock dividends;
3) an offering of additional shares at a price different from the original exercise price;
4) a merger, consolidation or quasi-reorganization;
5) a disposition of a substantial portion of the assets of the corporation; and
6) such other similar instances as may be approved by the Commission.Any corporation authorized to issue Warrants shall have a Warrants Registry Book maintained by the designated Warrants Registrar who shall be preferably the Stock and Transfer Agent of the Issuer. Upon the exercise of the right granted under a Warrant, a notation to this effect shall be duly recorded in the Warrants Registry Book, and the purchase of the Underlying Shares shall be recorded in the Stock and Transfer Book of the Issuer. Any sale, transfer, or assignment of a Warrant must be duly recorded in the Warrants Registry Book, including the names of the transferor and transferee, the number of Warrants transferred and the number of Underlying Shares covered by said transfer. Unless recorded in the Warrants Registry Book, the transfer of Warrants shall not be binding on the Issuer.vii. Transferability of WarrantsAll registered Warrants shall be transferable without need of approval from the Commission. In case of Non-detachable Warrants, they shall be transferred only together with the Beneficial Securities.viii. Listing RequirementsWarrants authorized for issuance by the Commission may be listed in an exchange together with the Beneficiary Securities under existing rules for listing of securities, and under such other rules as the exchange may adopt and approved by the Commission; provided, however, that the Warrants shall be automatically delisted upon the lapse of the Exercise Period. Warrants issued by listed companies are required to be listed.i. No corporation shall grant or offer any Option to the public unless the same is registered in accordance with Sections 8 and 12 of the Code and SRC Rules8.1 and 12.1, except when said security is exempt from registration under Sections 9 and 10 of the Code.C. Other Types of Derivatives
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ii. The registration of the Options shall include its underlying shares.
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iii. A person proposing to offer any Option to the public shall file SEC Form 12-1, with the prescribed filing fee based on the aggregate issue price of the Options and the underlying shares. Notwithstanding the Options having no issue value, the filing fee for the same shall be Fifty Thousand Pesos (P50,000.00) in addition to the fees which may be due on the underlying shares.
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iv. The issuer shall disclose in its registration statement the terms and conditions of the Option plan including computational data relative thereto. The Plan shall be submitted as exhibit to the registration statement.
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v. In considering registration of stock Options, the Commission shall be guided by the following:a. Stocks granted to stockholders proportionately with their shareholdings may be allowed.vi. Every corporation granting Options shall maintain an Option Registry Book where all Options granted including transfers shall be recorded with the entries showing the name of person to whom the Option is granted, the basis or authority for such grant, the date granted, the number of shares, the price per share, the exercise date, the total cost and official receipt number.
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b. Stock Options may be granted to employees or officials who are not members of the board subject however to a review of the scheme by the board and subject to approval by the stockholders, pursuant to the policy of the government to widen corporate base and to distribute corporate profits wider and more equitably,
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c. Stock Options granted to persons who are not stockholders may be granted only upon showing that the Board has been duly authorized to grant the same by its charter or by a resolution of the stockholders owning at least two-thirds (2/3) of all the outstanding capital stock, voting or nonvoting, excluding treasury stock.
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d. Stock Options granted to directors or managing groups and its officers must be approved in a meeting of stockholders owning at least two-thirds (2/3) of all the outstanding capital stock, voting or non-voting, excluding treasury stock. Certification by the Corporate Secretary as to the number of shares represented in said meeting and the number of votes cast for or against the grant of optional rights to the directors or managing groups and its officers shall be submitted.
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e. Exercise of Options must be done within the period set by the company and disclosed in its registration statement.
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vii. No underlying shares for stock Options shall come from the treasury shares of the issuer company.i. All companies proposing to issue derivatives to the public, unless covered by the Rules on Futures Market, shall file a registration statement under SEC Form 12-1, in accordance with SRC Rules 8.1 and 12.1.
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ii. Such registration statement shall include financial statements prepared in accordance with the Generally Accepted Accounting Principles (GAAP) in the Philippines and the applicable International Accounting Standards on Financial Instruments.
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iii. It shall likewise include a description of the company’s financial risk management objectives and policies, including its policies for hedging. Each major type of forecasted transaction shall be provided in its prospectus.
A. The registrant shall clearly indicate in its Articles of Incorporation, By-Laws and prospectus the following:i. A description of the nature and type of the shares/certificates, rights and privileges of the holders thereof particularly their right over the facilities of the Club;B. The registrant shall clearly indicate in its prospectus an undertaking that, in the event the project or the underlying asset for which the securities are sold is for whatever reasons, not completed as disclosed, it shall refund the amount of the investment of the purchaser of the securities within ten (10) days from receipt of the written demand.
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ii. The certificates or shares shall be issued within sixty (60) days from the date of full payment of the same;
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iii. The Club shall qualify the prospective club members before actual sale/transfer of the share/certificate is executed.
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C. The Club shall:i. Not collect membership dues unless the project is fifty percent (50%) usable as indicated in the prospectus, unless the Club’s by-laws provide a higher percentage of usability;D. The conditions under paragraph (C) shall be reflected in the company’s prospectus.
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ii. Submit to the Commission a report under oath of any increase in fees and the rationale for said increase within thirty (30) days from Board approval;
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iii. Notify club members of any increase in fees upon the Board’s approval of the said increase; and
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iv. Cause the posting of proper notices and other communications on the charging of fees on bulletin boards situated at conspicuous place/s at the site, for the benefit of secondary markets.
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E. The following documents shall be submitted with the registration statement as exhibits thereof:i. Copy of Subscription Agreement containing the required undertaking under paragraph (B) above;
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ii. Copy of a Credit Line Agreement with a reputable domestic bank. Such credit line shall be availed of in the event that an insufficiency of fund for the completion of the project shall occur. The terms of the credit line agreement shall be disclosed in the prospectus;
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iii. Copy of a Custodianship/Escrow Agreement with a reputable bank covering the proceeds from the sale of said shares/certificates, providing among others, the withdrawal of the same only upon presentation of the company’s work progress report; and
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iv. Copy of the Environmental Compliance Certificate from the Department of Environment and Natural Resources covering the location of the project.
A. Financial statements incorporated by reference shall satisfy the requirements of the form or report in which they are incorporated. Financial statements or other financial data required to be given in comparative form for two (2) or more fiscal years or periods shall not be incorporated by reference unless the material incorporated by reference includes the entire period for which the comparative data are given;2. A material incorporated by reference shall be clearly identified in the reference by page, paragraph, caption or otherwise. Where only certain pages of a document are incorporated by reference and filed as an exhibit, the document from which the material is taken shall be clearly identified in the reference. An express statement that the specified matter is incorporated by reference shall be made at the particular place in the statement or report where the information is required. A matter shall not be incorporated by reference in any case where such incorporation would render the statement or report incomplete, unclear or confusing.
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B. Information in any part of the registration statement or other reports may be incorporated by reference in answer, or partial answer, to any other item of the registration statement or other report; and
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C. Copies of any information or financial statement incorporated into a registration statement or other report by reference, or copies of the pertinent pages of the document containing such information or statements, shall be filed as an exhibit to the statement or report.
A. Any document or part thereof filed with the Commission pursuant to the Code may be incorporated by reference as an exhibit to any statement or report filed with the Commission by the same or any other person. Any document or part thereof filed with an Exchange pursuant to the Code may be incorporated by reference as an exhibit to any statement or report filed with that Exchange by the same or any other person.4. Information shall not be incorporated by reference in a prospectus.
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B. If any modification has occurred in the text of any document incorporated by reference since the filing thereof, the registrant shall file with the reference a statement containing the text of any such modification and the date thereof.
A. The Commission shall publish a notice of the order of revocation or suspension in a newspaper of general circulation in the Philippines and/or post on the Commission’s website along with a statement that the offering in its current form has been cancelled and that the issuer, subject to such order, or any person acting on behalf of the issuer in the distribution of the subject securities and has in his possession any payment for the purchase of securities, pursuant to paragraph 3 hereof if applicable, has the duty to return any and all payments made by purchasers of the subject securities within ten (10) days of such publication, and simultaneously furnish the issuer a copy of this notice.2. If the public offering is already terminated and the Commission, after due notice and hearing, revokes the effectivity of the registration statement under Section 13 of the Code, or suspends registration under Section 15 thereof, the Commission shall publish a notice of the order of revocation or suspension in a newspaper of general circulation in the Philippines and/or post in the Commission’s website.
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B. Upon receipt of a notice under paragraph 1(A) above, the issuer and all persons acting on its behalf in the distribution of the subject securities shall immediately terminate the offering and return any and all payments received from purchasers within ten (10) days after the notice is first published.
A. An Application for the Voluntary Revocation of Registration of Securities shall be effected by filing the following:5. The Order of Revocation shall not exempt the company from its reporting obligations under Section 17.2 of the Securities Regulation Code.i. Verified Petition for Revocation of Registration and Permit to Sell Securities to the Public;B. The Commission may impose such other requirements or conditions as it may deem necessary. The same may include an Order to produce all the books and papers of the petitioner and to administer oaths to, and examine its officers or other persons connected therewith.
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ii. Board Resolution approving said revocation, certified under oath by the Corporate Secretary and attested to by the President or one performing similar function;
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iii. List of Stockholders indicating their respective shareholdings as of the latest date;
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iv. Proposed Notice of Filing of Petition for Voluntary Revocation of Registration of its Securities, reciting the facts supporting the said petition and that the same is subject to the approval of the Commission; and
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v. Copy of Official Receipt representing payment of filing fee in the amount of Five Thousand Pesos (P5,000.00) or such amount as the Commission may determine.
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C. Proceduresi. Upon presentation of the documents required for voluntary revocation of registration of securities, the Notice of Filing of Petition for Voluntary Revocation shall be immediately published by the Commission, at the expense of the petitioner, once in a newspaper of general circulation;
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ii. If after fifteen (15) business days from the aforesaid publication, the Commission finds that the petition together with all other papers and documents attached thereto, is on its face complete and that no party stands to suffer damage thereby, it shall prepare an Order revoking said Registration, without prejudice to the filing of claims for damages, by the affected persons or stockholders, with the regular courts of justice.
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iii. The Order of Revocation shall be published once, in a newspaper of general circulation, at the expense of the company and/or uploaded at the SEC Website.
A. Any event or transaction which increases or creates a risk on the investments or on the securities covered by the registration;2. If a registration statement or a prospectus on file with the Commission under the Code becomes incomplete or inaccurate in any material respect or if the issuer wants to change any material information therein, the issuer shall:
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B. Increase/decrease in the volume of the securities being offered at an issue price higher/lower than the range set and disclosed in the registration statement and which results to a derogation of the rights of existing security holders, as may be determined by the Commission;
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C. Major change in the primary business of the registrant;
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D. Reorganization of the company;
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E. Change in the work program or use of proceeds;
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F. Loss, deterioration or substitution of the property underlying the securities;
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G. Significant or ten percent (10%) or more change in the financial condition or results of operation of the registrant unless a report to that effect is filed with the Commission and furnished the prospective purchaser;
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H. Classification, de-classification or re-classification of securities which results to derogation of rights of existing security holders, as may be determined by the Commission.
A. file an amendment to the registration statement with the Commission explaining all proposed changes which shall be reviewed by the Commission in accordance with Section 14 of the Code;3. If after commencement of a public offering, the Commission becomes aware that the prospectus is on its face incomplete or inaccurate in any material respect, or there is a material omission therefrom, the Commission may require an issuer to comply with paragraph 2 above or suspend or revoke its registration under Section 13 or 15 of the Code and SRC Rule 13.
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B. where the registration statement has been declared effective by the Commission, publish a notice of the proposed amendment/s, including the reasons therefor, in two (2) newspapers of general circulation in the Philippines stating that the offering in its current form has been cancelled;
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C. if the changes shall result to a derogation of rights of existing security holders or purchasers of subject securities who have paid a portion of the selling price thereof, the issuer shall include in the above-mentioned publication an offer to rescind all transactions that have been completed for sale to date, without making any deduction pursuant to paragraph (D) below and wait for thirty (30) days for purchasers to respond to the rescission offer before initiation of the amended offering; and
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D. where the conditions under paragraph (C) are present, purchasers may, within thirty (30) days from the date of such notification, renounce their purchase of securities. Whereupon the issuer, or any person acting on behalf of the issuer in connection with the distribution of said securities, shall, within ten (10) days from receipt of notification of such election, return the contributions paid by such purchasers without making any deduction. Purchasers who decide not to renounce their purchase of securities shall be subject to the terms of the amended offering.
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E. In case of an increase in the volume or offering price of securities to a level higher than the range previously disclosed by the company, the amended registration statement or prospectus shall be accompanied by a filing fee based on the difference between the highest aggregate amount per old range and the total amount based on new volume or price. For amendments other than the offering price, the minimum filing fee for the amended registration statement or prospectus shall be Ten Thousand Pesos (P10,000.00) or such amount as the Commission may determine.
The reportorial provisions of this paragraph shall apply to reporting and public companies, as defined under SRC Rule 3. However, the obligation of a company, which has sold a class of its securities pursuant to a registration under Section 12 of the Code shall be suspended for any fiscal year if as of the first day of any such fiscal year, it has less than one hundred (100) holders of such class of securities and the Commission is duly notified of the same. Such suspension shall only be availed of after the year said registration becomes effective.2. Issuers of Exempt SecuritiesA. Every issuer set forth in paragraph 1 hereof, shall file with the Commission:i. An annual report on SEC Form 17-A for the fiscal year in which the registration statement was rendered effective by the Commission, and for each fiscal year thereafter, within one hundred five (105) days after the end of the fiscal year.B. Any disclosure signed and filed with the Commission and the Exchange where the securities of the issuer are listed, or released in mass media, in the personal capacity of any director, executive officer or a substantial stockholder (as defined under SRC Rule 38.1) direct or indirect, of an issuer shall be considered as part of any report mentioned in paragraph 1(A)(iii) hereof and deemed as an official filing of such company if it does not deny the subject information within two (2) days from the filing/release of the aforementioned disclosure. Any misleading statement, misrepresentation or omission of a material fact therein shall be the joint responsibility of the issuer and the reporting director, officer or substantial stockholder.
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ii. A quarterly report on SEC Form 17-Q, within forty five (45) days after the end of each of the first three quarters (3) of each fiscal year. The first quarterly report of the issuer shall be filed either within forty five (45) days after the effective date of the registration statement or on or before the date on which such report would have been required to be filed if the issuer had been required previously to file reports on SEC Form 17-Q, whichever is later.
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iii. 1. a current report on SEC Form 17-C, as necessary, to make a full, fair and accurate disclosure to the public of every material fact or event that occurs, which would reasonably be expected to affect investors' decisions in relation to those securities. In the event a news report appears in the media involving an alleged material event, a current report shall be made within the period prescribed herein, in order to clarify said news item, which could create public speculation if not officially denied or clarified by the concerned company.2. The disclosure required by paragraph 1(A)(iii)(1) above shall be made by the issuer:iv. In addition to the above reports, issuers of registered commercial papers shall file the following in the form prescribed by the Commission until all the outstanding commercial papers have been paid:a. promptly to the public through the news media;3. An illustrative, non-all inclusive, list of events which shall be reported pursuant to this paragraph is contained in SEC Form 17-C. Merely because an event does not appear in that list does not mean that it does not have to be reported if, in fact, it is material.
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b. if the issuer is listed on an Exchange, to that Exchange within ten (10) minutes after occurrence of the event and prior to its release to the public through the news media, copy furnished the Commission;
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c. to the Commission on SEC Form 17-C within five (5) days after occurrence of the event being reported, unless substantially similar information as that required by Form 17-C has been previously reported to the Commission by the registrant.1. Monthly reports (M-101-40) on commercial paper total issuances/outstanding as at the end of each month, to be submitted within ten (10) business days following the end of the reference month;
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2.A list of issuances, outstanding balance and maturing commercial papers as at the end of each quarter, to form part of the required SEC Form 17-Q.
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The obligation to file reports under this item shall not be suspended even when the number of holders of the issuer’s commercial papers shall be reduced to less than one hundred (100).
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C. An owner of more than five percent (5%) of the voting rights of a listed company or any related party thereof, who holds material information which may materially affect such company may be required by the Commission to disclose such information within the period prescribed under paragraph 1(A)(iii) of this Rule. Failure to provide the required information shall subject said stockholder to sanctions applicable to violations of this Rule.
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D. Every issuer having securities registered with the Commission shall file an annual report on SEC Form 17-A for each of its predecessors which had securities registered with the Commission covering the last full fiscal year of the predecessor prior to the registrant’s succession, unless such report has been filed by the predecessor. Such annual report shall contain the information that would be required if filed by the predecessor.
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E. In the event that a non-reporting issuer (in connection with succession by merger, consolidation, exchange of securities or acquisition of assets) issues equity securities to holders of equity securities issued by a reporting issuer, the non-reporting issuer shall assume the same obligation as the reporting issuer to file reports pursuant to Section 17 of the Code, and the non-reporting issuer shall file such reports on the same forms as the reporting issuer.
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F. Notification of Inability to File On Time All or Any Required Portion of SEC FORM 17-A or 17-Qi. If all or any required portion of an annual report (SEC Form 17-A) or quarterly report (SEC Form 17-Q) required to be filed pursuant to Section 17 of the Code and SRC Rule 17.1 thereunder is not filed within the period prescribed for such report, the issuer shall, no later than the due date for such report, file with the Commission and, if applicable, with the Exchange where any class of its securities are listed, a SEC Form 17-L which shall contain a disclosure in reasonable detail of its inability to file the report timely and the reasons therefore. All information which are available on the date of the required filing shall be filed.
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ii. With respect to any report or portion of any report described in paragraph (A) above which is not timely filed because the issuer is unable to do so without unreasonable effort or expense, such report shall be deemed to be filed on the prescribed due date for such report if:1. The issuer files SEC Form 17-L in compliance with paragraph (i) hereof and, when applicable, furnishes the exhibit required by paragraph (iii) hereof;iii. If paragraph (ii) above is applicable and the reason the subject report/portion thereof cannot be filed timely without unreasonable effort or expense relates to the inability of any person, other than the issuer, to furnish any required opinion, report or certification, SEC Form 17-L shall have attached as an exhibit a statement signed by such person stating the specific reasons why such person is unable to furnish the required opinion, report or certification on or before the date such report must be filed.
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2. The issuer represents in SEC Form 17-L that:a. The reason(s) causing the inability to file timely could not be eliminated by the issuer without unreasonable effort or expense; and3. The report/portion thereof is actually filed within the period specified by paragraph 1(A) hereof.
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b. Either the subject annual report on SEC Form 17-A, or portion thereof, will be filed no later than the fifteenth calendar day following the prescribed due date, or the subject quarterly report on SEC Form 17-Q, or portion thereof, will be filed no later than the fifth calendar day following the prescribed due date; and
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iv. Notwithstanding paragraph (ii) above, a registration statement filed on SEC Form 12-1 pursuant to SRC Rule 8.1, the use of which is predicated on timely filed reports, shall not be declared effective until the subject report is actually filed pursuant to paragraph A hereof.
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v. If SEC Form 17-L filed pursuant to paragraph (ii) above relates only to a portion of a subject report, the issuer shall:1. File the balance of such report and indicate on the cover page thereof which disclosure items are omitted; and
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2. Include, on the upper right corner of the amendment to the report which includes the previously omitted information, the following statement:"The following items were the subject of SEC FORM 17-L and are included herein: (List Item Numbers)"
A. Issuers of exempt commercial papers shall file the followingi. Monthly reports (M-2-3-01) within ten (10) days after the end of the month;B. Issuers shall furnish BSP copies of said reports.
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ii. Quarterly reports (Q-EPS for non-banks and Q-2-3-01 for banks) within forty-five (45) days after the end of the quarter, respectively.
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C. Underwriters or issuers of commercial papers shall file an annual information statement (SEC Form 85-18-1) on commercial paper transactions on or before January 30 of each year. A fee of Ten Thousand Pesos (P10,000.00) shall be paid in connection therewith.
4. A person, in determining the amount of outstanding securities of a class of equity securities, may rely upon information set forth in the issuer’s most recent quarterly or annual report, and any current report subsequent thereto unless he knows or has reason to believe that the information contained therein is inaccurate.i. such person has acquired such securities in the ordinary course of business and not with the purpose nor with the effect of changing or influencing the control of the issuer, nor in connection with or as a participant in any transaction having such purpose or effect;B. Any person who has reported an acquisition of securities on SEC Form 18-AS but thereafter ceases to be a person specified in paragraph 3(A)(i) or 3(A)(ii) (a) through (g) of this Rule shall file within three (3) business days thereafter a sworn statement on SEC Form 18-A in the event such person is a beneficial owner at that time of more than five percent (5%) of the class of equity securities.
ii. such person is:a. A broker or dealer registered under the Code;iii. such person has promptly notified any other person on whose behalf it holds, on a discretionary basis, securities exceeding five percent (5%) of the class, of any acquisition or transaction on behalf of such other person which might be reportable by that person under Section 18.1(a) of the Code.
b. A bank authorized to operate as such by the BSP;
c. An insurance company subject to the supervision of the Insurance Commission;
d. An investment house registered under the Investment Houses Law;
e. An investment company registered under the Investment Company Act;
f. A pension plan subject to regulation and supervision by the BIR and/or the Insurance Commission; or
g. A group where all of the members are persons specified above, and
A. A person who, in the ordinary course of business, is a pledgee of securities under a written agreement shall not be deemed to be the beneficial owner of such pledged securities until the pledgee has taken all necessary steps which are required to declare a default and determines that the power to vote or to dispose or to direct the disposition of such pledged securities will be exercised;
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B. A person engaged in the business of an investment house who acquires his securities through his participation in good faith in a firm commitment underwriting shall not be deemed to be the beneficial owner of such securities until the expiration of six (6) months after the date of such acquisition; and
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C. When two (2) or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of equity securities of an issuer, the group formed thereby shall be deemed to have acquired beneficial ownership, for purposes of Section 18 of the Code, as of the date of such agreement, of all equity securities of that issuer beneficially owned by such persons.
A. Affiliate means any person, controlling, controlled by, or under common control with the issuer.2. Mandatory tender offers
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B. Beneficial owner shall have the same meaning as set forth in SRC Rule 3.
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C. Bidder means any person who makes a tender offer or on whose behalf a tender offer is made.
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D. Commencement means the date a tender offer is first published, sent or given to security holders.
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E. Issuer means any issuer subject to reporting obligations under Section 17.2 of the Code.
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F. Issuer Tender Offer means a publicly announced intention by an issuer to reacquire any of its own class of equity securities, or by an affiliate of such issuer to acquire such securities.
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G. Security holders mean holders of record and beneficial owners of securities that are the subject of a tender offer.
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H. Target company means any issuer of securities that are sought by a bidder pursuant to tender offer.
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I. Tender offer means a publicly announced intention by a person acting alone or in concert with other persons (hereinafter referred to as “person”) to acquire equity securities of a public company as defined in SRC Rule 3.
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J. Tender offer materials mean: (i) the bidder’s formal offer, including all the material terms and conditions of the tender offer and all amendments thereto; (ii) the related transmittal letter (whereby securities of the target company which are sought in the tender offer may be transmitted to the bidder or its depository) and all amendments thereto; and (iii) press releases, advertisements, letters and other documents published by the bidder or sent or given by the bidder to security holders which, directly or indirectly, solicit, invite or request tenders of the securities being sought in the tender offer.
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K. Termination means the date after which securities may not be tendered pursuant to the tender offer.
A. Any person or group of persons acting in concert, who intends to acquire thirty five percent (35%)1 or more of equity shares in a public company shall disclose such intention and contemporaneously make a tender offer for the percent sought to all holders of such class, subject to paragraph (9)(E) of this Rule.3. Exempt from Mandatory Tender Offer Requirement
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In the event that the tender offer is oversubscribed, the aggregate amount of securities to be acquired at the close of such tender offer shall be proportionately distributed across both selling shareholder with whom the acquirer may have been in private negotiations and minority shareholders.
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B. Any person or group of persons acting in concert, who intends to acquire thirty five percent (35%)1 or more of equity shares in a public company in one or more transactions within a period of twelve (12) months, shall be required to make a tender offer to all holders of such class for the number of shares so acquired within the said period.
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C. If any acquisition of even less than thirty five percent (35%) would result in ownership of over fifty one percent (51%) of the total outstanding equity securities of a public company, the acquirer shall be required to make a tender offer under this Rule for all the outstanding equity securities to all remaining stockholders of the said company at a price supported by a fairness opinion provided by an independent financial advisor or equivalent third party. The acquirer in such a tender offer shall be required to accept any and all securities thus tendered.
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D. In any transaction covered by this Rule, the sale of the shares pursuant to the private transaction shall not be completed prior to the closing and completion of the tender offer. Transactions with any of the seller/s of significant blocks of shares with whom the acquirers may have been in private negotiations shall close at the same time and upon the same terms as the tender offer made to the public under this Rule. For paragraph (2)(B), the last sale meeting the threshold shall not be consummated until the closing and completion of the tender offer.
A. The mandatory tender offer requirement shall not apply to the following:4. Tender Offer by an Issuer/Buy Backi. any purchase of shares from the unissued capital stock provided that the acquisition will not result to a fifty percent (50%) or more ownership of shares by the purchaser;B. Purchasers of shares in the foregoing transactions shall, however, comply with the disclosure and other obligations under SRC Rule 18.1 and SRC Rule 23.
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ii. any purchase of shares from an increase in authorized capital stock;
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iii. purchase in connection with foreclosure proceedings involving a duly constituted pledge or security arrangement where the acquisition is made by the debtor or creditor;
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iv. purchases in connection with privatization undertaken by the government of the Philippines;
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v. purchases in connection with corporate rehabilitation under court supervision;
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vi. purchases through an open market at the prevailing market price;
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vii. merger or consolidation.
The thresholds of fifteen percent (15%) or more for a single acquisition or thirty percent (30%) for creeping acquisition as provided for in Section 19 of the Code are increased to thirty five percent (35%), pending the passage of the proposed amendments to the SRC.5. Any person making a tender offer shall make an announcement of his intention in a newspaper of general circulation, prior to the commencement of the offer; Provided, however, that such announcement shall not be made until the bidder has the resources to implement the offer in full. A copy of said notice shall be submitted to the Commission on the date of publication thereof.A. A reacquisition or repurchase by an issuer of its own securities shall only be made if such issuer has unrestricted retained earnings in its books to cover the amount of shares to be purchased, and the same is pursuant to any of the following purposes:i. to implement a stock option or stock purchase plan;B Any issuer or any of its affiliates which intend to reacquire its own securities through active and widespread solicitation from the stockholders in general and in substantial amount of its shares, shall comply with disclosure and procedural requirements set forth under subparagraphs (C) and (D) below, and the preceding provisions of this Rule.
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ii. to meet short-term obligations which can be settled by the re-issuance of the repurchased shares;
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iii. to pay dissenting or withdrawing stockholders entitled to payment for their shares under the Corporation Code;
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iv. such other legitimate corporate purpose/s.
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In case of acquisition pursuant to subparagraph (i) or (ii) above, the same may be accounted for as “Investment in Marketable Securities”, in accordance with International Accounting Standards.
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C. If an issuer or an affiliate publishes, sends or disseminates its tender offer to security holders by means of a summary publication in the manner prescribed in this Rule, the summary publication shall disclose only the following information:i. The identity of the issuer or affiliate making the tender offer;D. Until the expiration of at least ten (10) business days after the date of termination of the issuer tender offer, neither the issuer nor any affiliate shall make any repurchase, otherwise than pursuant to the tender offer of:
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ii. The amount and class of securities being sought and the price being offered;
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iii. The information required by paragraph 8 of this Rule;
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iv. A statement of the purpose of the issuer tender offer; and
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v. The appropriate instruction for security holders on how to obtain promptly, at the expense of the issuer or affiliate making the issuer tender offer, the information required by paragraph 7 of the Rule.i. Any security which is the subject of the issuer tender offer, or any security of the same class and series, or any right to repurchase such securities; andE. This rule shall not apply to:
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ii. In the case of an issuer tender offer which is an exchange offer, any security being offered pursuant to the exchange offer, or any security of the same class and series, or any right to repurchase any such security.i. Calls or redemption of any security in accordance with the terms and conditions of its governing instruments;
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ii. Offers to repurchase securities evidenced by a certificate, order form or similar document which represents a fractional interest in a share of stock or similar security.
A. No bidder shall make a tender offer unless at least two (2) business days prior to the date of the commencement of the tender offer, such bidder:7. Disclosure Requirements with Respect to Tender Offersi. Files with the Commission copies of SEC Form 19-1, including all exhibits thereto, with the prescribed filing fees; andB. The bidder shall file with the Commission copies of any additional tender offer materials as exhibit to SEC Form 19-1 and, if a material change occurs in the information set forth in such SEC Form, copies of an amendment to such form. Copies of such additional tender offer materials and amendments shall be hand delivered to the target company and to any Exchange as required above.
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ii. Hand delivers a copy of such SEC Form 19-1, including all exhibits thereto to the target company at its principal executive office and to each Exchange where such class of the target company’s securities are listed for trading.
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C. The bidder shall report the results of the tender offer by filing with the Commission, not later than ten (10) calendar days after the termination of the tender offer, copies of the final amendments to SEC Form 19-1.
A. The bidder shall publish, send or give to security holders in the manner prescribed under paragraph 9 of this Rule, a report containing the following information:8. Dissemination Requirementsi. The identity of the bidder including his/its present principal occupation;B. If any material change occurs in the information previously disclosed to security holders, the bidder shall disclose promptly such change in the manner prescribed by this Rule.
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ii. The identity of the target company;
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iii. The amount of class of securities being sought and the type and amount of consideration being offered therefor;
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iv. The scheduled expiration date of the tender offer, whether the tender offer may be extended and, if so, the procedures for extension of the tender offer;
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v. The exact dates when security holders who deposit their securities will have the right to withdraw their securities pursuant to this Rule and the manner in which shares will be accepted for payment and in which withdrawal may be effected;
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vi. If the tender offer is for less than all of the securities of the class and the bidder is not obligated to purchase all securities tendered, the exact date of the period during which securities will be accepted on a pro rata basis under this Rule and the present intention or plan of the bidder with respect to the tender offer in the event of an oversubscription by security holders;
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vii. The confirmation by the bidder’s financial adviser or another appropriate third party that resources available to the bidder are sufficient to satisfy full acceptance of the offer; and
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viii. The information included in SEC Form 19-1.
A. A bidder or an issuer shall disseminate the tender offer by complying fully with one of the following methods of dissemination:9. Period and Manner of Making Tender Offeri. Long Form Publication. The bidder shall publish in two (2) newspapers of general circulation in the Philippines on the date of commencement of the tender offer and for two (2) consecutive days thereafter the information required by paragraph 7 (A) of this Rule; orB. If a material change occurs in the information published, sent or given to security holders, the bidder shall disseminate promptly disclosure of such change in a manner reasonably calculated to inform security holders of such change.
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ii. Summary Publication. The bidder shall publish in two (2) newspapers of general circulation in the Philippines on the date of commencement of the tender offer and for two (2) consecutive days thereafter the information required by paragraph 7(A)(i) through (viii) of this Rule, including appropriate instructions for security holders on how to obtain promptly, at the expense of the bidder, the information included in SEC Form 19-1, and furnish promptly a copy of such form to any security holder who requests a copy of such information.
A. The tender offer, unless withdrawn, shall remain open until the expiration of:10. Transactions on the Basis of Material, Non-Public Informationi. At least twenty (20) business days from its commencement; provided, however, that an offer should generally be completed within sixty (60) days from the date the intention to acquire is publicly announced; orB. Where a mandatory tender offer is required, the bidder is compelled to offer the highest price paid by him for such shares during the past six (6) months. Where the offer involves payment by transfer or allotment of securities, such securities must be valued on an equitable basis.
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ii. At least ten (10) business days from the date the notice of a change in the percentage of the class of securities being sought or in the consideration offered is first published, sent or given to security holders.
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C. In case of a tender offer other than by an issuer, a target company shall not engage in any of the following transactions during the course of a tender offer, or before the commencement thereof if its board has reason to believe that an offer might be imminent, except if such transaction is in pursuance of a contract entered into earlier, or with the approval of shareholders in a general meeting or, where special circumstances exist, Commission approval has been obtained:i. Issue any authorized but unissued shares;D. The bidder in a tender offer shall permit securities tendered to be withdrawn:
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ii. Issue or grant options in respect to any unissued shares;
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iii. Create or issue, or permit the creation or issue of, any securities carrying rights of conversion into, or subscription for, shares;
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iv. Sell, dispose of or acquire, or agree to acquire, any asset, the value of which amounts to five percent (5%) or more of the total value of assets prior to acquisition; or
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v. Enter into contracts otherwise done in the ordinary course of business.i. At any time during the period such tender offer remains open; andE. If the tender offer shall be for less than the total outstanding securities of a class but a greater number of securities is tendered pursuant thereto, the bidder shall be bound to take up and pay for the securities on a pro rata basis, disregarding fractions, according to the number of securities tendered by each security holder during the period such offer remains open.
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ii. If not yet accepted for payment, after the expiration of sixty (60) business days from the commencement of the tender offer.
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F. In the event the bidder in a tender offer shall increase the consideration offered after the tender offer has commenced, such bidder shall pay such increased consideration to all security holders whose tendered securities are accepted for payment by such bidder, whether or not the securities were tendered prior to the variation of the tender offer’s terms.
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G. The bidder in a tender offer shall either pay the consideration offered, or return the tendered securities, not later than ten (10) business days after the termination or the withdrawal of the tender offer.
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H. No tender offer may be made unless:i. The tender offer shall be open to all security holders of the class of securities subject to the tender offer; andI. The bidder in a tender offer shall not extend the length of a tender offer without prior clearance from the Commission and without issuing a notice of such extension by press release or other public announcement, which notice shall include disclosure of the appropriate number of securities deposited to date and shall be issued no later than the scheduled original expiration date of the offer.
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ii. The consideration paid to any security holder pursuant to the tender offer shall be the highest consideration paid to any other security holder during such tender offer.
If a person shall become aware of a potential tender offer before the tender offer has been publicly announced, such person shall not buy or sell, directly or indirectly, the securities of the target company until the tender offer shall have been publicly announced. Such buying or selling shall constitute insider trading under Section 27.4 of the Code.11. Withdrawal/Lapse of Tender Offer
Except with the consent of the Commission, where an offer has been announced but has not become unconditional in all respects and has been withdrawn or lapsed, neither the bidder nor any person who acted in concert with it in the course of the offer may, within six (6) months from the date on which such offer has been withdrawn or lapsed, announce an offer for the target company nor acquire any securities of the target company which would require such person to make a mandatory tender offer under this Rule and Section 19.1 of the Code.12. Prohibited practices
It shall be a fraudulent, deceptive or manipulative act or practice, in connection with any tender offer:13. ViolationA. to employ any device, scheme or artifice to defraud any person;
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B. to make any untrue statement of a material fact or to omit 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
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C. to engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.
If there shall be violation of this Rule by pursuing a purchase of equity shares of a public company at threshold amounts without the required tender offer, the Commission, upon complaint, may nullify the said purchase and direct the holding of a tender offer. This shall be without prejudice to the imposition of other sanctions under the Code.
For the purpose of holding any stockholders’ meeting, the provisions of this Rule shall apply to any corporation enumerated in Section 17.2 that is subject to the reporting requirements of Section 17 of the Code and to any person who shall solicit votes for a stockholders’ meeting of a particular corporation.2. Definitions
A. As used in this Rule and SEC Form 20-IS, the following terms shall have the following meaning:3. Obligations of a Registrant Proposing to Hold a Stockholders’ Meetingi. Employee Benefit Plan means any purchase, savings, option, bonus, profit sharing, incentive, pension or similar plan primarily for employees, directors, trustees or officers.B. Solicitation
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ii. Entity that exercises fiduciary powers means any entity that holds securities in nominee name or otherwise on behalf of a beneficial owner.
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iii. Information statement means the statement required by this Rule.
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iv. Proxy includes every proxy, consent or authorization within the meaning of Section 20 of the Code.
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v. Record date means the date on which the record holders of securities entitled to vote at the meeting in person or by written consent or authorization shall be determined.i. The terms solicit and solicitation shall include:a. any request for a proxy or authorization;ii. The terms shall not apply to:
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b. any request to execute or not to execute, or to revoke, a proxy or authorization; or
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c. the furnishing of a form of proxy or other communication to security holders under a circumstance reasonably calculated to result in the procurement, withholding or revocation of a proxy.a. the performance by any person of ministerial acts on behalf of a person soliciting a proxy; or
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b. any solicitation made otherwise than on behalf of the registrant where the total number of persons solicited is not more than nineteen (19).
A. In connection with an annual or other meetings of stockholders, the registrant shall transmit a written information statement and proxy form (in case of a proxy solicitation) containing the information specified under SEC Form 20-IS, and a management report under paragraph (4) of this Rule, if applicable, to every security holder of the class that is entitled to vote.4. Report to be Furnished to the Stockholders
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B. The proxy form shall be prepared in accordance with paragraph (5) hereof.
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C. Filing Requirementsi. Preliminary copies of the information statement and proxy form shall be filed with the Commission at least ten (10) business days prior to the date definitive copies of such material shall be first sent or given to security holders.D. If the solicitation or distribution shall be made personally in whole or in part, copies of all written instructions or other materials which shall discuss or review, or comment upon the merits of, any matter to be acted upon and which shall be furnished by the persons making the actual solicitation for their use directly or indirectly in connection with the solicitation shall be filed with, or mailed for filing to, the Commission by the person on whose behalf the solicitation shall be made not later than the date any such material is first sent or given to such individuals.
The registrant shall contact the Commission for any comment on the preliminary materials.
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ii. At the time of filing the preliminary information material, the registrant shall pay the Commission the fee of Five Thousand Pesos (P5,000.00) or such other amount as the Commission may prescribe.
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iii. Copies of the definitive information statement, proxy form and all other materials (if any), shall be filed with the Commission prior to the date such material/s shall be first sent or given to security holders. One (1) copy of such material shall at the same time be filed with, or mailed for filing to, any Exchange in which any class of securities of the registrant is listed for trading.
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iv. The information statement, proxy form and the management report under paragraph (4) of this Rule, if applicable, shall be distributed to security holders at least fifteen (15) business days from the date of the stockholders’ meeting.
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E. If any information statement or form of proxy or other materials (if applicable) filed pursuant to this Rule shall be amended or revised, copies of such amended or revised material shall be filed pursuant to this Rule and shall be marked to indicate clearly and precisely the changes effected therein.
A. If the information statement shall relate to an annual (or special meeting in lieu of the annual) meeting of stockholders at which directors shall be elected, it shall be accompanied or preceded by a management report to such stockholders containing the following:5. Requirements as to Form of Proxy and Delivery of Information to Security Holdersi. Consolidated audited financial statements and interim unaudited financial statements (if applicable), as required by SRC Rule 68, as amended;B. Any information that is required to be disclosed in the information statement, which is also contained in the registrant’s annual report, need not be provided in the said statement. Reference to the page of the annual report shall be made.
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ii. Information concerning disagreements with accountants on accounting and financial disclosure required by Part III(B) of “Annex C”;
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iii. A management’s discussion and analysis or plan of operation required by Part III(A) of “Annex C”;
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iv. A brief description of the general nature and scope of the business of the registrant and its subsidiaries;
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v. Identity of each of the registrant's directors and executive officers including their principal occupation or employment, name and principal business of any organization by which such persons are employed;
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vi. The market price of and dividends on the registrant’s common shares required by Part II (A) of “Annex C”;
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vii. Discussion on compliance with leading practices on corporate governance as required by Part V of Annex “C”; and
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viii. An undertaking in bold face prominent type to provide without charge to each person solicited, on the written request of any such person, a copy of the registrant's annual report on SEC Form 17-A and the name and address of the person to whom such a written request is to be directed. At the discretion of management, a charge may be made for exhibits, provided such charge is limited to reasonable expenses incurred by the registrant in furnishing such exhibits.
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C. In case of a special meeting where the registrant has already distributed to its stockholders its annual report on SEC Form 17-A for the fiscal year preceding its annual stockholders’ meeting date, it shall no longer be required to comply with paragraph (A) above except with respect to the disclosure of updated financial and non-financial information.
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D. Copies of the management report for distribution to security holders shall be filed with the Commission prior to the date on which such report shall be first sent or given to security holders.
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E. The distribution of management report to security holders is deemed to satisfy Section 75 of the Corporation Code of the Philippines with respect to presenting a financial report of operations including financial statements to stockholders at their regular meeting.
A. The form of proxy shall:6. Obligations of Registrant to Provide a List of, or Mail Meeting Material/s to Security Holdersi. indicate in bold-face type on whose behalf the solicitation is made;B. Means shall be provided in the proxy form whereby the person solicited is afforded an opportunity to specify by boxes a choice between approval or disapproval of, or abstention with respect to, each separate matter referred to therein as intended to be acted upon, other than election to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not specified by the security holder provided that the form of proxy states in bold-face type how it is intended to vote the shares represented by the proxy in each such case.
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ii. provide a specifically designated blank space for dating the proxy card;
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iii. identify clearly and impartially each separate matter intended to be acted upon;
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iv. be in writing, signed by the stockholder or his duly authorized representative; and
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v. be filed with the Corporate Secretary before the scheduled meeting.
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C. A proxy form which provides for the election of directors shall set forth the names of persons nominated for election as directors. Such form of proxy shall clearly provide any of the following means for security holders to withhold authority to vote for each nominee:i. a box opposite the name of each nominee which may be marked to indicate that authority to vote for such nominee is withheld;D. Any proxy form which is executed by the security holder in such manner as not to withhold authority to vote for the election of any nominee shall be deemed to grant such authority, provided that the proxy form so states in prominent bold-face type.
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ii. an instruction in bold-face type which indicates that the security holder may withhold authority to vote for any nominee by lining through or otherwise striking out the name of the nominee; or
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iii. designated blank spaces in which the shareholder may enter the names of nominees with respect to whom the shareholder chooses to withhold authority to vote.
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E. A proxy may confer discretionary authority to vote with respect to any of the following:i. Matters that are to be presented at the meeting but which, at a reasonable time before the solicitation, are not known to the persons making the solicitation; provided, however, that a specific statement to that effect is made in the information statement or proxy form;F. No proxy shall confer authority:
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ii. Approval of the minutes of the prior meeting;
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iii. The election of any person to any office for which a bona fide nominee is named in the information statement and such nominee is unable to serve or for good cause will not serve; or
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iv. Matters incident to the conduct of the meeting.i. to vote for any person to any office for which a bona fide nominee is not named in the information statement or in any material attached thereto;G. The proxy form shall provide, subject to reasonable specified conditions, that the shares represented by the proxy will be voted and that, where the person solicited specifies by means of a ballot provided pursuant to this Rule a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the specifications so made.
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ii. to vote with respect to more than one meeting (and any adjournment thereof), unless a specific statement is made in the information statement and form of proxy that the proxy is valid for more than one meeting. Provided, however, that no proxy shall be valid and effective for a period longer than five (5) years from the date of the proxy; or
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iii. to consent to or authorize any action other than the action proposed to be taken in the information statement or matters referred to above.
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H. Prohibition of Certain SolicitationsNo person making a solicitation which is subject to this Rule shall solicit:i. any undated or post-dated proxy; or
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ii. any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the security holder.
A. When a record or beneficial holder of securities of the class entitled to vote at the meeting makes a written request to be provided with a list of stockholders or to mail the meeting material, the registrant shall grant the request either by providing the list or mailing the materials to the requesting stockholder.7. Providing Copies of Material for Certain Beneficial Owners
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B. If the registrant elects to mail the materials for the requesting stockholder, the registrant shall:i. advise the requesting stockholder promptly of the number of record holders and beneficial holders to whom the materials will be sent;
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ii. advise the requesting stockholder of the estimated cost of mailing an information statement, form of proxy or other forms of communication to such holders; and
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iii. mail the materials to the stockholders with reasonable promptness.
A. If the registrant or the solicitor knows that securities of any class entitled to vote at a meeting with respect to which the SEC Form 20-IS being furnished are held of record by a broker, dealer, investment house, voting trustee, bank, association, or other entity that exercises fiduciary powers in nominee name or otherwise, the registrant or the solicitor shall by first class mail or other equally prompt means, inquire of such record holders at least twenty (20) business days prior to the record date of the meeting:8. Special Provisions Applicable to Solicitation of Votes Other Than by the Registranti. whether other persons are the beneficial owners of such securities and if so, the number of copies of the information statement necessary to supply such material to such beneficial owners; andB. The registrant or the solicitor shall supply, in a timely manner, each record holder of whom the inquiries required by paragraph 7(A) of this Rule are made with copies of the information statement and/or the management report to security holders in such quantities, assembled in such form and at such place(s), as the record holder may reasonably request in order to send such material to each beneficial owner of securities who is to be furnished with such material by the record holder.
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ii. in the case of an annual (or special meeting in lieu of the annual) meeting at which directors are to be elected, the number of copies of the management report to security holders necessary to supply such report to beneficial owners to whom such reports are to be distributed by such record holder.
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C. Upon the request of any record holder that is supplied with the information statement and/or annual reports to security holders pursuant to paragraph 7(A) of this Rule, the registrant shall reimburse the record holder for its reasonable expenses for completing the mailing of such material to beneficial owners.
A. This paragraph applies to any solicitation by any person or group of persons other than by the registrant, with respect to any item/s to be taken up in an annual or special stockholders’ meeting.9. False or Misleading Statements
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B. Notwithstanding the provisions of paragraph 3 of this Rule, a solicitation subject to this Rule may be made without furnishing the security holders with a written information statement on SEC Form 20-IS, provided that:i. The following information shall be set forth in the communication which shall be attached and distributed with the proxy form prepared in accordance with paragraph (5) of this Rule:C. Copies of the proxy form with its attachments shall be filed with the Commission at least fifteen (15) business days prior to the date such materials shall be distributed, sent or given to any security holder. The solicitor shall contact the Commission for any comment on the said materials before said distribution.a. The name of the solicitor and person who shall shoulder the expenses, and the mode of solicitation;ii. All matters to be taken up in the meeting shall be considered and reflected in the proxy form and its attachments.
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b. In case of election of directors, the name/s of nominee/s including his business experience for the past five (5) years, involvement in legal proceedings, family relationship with any other nominee, incumbent director or officer, and his interest, direct or indirect, by security holdings or otherwise;
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c. A discussion of the reason/s for the solicitation of votes against the proposed action/s by the registrant;
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d. A brief description of any substantial interest, direct or indirect, by security holdings or otherwise, of each solicitor or participant to the solicitation, in any matter to be acted upon at the meeting and include with respect to each solicitor the following information, or a fair and accurate summary thereof:1. Name and business address of the solicitor;e. If specially engaged employees, representatives or other persons have been or are to be employed to solicit security holders, the (1) material features of any contract or arrangement for such solicitation and the identity of the parties, (2) cost or anticipated cost thereof, and (3) approximate number of such employees or employees of any other person (naming such other person) who will solicit security holders; and
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2. Present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on;
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3. Amount of each class of securities of the registrant which the solicitor owns beneficially, directly or indirectly;
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4. Amount of each class of securities of the registrant which the solicitor owns of record but not beneficially;
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5. All securities of the registrant purchased or sold by the solicitor within the past two years, the dates on which they were purchased or sold and the amount purchased or sold on each date;
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6. If the solicitor is, or was within the past year, a party to any contract, arrangement or understanding with any person with respect to any security of the registrant, including, but not limited to joint ventures, loan or option arrangements, puts or calls, guarantees against loss or guarantees of profit, division of losses or profits, or the giving or withholding of proxies. If so, name the parties to such contracts, arrangements or understandings and give the details thereof; and
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7. Amount of each class of securities of any parent or subsidiary of the registrant which the solicitor owns beneficially, directly or indirectly.
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f. The total amount estimated to be spent and the total expenditures in furtherance of, or in connection with the solicitation of security holders.
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D. A filing fee of Two Thousand Pesos (P2,000.00) or such amount as the Commission may determine, for each proxy solicitation other than by the registrant, shall be paid to the Commission.
a. No information subject to this Rule shall be made containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.10. Obligation of Registrants in Communicating with Beneficial Owners
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b. The fact that a statement or other material has been filed with or examined by the Commission shall not be deemed a finding by the Commission that such material is accurate or complete or not false or misleading, or that the Commission has passed upon the merits of or approved any statement contained therein or any matter to be acted upon by security holders. No representation contrary to the foregoing shall be made.
a. If the registrant knows that securities of any class entitled to vote at a meeting with respect to which the registrant intends to solicit proxies, consents or authorizations are held of record by a broker, dealer, investment house, voting trustee, bank, association, or other entity that exercises fiduciary powers in nominee name or otherwise, the registrant shall by first class mail or other equally prompt means, inquire of such record holders at least twenty (20) business days prior to the record date of the meeting:11. Other Procedural Requirementsi. whether other persons are the beneficial owners of such securities and if so, the number of copies of the proxy and other soliciting material necessary to supply such material to such beneficial owners; andb. The registrant shall supply, in a timely manner, each record holder of whom the inquiries required by this paragraph 10(a) are made with copies of the information statement, proxy form (if applicable), other proxy soliciting material, and/or the management report to security holders, in such quantities, assembled in such form and at such place(s), as the record holder may reasonably request in order to send such material to each beneficial owner of securities who is to be furnished with such material by the record holder.
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ii. in the case of an annual (or special meeting in lieu of the annual) meeting at which directors are to be elected, the number of copies of the management report to security holders necessary to supply such report to beneficial owners to whom such reports are to be distributed by such record holder.
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c. Upon the request of any record holder that is supplied with the said documents pursuant to this paragraph 10(b), the registrant shall reimburse the record holder for its reasonable expenses in completing the mailing of such material to beneficial owners.
a. Annual Meetingi. Regular meeting of stockholders for the election of Directors and Officers of the corporation shall be held annually on the date fixed in the by-laws, or if not so fixed, on any date in April as determined by the Board of Directors. If the date of the annual meeting falls on a legal holiday, the annual meeting shall be held in the next succeeding business day which is not a legal holiday.b. Proxy
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ii. The annual stockholders’ meeting shall be held in the city or municipality where the principal office of the corporation is located, and if practicable in the principal office of the corporation. Metro Manila shall, for purposes of said meeting, be considered a city or municipality.
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iii. Written notice, stating the date, time and place of the annual meeting shall be sent to all stockholders of record at least two (2) weeks prior to the scheduled annual stockholders’ meeting, unless a different period is required by the bylaws. The distribution to stockholders of information statement (SEC Form 20-IS) within the prescribed period under this Rule shall be sufficient compliance with the notice requirement.
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iv. If for any justifiable and valid reason, the annual stockholders’ meeting has to be postponed, the corporation shall notify the Commission in writing of such postponement within ten (10) days from the date of such postponement.
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v. No postponement of annual stockholders’ meeting shall be allowed except for justifiable reasons to be stated in writing signed under oath by the President or Secretary of the corporation.
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vi. The Commission en-banc may, motu propio, or upon the written request of any stockholder, direct the calling of an annual stockholders’ meeting under its supervision, if the corporation fails or refuses to call said meeting for any justifiable reason.
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vii. The Commission may send its representatives/observers to stockholders’ meetings, under such terms and conditions it deems appropriate.
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viii. Unless otherwise provided by the by-laws, the stock and transfer book shall be closed at least twenty (20) days before the scheduled date of the annual stockholders’ meeting to enable the corporation to prepare a list of stockholders entitled to vote.
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ix. A copy of the list of stockholders entitled to vote shall be made available at the company’s principal office at least fifteen (15) days prior to the date of the annual stockholders’ meeting and the corporation shall furnish a copy thereof to any stockholder who may request the same at the expense of said stockholder.i. The corporate by-laws shall be controlling in determining the proper procedure to be followed in the execution and acceptance of proxies, provided that the minimum required formalities prescribed under Section 58 of the Corporation Code and SRC Rule 20 shall be complied with.
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ii. The notice of stockholders’ meeting shall also set the date, time and place of the validation of proxies, which in no case shall be less than five (5) days prior to the annual stockholders’ meeting to be held. The presence of any stockholder who may wish to be present in person or through counsel shall be allowed.
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iii. Failure to affix documentary stamps shall not affect the validity of the proxy. The only adverse effect of such failure is that the same cannot be recorded as a public document and cannot be admitted or used as evidence in Court until the required documentary stamp is affixed and cancelled.
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iv. Unless required by the corporate by-laws, a proxy need not be notarized.
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v. If the name of the proxy is left in blank, the person to whom it is given or the issuer corporation receiving the proxy is at liberty to fill in any name he/it chooses.
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vi. If a duly accomplished and executed proxy is undated, the postmark or, if not mailed, its actual date of presentation shall be considered.
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vii. A proxy executed by a corporation shall be in the form of a board resolution duly certified by the Corporate Secretary or in a proxy form executed by a duly authorized corporate officer accompanied by a Corporate Secretary's certificate quoting the board resolution authorizing the said corporate officer to execute the said proxy.
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viii. If the by-laws provide for a cut-off date for the submission of proxies the same should be strictly followed. In the absence of a provision in the by-laws fixing a deadline, proxies shall be submitted not later than ten (10) days prior to the date of the stockholders meeting.
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ix. Where the corporation receives more than one (1) proxy from the same stockholder and they are all undated, the postmark dates shall be considered. If the proxies are mailed on the same date, the one bearing the latest time of day of postmark is counted. If the proxies are not mailed, then the time of their actual presentation is considered. That which is presented last will be recognized.
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x. Where a proxy is given to two (2) or more persons in the alternative in one instrument, the proxy designated as an alternate can only act as proxy in the event of non-attendance of the other designated person.
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xi. Where the same stockholder gives two (2) or more proxies, the latest one given is to be deemed to revoke all former proxies.
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xii. A proxy shall be valid only for the meeting for which it is intended.
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xiii. Executors, administrators, receivers and other legal representatives duly appointed by the court may attend and vote on behalf of the stockholders without a need of any written proxy.
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xiv. If the stockholder intends to designate several proxies, the number of shares of stock to be represented by each proxy shall be specifically indicated in the proxy form. If some of the proxy forms do not indicate the number of shares, the total shareholdings of the stockholder shall be tallied and the balance thereof, if any, shall be allotted to the holder of the proxy form without the number of shares. If all are in blank, the stocks shall be distributed equally among the proxies. The number of persons to be designated as proxies may be limited by the By-laws.
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xv. In case of shares of stock owned jointly by two (2) or more persons, the consent of all co-owners shall be necessary to appoint or revoke a proxy.
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xvi. For persons owning shares in an "and/or" capacity, any one of them may appoint and revoke a proxy.
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xvii. Proxies executed abroad shall be duly authenticated by the Philippine Embassy or Consular Office.
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xviii. No member of the Stock Exchange and no broker/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. The proxy executed by the broker shall be accompanied by a certification under oath stating that before the proxy was given to the broker, he had duly obtained the written consent of the persons in whose account the shares are held.
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xix. A proxy shall not be invalidated on the ground that the stockholder who executed the same has no signature card on file with the Corporate Secretary or Transfer Agent, unless it can be shown that he/she had refused to submit the signature card despite written demand to that effect duly received by the said stockholder at least ten (10) days before the annual stockholders’ meeting and election.
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xx. There shall be a presumption of regularity in the execution of proxies and shall be accepted if they have the appearance of prima facie authenticity in the absence of a timely and valid challenge.
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xxi. In the validation of proxies, a special committee of inspectors shall be designated or appointed by the Board of Directors which shall be empowered to pass on the validity of proxies. Any dispute that may arise pertaining thereto, shall be resolved by the Securities and Exchange Commission upon formal complaint filed by the aggrieved party, or by the SEC officer supervising the proxy validation process.
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xxii. All issues relative to proxies including their validation shall be resolved prior to the canvassing of votes for purposes of determining a quorum.
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xxiii. All shares which are subject of a case where ownership is at issue, shall be set aside for purposes of proxy validation unless there is a court appointed representative who shall then vote on said shares.
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xxiv. Any violation of this Rule on Proxy shall be subject to the administrative sanctions provided for under Section 144 of the Corporation Code and Section 54 of the Securities Regulation Code, and shall render the proceedings null and void.
A. within ten (10) days after the effective date of the registration statement for that security, or within ten (10) days after he becomes such beneficial owner, director or officer, subsequent to the effective date of the registration statement, whichever is earlier, file a statement with the Commission, and with an Exchange if the security is listed on that Exchange, on Form 23-A indicating the amount of all securities of such issuer of which he is the beneficial owner;2. In determining, whether a person is the beneficial owner, directly or indirectly, of more than ten percent (10%) of any class of any registered security, such class shall be deemed to consist of the amount of such class which has been issued, regardless of whether any part of such amount is held by or for the account of the issuer; except that for the purpose of determining the percentage of ownership of voting trust certificate or certificates of deposit for securities, the class of voting trust certificate or certificates of deposit shall be deemed to consist of the entire amount of voting trust certificates or certificates of deposit issuable in respect of the class of securities which may be deposited under the voting trust agreement or deposit agreement in question, whether or not all of such class has been so deposited.
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B. within ten (10) days after the close of each calendar month thereafter, if there has been any change in such ownership during the month, file a statement with the Commission, and with an Exchange if the security is listed on that Exchange, on Form 23-B indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during that calendar month;
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C. notify the Commission if his direct or indirect beneficial ownership of securities falls below ten percent (10%), or if he ceases to be an officer or director of the issuer. After filing such notification, he shall no longer be required to file Form 23-B; and
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D. Newly appointed officer who has no beneficial ownership over the shares of the company shall notify the Commission of such fact within the above-stated reporting period, otherwise, the obligation to file SEC Form 23-A shall accrue against him.
i. Whether the order or execution of the order, would materially alter the market for, and/or the price of, the securities;4. Set forth below are examples of prohibited conduct.
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ii. The time the order is entered or any instructions concerning the time of entry of the order;
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iii. Whether the person on whose behalf the order is placed, or another person who the Broker Dealer knows to be a related party of that person, may have an interest in creating a false or misleading appearance of active trading in any security or with respect to the market for, or the price of, any security;
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iv. Whether the order is accompanied by settlement, delivery or security arrangements which are unusual;
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v. Whether the order appears to be part of a series of orders, which when put together with the orders which appear to make up the series, the order or the series is unusual having regard to the matters referred to in this paragraph 3; and
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vi. Whether there appears to be a legitimate commercial reason or basis in placing the order, unrelated to an intention to create a false or misleading appearance of active trading in or with respect to the market for, or price of, any security.
Failure to consider these factors shall raise a presumption that the transaction/s is/are manipulative.
i. Engaging in a series of transactions in securities that are reported publicly to give the impression of activity or price movement in a security (e.g. painting the tape);5. Obligations imposed on registered persons under this rule apply in respect of all orders, irrespective of the trading system used and whether executed or not.
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ii. Buying and selling securities at the close of the market in an effort to alter the closing price of the security (marking the close);
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iii. Engaging in transactions where both the buy and sell orders are entered at the same time with the same price and quantity by different but colluding parties (improper matched orders);
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iv. Engaging in buying activity at increasingly higher prices and then selling securities in the market at the higher prices (hype and dump) or vice versa (i.e. selling activity at lower prices and then buying at such lower prices);
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v. Engaging in transactions in which there is no genuine change in actual ownership of a security (wash sales) taking into consideration internal control systems adopted by the firms to prevent manipulative practices;
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vi. Taking advantage of a shortage of securities in the market by controlling the demand side and exploiting market congestion during such shortages in a way as to create artificial prices (squeezing the float);
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vii. Disseminating false or misleading market information through media, including the internet, or any other means to move the price of a security in a direction that is favorable to a position held or a transaction; and
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viii. Other types of prohibited conduct and/or manipulative practices which include, among others, the creation of temporary funds for the purpose of engaging in other manipulative practices.
A. All communications by Broker Dealers or associated persons or salesmen of Broker Dealers (hereinafter “registered persons”), with the public shall be based on principles of fair dealing and good faith and should provide a sound basis for evaluating the facts in regard to any particular security or securities or type of security, industry discussed, or service offered. No material fact or qualification shall be omitted if the omission, in the light of the context of the material presented, would cause the advertising or sales literature to be misleading.2. Publication of Transactions and Quotations
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B. Exaggerated, unwarranted or misleading statements or claims are prohibited in all public communications of registered persons. In preparing such literature, it must be borne in mind by registered persons that inherent in investment are the risks of fluctuating prices and the uncertainty of dividends, rates of return and yield, and no registered person shall, directly or indirectly, publish, circulate or distribute any public communication that he knows, or had reason to know, contains any untrue statement of a material fact or is otherwise false or misleading
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C. Communications with the public shall not contain promises of specific results, exaggerated or unwarranted claims, or unwarranted superlatives, unfounded opinions for which there is no basis, or forecasts of future events which are unwarranted, or which are not clearly labeled as forecasts.
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D. In judging whether a communication or a particular element of a communication may be misleading, several factors should be considered, including but not limited to:i. the overall context in which the statement/s is/are made. A statement made in one context may be misleading even though such a statement could be perfectly appropriate in another context. An essential test in this regard is the balance of treatment of risks and potential benefits;
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ii. the audience to which the communication is directed. Different levels of explanation or detail may be necessary depending on the audience to which a communication is directed and the ability of the registered person given the nature of the media used, to restrict the audience appropriately. If the statements made in a communication would be applicable only to a limited audience, or if additional information might be necessary for other audiences, it should be kept in mind that it is not always possible to restrict the readership of a particular communication; and/or
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iii. the clarity of the communication. A statement or disclosure made in an unclear manner can result in a failure to understand the statement, or in a serious misunderstanding. A complex or overly technical explanation may worse cause even greater misunderstanding than too scant information. Likewise material disclosure relegated to legends or footnotes may not generally enhance the reader's understanding of the communication.
No Broker Dealer, or associated person or salesman of a Broker Dealer, shall publish or circulate, or cause to be published or circulated, any notice, circular, advertisement, newspaper article, investment service, or communication of any kind that purports to report any transaction as a purchase or sale of any security unless he believes that such transaction was a bona fide purchase or sale of such security; or that it purports to quote the bid price or asked price for any security, unless he believes that such quotation represents a bona fide bid for, or offer of, such security.3. Payment to Influence Market Prices
No Broker Dealer shall, directly or indirectly, give, permit to be given, or offer to give, anything of value to any person for the purpose of influencing or rewarding the action of such person in connection with the publication or circulation in any newspaper, investment service, or similar publication, of any matter which has, or is intended to have, an effect upon the market price of any security, provided that this rule shall not be construed to apply to a matter which is clearly identifiable as paid advertising.
The term “short sale” shall mean any sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of the seller. A person shall be deemed to own a security if: (1) he or his agent has title to it; (2) he has purchased, or has entered into an unconditional contract, binding on both parties thereto, to purchase it and has not yet received it; (3) he owns a security convertible into or exchangeable for it and has tendered such security for conversion or exchange; (4) he has an option to purchase or acquire it and has exercised such option; or (5) he has rights or warrants to subscribe to it and has exercised such rights or warrants provided, however, that a person shall be deemed to own securities only to the extent he has a net long position in such securities.2. Determination of Good Delivery
No broker or dealer shall accept a long sale order from a customer unless he has made a determination that the customer owns the security and will deliver in good deliverable form within three (3) business days of the execution of the order. The determination must include a notation on the order ticket at the time the order is taken which reflects the conversation with the customer as to the present location of the securities, whether they are in good deliverable form, and the customer’s ability to make delivery.3. Execution of Short Sale
No broker or dealer shall use any facility of a securities exchange to effect a short sale of any security unless (1) at a price higher than the last sale or (2) at the price of the sale if and only if that price is above the next preceding different sale price on such day.4. Failure to Deliver
No person shall, directly or indirectly, by the use of any facility of a securities exchange, effect a short sale in a security registered or listed on any securities exchange, where the seller does not intend to make delivery of the securities within the period specified in the contract. Failure on the part of the seller to make delivery on such date will be taken by the Commission as prima facie evidence of the lack of intention on his part to make such delivery.5. Mandatory Close-Out
A contract involving a short sale which has not resulted in a delivery by the Broker Dealer within the settlement period must be closed by the Broker Dealer by purchasing for cash or guaranteed delivery securities of like kind and quantity on the next business day after settlement date, unless such purchase cannot be effected within said period for justifiable reasons in which case, notification in writing shall be made with the Exchange and the Commission6. Directors, Officers or Principal Stockholders
No director, officer or principal stockholder of a corporation shall make a short sale in securities of the corporation in which he is a director, officer or principal stockholder.7. Order for Short Sale
Upon receiving an order to sell short, the same should be indicated on the selling order and throughout all the records pertinent to the sale. Prior to acceptance of any short sale order, the broker or dealer shall arrange to borrow the securities to make delivery by settlement date.8. Exempt Transaction
This rule notwithstanding, the Exchange may prohibit short selling in the Exchange indefinitely or for such period of time as it may deem necessary or advisable for the protection of investors, and the Commission may also prohibit short selling on any exchange as an emergency measure or whenever the same is necessary or appropriate in the public interest or for the protection of investors.
No Broker Dealer or salesman shall guarantee a customer against loss in any securities account of such customer carried by the Broker Dealer or in any securities transaction effected by the Broker Dealer with or for the customer.
A Broker Dealer, associated person or salesman of a Broker Dealer, a paying agent, transfer agent, trustee, or any other person acting in a similar fiduciary capacity, who has received information as to the ownership of securities, shall not make use of such information for the purpose of soliciting or making purchases, sales or exchanges of securities or, except as provided in SRC Rule 30.2, paragraph 9, provide such information to any person who does not need such information to fulfill his responsibilities under the Code.2. Prohibited Representations
It shall be unlawful for any:A. Person to represent that he has been registered as a securities intermediary with the Commission unless such person is registered under the Code. Registration under the Corporation Code shall not be deemed to be registration under the Code;
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B. Broker Dealer to represent that the registration of the Broker Dealer under the Code, or the failure of the Commission to deny, suspend, or revoke such registration, indicates in any way that the Commission has passed upon or approved the financial standing, business, or conduct of such Broker Dealer, or the merits of any security or any transaction/s conducted thereby;
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C. Person to represent that a security is a particular type of security when such representation is inconsistent with a stated definition under the Code or rules or regulations adopted thereunder, or internationally accepted practice.
D. Person to represent that a security to be sold, transferred, pledged, mortgaged, encumbered, used for delivery, or any other purpose to another entity or itself has been legally authorized by the recorded owner when such representation is not true and documented in writing at the time and date it was used.
A. A person applying for registration as a Broker Dealer under Section 28 shall indicate in the application form for registration, or in an amendment thereto:B. “Market making transactions” shall mean transactions in a particular security/ies:i. Whether he is an Exchange Trading Participant or a Non-Exchange Broker Dealer
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ii. If an Exchange Trading Participant, whether it is a clearing trading participant or a non-clearing trading participant;
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iii. If an Exchange Trading Participant, whether he shall engage in market making transactions;
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iv. If a non-Exchange Broker Dealer, whether he is operating a seat for or is using the trading rights of an Exchange member Trading Participant;
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v. For both non-Exchange member Broker Dealer and Exchange Trading Participant, whether they shall deal only with proprietary shares, equity securities, or fixed income/debt securities, or they are registered/licensed as government securities eligible dealers (GSED).
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For purposes of this section and subsequent provisions that refer to this classification, the following terms are used interchangeably and shall have the same meaning: (1) “Exchange member” with that of “Exchange Trading Participant;” and (2) “Non-Exchange Member” with that of “Non-Exchange Broker Dealer.”
i. by a Broker Dealer which complies with the Commission and Exchange rules regarding its duty as a market maker;C. An applicant for registration as a Broker Dealer shall be solely engaged in the business of a Broker Dealer.
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ii. to ensure two way quotes, provide liquidity, and maintain a fair and orderly trading market therein.
i. A continuing authorization for the Commission’s duly authorized representative to verify the applicant’s bank accounts. The authorization shall be for all banks wherein accounts are maintained by the Broker Dealer and shall be continuous with registration by the Commission;E. Terms and Conditions for registration and subsequent renewal of license
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ii. Proof of compliance with paid up capital requirements pursuant to Paragraph 1 (E) (v) of this rule;
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iii. Certified True Copy of valid work permit of foreigners who are employees or officers of the applicant corporation duly issued by the Department of Labor and Employment (DOLE) or any appropriate agency;
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iv. Copies of identity cards/passports of the following:1. Individual applicants (salesman/ associated person);v. Written supervision and control procedures, including procedures for establishing and maintaining a “Chinese Wall” pursuant to SRC 34.1, paragraph 2; taking into consideration the applicable requirements under the Anti-Money Laundering Act of 2001 (RA 9160, as amended) and the Code of Corporate Governance (SEC Memorandum Circular No. 2, Series of 2002);
2. Officers;
3. Directors; and
4. Persons who control more than ten percent (10%) of a class of voting securities of corporate applicants.
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vi. A schedule of minimum commission charges as required by SRC Rule 30.2, paragraph 5;
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vii. Calculation of net capital requirements in accordance with paragraph (E) (ii) of this Rule and SRC Rule 49.1,paragraph 1 or any other financial ratio/measure which the Commission may in the future mandate;
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viii. Certified True Copy of educational, professional/technical or other academic qualifications of Officers, Associated Persons and Salesmen;
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ix. Latest audited financial statement;
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x. Where applicant has been in existence for more than one year, certified copies of income tax returns for the two years preceding date of application;
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xi. Organization chart, including branch offices;
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xii. If the applicant is a corporation, a certified copy of the following documents under oath, by the corporate secretary:1. With respect to a foreign corporation, certificate that the board of directors has authorized, in a resolution, the President and Secretary to sign an irrevocable consent to service of process upon the Commission as service to the corporation;xiii. Business plan regarding proposed and/or current operations, including projected volume of business. Such plan should reflect applicant’s ability and plans to engage in a profitable level of business; and
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2. Articles of Incorporation indicating that the purpose of the applicant is to engage in the business of a Broker Dealer;
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3. Board resolution attesting to particulars contained in the application.
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xiv. A yearly schedule/timetable on the implementation of the training program for the staff, which specifies, among others, the description of the training program, date of implementation and name of participants.
(1) Applicable to Exchange Trading ParticipantsF. Every registered broker dealer shall apply for issuance of an annual license in November of each year. Upon filing and payment of the required annual fee, the Commission will issue a new license which shall be effective for one (1) year provided, however, that the applicant is cleared by the Commission and/or the SRO of all derogatory reports and cases. The filing and payment of the required annual fee after the prescribed period will be treated as a new application and the applicant shall be charged the filing fee of a new registrant.i. Membership in good standing in an Exchange; provided, however that any applicant who is not a member of an Exchange may only be granted registration conditioned upon future membership in an Exchange;(2) Applicable to both Exchange Trading Participants and Non-Exchange Broker Dealers
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ii. Membership or participation in a Trust Fund accredited by the Commission under SRC Rule 36.4 5 (a);
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iii. Where the Broker Dealer is a participant in a registered clearing agency, fulfillment of its obligation to contribute to the guarantee fund;iv. Net Capital in the amount of Five Million Pesos or five percent (5%) of aggregate indebtedness whichever is higher, calculated in accordance with SRC Rule 49.1, paragraph 1 for firms falling under paragraphs (v) (a) and (b) below; or the Net capital in the amount of Two Million Five Hundred Thousand (P2.5 Million) or two and one-half percent (2.5%) of his aggregate indebtedness whichever is higher for firms falling under paragraph (v) (c); provided, however, that the Commission may set a different requirement for those firms authorized to use the Risk-based capital adequacy model.
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“Risk Based Capital Adequacy Requirement/Ratio shall refer to the minimum levels of capital that has to be maintained by firms which are licensed, or securing a Broker Dealer license, taking into consideration the firm size, complexity and business risk. Such risks that are considered in determining the capital requirement include, among others, Operational, Position, Counterparty, Large Exposure, Underwriting, and Margin Financing Risks.”
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v. a. Unimpaired paid up capital of One Hundred (100) million pesos for the following types of Broker Dealers:vi. Registration of each branch office;(1) First time registrants who will be participating in a registered clearing agency upon the effectivity of the Code;b. Other existing Broker Dealer applicants not meeting the One Hundred Million (P100,000,000.00) capitalization and not seeking authorization to engage in market making transactions shall maintain a Ten Million Pesos (P10,000,000.00) unimpaired paid up capital and file the required surety bond in lieu of the 100 Million pesos as prescribed under SRC Rule 28.1 (5).
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(2) Those acquiring the business of existing Broker Dealer firms pursuant to SRC Rule 28.1, paragraph 2 and will be participating in a registered clearing agency;
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Provided, however, that the Commission may authorize a lower capitalization for applicants not participating in a registered clearing agency.
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c. Unimpaired paid up capital of Two Million Five Hundred Thousand Pesos (P2,500,000.00) for applicants dealing purely in proprietary shares and who are not holding securities.
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vii. At least one trained and registered salesman at each registered branch office. All salesmen of the applicant shall apply for registration as a salesman under SRC Rule 28.1, paragraph 4;
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viii. At least one registered Associated Person. Any person with supervisory responsibility for the applicant shall apply for registration as an Associated Person under SRC Rule 28.1, paragraph 4;
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ix. A sufficient number of back office staff at the main office of the applicant;
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x. A computerized and effective recording and accounting system;
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xi. Separate bank accounts for client funds;
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xii. Separate bank account for firm funds;
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xiii. Reporting, using SEC Form 28-BDA of changes in the information provided in the application form to the Commission in writing within seven (7) days of such changes;
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xiv. Compliance with the provisions of the Code of Corporate Governance and Anti Money Laundering Act;
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xv. Filing of reports required under the rules and regulations, including but not limited to the filing of the Manuals on Good Governance and Anti- Money Laundering; and
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xvi. A certificate of Membership in good standing from a duly-accredited or recognized broker/dealer association; and
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xvii. Such other requirements which the Commission may prescribe.
2. Registration of Successor to Broker Dealer4. Registration of Salesmen and Associated Persons of Broker DealersA. In the event that a Broker Dealer succeeds to and continues the business of another Broker Dealer, the registration of the predecessor Broker Dealer shall be deemed to remain effective for a period of forty five (45) days from date of sale or succession as the registration of the successor if the successor within thirty (30) days after such succession, (i) files an application for registration on SEC Form 28-BD and the Commission, within an equivalent period, approves such registration; and simultaneously (ii) publishes a notice of such application in any newspaper of general circulation expenses of which shall be borne by the successor broker.3. Withdrawal of Business and/or Cancellation of Registration as Broker Dealer
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B. The following are examples of the types of reorganizations that require the successor of a Broker Dealer to file a new application:i. An entity purchases or assumes substantially all of the assets and liabilities of a Broker Dealer, and, after so doing, the said entity decides to operate the business of the Broker Dealer;C. Notwithstanding paragraph 2 (A) of this Rule, the successor may file an amendment to the registration of the predecessor Broker Dealer on SEC Form 28-BDA instead of an original application for registration, within thirty (30) days after the succession in the following instances:
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ii. If two or more registered Broker Dealers consolidate their firms and conduct their business through a new entity which assumes substantially all of the assets and liabilities of the predecessor broker dealer the new entity shall file a complete application on SEC Form 28-BD, while the predecessor firms shall each be required to file a Request for Withdrawal of Business and/or Cancellation of Registration as Broker Dealer under SRC Rule 28.1, paragraph 3.
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iii. An entity invests in the Broker Dealer, such investment resulting in a change in the management and/or ownership control of the Broker Dealer.i. A corporate reorganization or restructuring that does not result in a change in control of the Broker Dealer.
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ii. A succession resulting from a change in the form of business, such as from a partnership to a corporation.A. The Request for Withdrawal of Business and/or Cancellation of Registration as a Broker Dealer shall be filed on SEC Form 28-BDW in accordance with the instructions contained therein.
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B. A request to withdraw business and/or cancel registration filed by a Broker Dealer shall become effective on the sixtieth (60th) day after the filing thereof with the Commission unless another date has been determined by the Commission for its effectivity. If the request to cancel registration is filed with the Commission at any time subsequent to the date of issuance of a Commission order instituting proceedings pursuant to Section 29 of the Code to suspend or revoke the registration of such Broker Dealer, or if, prior to the effective date of the cancellation of registration, the Commission institutes such proceeding(s) to impose terms and conditions for its cancellation, the request to withdraw business and/or cancel registration as broker dealer shall not become effective except at such time and upon such terms and conditions as the Commission deems necessary or appropriate in the public interest or for the protection of investors.
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C. Subsequent to filing of such Notice or Request to withdraw business and/or cancel registration, the Broker Dealer shall perform the following:i. The company will execute within five (5) days an affidavit under oath, undertaking to comply with the following conditions:1. The company will cease to solicit new business and that should the company remain inoperative for five (5) years, its Certificate of Incorporation will be revoked;ii. Following the submission of SEC Form 28 BDW Notice of Withdrawal from Registration, the company is given a maximum of 45 days to effect the transfer of its clients’ securities to the successor broker duly approved by the Exchange (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) or any broker chosen by the client. During such period the following requirements shall be complied with:
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2. The company will no longer execute orders from clients within five (5) days from actual cessation of operation;
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3. The terms and conditions of the Surety Bond shall remain effective until its expiration;
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4. There will be no disposal or transfer of clients’ securities to successor broker without the knowledge or instruction from the client;
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5. The company will continually inform the client of its corporate activities until the transfer to successor broker;
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6. The company will preserve for a period of not less than five (5) years from the date the Exchange and/or the Commission has approved its operation to cease, all records required to be maintained pursuant to the Books and Records Rule. The company shall inform the Exchange and the Commission of the names and residence addresses and contact numbers of at least two (2) person/s responsible for the safekeeping of all the records, reporting any change in the person/s responsible, if there is any. If money laundering, criminal or administrative cases have been filed in court or an investigation is being conducted wherein the customer is involved or impleaded as a party to the case or investigation, the file must be retained beyond the five (5) year period until it is confirmed that the case has been finally been resolved or terminated by the court;
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7. It shall be the responsibility of the Compliance Officer or Associated Person to oversee compliance with the requirements of the Commission and/or Exchange relative to the closure of its business;1. Submit to the Exchange (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) for its approval a draft letter informing the clients of the closure of business including the procedures that it will undertake to service the clients and the creditors;iii The Exchange (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer), if it deems necessary, will conduct a post audit of the company to ensure compliance with the aforementioned requirements after the end of the forty five (45) day period.
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2. Issue latest statement of accounts to individual clients to give them the opportunity to validate their stock positions with the company including their payables;
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3. Submit to the Exchange (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) a summary of clients’ account balances;
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4. Execute clients’ instructions on how to effect transfer/ liquidate their securities and cash positions;
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5. Provide the Exchange (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) with a status report of clients’ complaints with the corresponding action/s taken; and
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6. Submit to the Exchange (in the case of Exchange Trading Participants), copy furnished the Commission, or the Commission (in the case of Non-Exchange Broker Dealer) an undertaking to be accomplished by the persons responsible in the safekeeping of all the records of the company pursuant to AMLA and SRC’s IRR.
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iv. After effecting the transfer of clients’ securities to the successor broker duly approved by the Exchange (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) or any broker of their choice, the company is required to submit to the Commission the following documents:1. A list, executed under oath, of all transfers of customer accounts from the time notice of cessation of business or withdrawal of registration has been communicated to the Commission or the Exchange;v. Notwithstanding, the filing of the notice of cessation of operation with the Commission, the liabilities and obligations of the company to third parties shall continue until full compliance with and submission of the abovementioned conditions/requirements. Furthermore, the primary license of the company will be cancelled/revoked should it remain non-operational for five years pursuant to Section 22 of the Corporation Code.
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2. Certificate of Good Standing from the Commission;
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3. Clearance from the Exchange that the company has no outstanding liabilities to the Exchange;
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4. Clearance from the Exchange’s Compliance and Surveillance Group that the company can settle or has settled all of its trading related liabilities and obligations prior to the date of effectivity of the termination of operation;
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5. Clearance from the registered clearing agency that all obligations have been settled, delivered and/or securities intact and in good control location;
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6. Current original licenses of the Broker Dealer, salespersons and its associated person; and
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7. Filing of SEC Form 28 T for each of the company’s associated person/s and salesperson/s.
A. A person may not be employed as a salesman or associated person of a Broker Dealer unless registered as a salesman or associated person under this Rule. The Broker Dealer may be allowed to employ trainees for a one-time, non-extendible period of six (6) months provided however that:5. Broker Dealer Surety Bond and Self-Insurance Bondi. The trainees are supervised by a registered salesman;B. For purposes of this Rule:
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ii. The trainees are not soliciting clients or dealing directly with clients;
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iii. The trainees are not receiving any form of commission or salary from the Broker Dealer other than a reasonable allowance; and
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iv. The Broker Dealer immediately informs the Commission in writing of the hiring of such trainees.
The Commission shall consider the attendant conditions to warrant the determination of compliance with the above requirements.i. Salesman shall refer to a natural person hired to buy and sell securities on a salary or commission basis properly endorsed to the Commission by the employing Broker Dealer. It shall also include any employee of an issuer company whose compensation is determined directly or indirectly on sales of the issuer’s securities.C. Notice of discontinuation of employment of a salesman or associated person and the reasons therefore, shall be provided to the Commission by the employing Broker Dealer by filing SEC Form 28-T no later than thirty (30) days after the discontinuation of employment.
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ii. Associated person shall mean any person employed full time by the Broker Dealer whose responsibilities include internal control supervision of other employees, agents, salesmen, officers, directors, clerks and stockholders of such Broker Dealer for compliance with the Code and rules and regulations adopted thereunder. He cannot perform other duties without Commission approval and subject to the condition that the broker dealer will maintain the appropriate Chinese Wall between the functions of an Associated Person and that of his other duties.
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D. Every application for registration as a salesman or associated person shall be filed on SEC Form 28-S, or SEC 28-AP, respectively, verified under oath by the Broker Dealer who is the employer of the salesman or associated person, be accompanied by the prescribed fee and the following papers and documents:i. If an applicant is a foreigner, certified true copy of valid work permit duly issued by the Department of Labor and Employment (DOLE) or any appropriate agency;E. Terms and conditions for applicants for registration:
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ii. Copies of identity cards/passports of applicant;
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iii. Evidence, preferably a certified true copy, that such person has complied with applicable examination requirements and/or meets other educational, professional or technical qualifications; and
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iv. Written evidence that a Broker Dealer has agreed to employ such person contingent upon such person’s registration as a salesman or associated person.i. Only natural persons can apply and be employed by a Broker Dealer.F. The registration of a salesman or associated person shall cease when he is no longer employed by the Broker Dealer identified in his registration application.
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ii. Applicants for salesmen shall be at least eighteen (18) years of age and applicants for associated person shall be at least twenty one (21) years of age.
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iii. Applicants for registration as a salesman must have no disciplinary history that would subject them to disqualification from registration under Section 29 of the Code.
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iv. Applicants for registration as an associated person, must not have been censured or reprimanded by a professional (e.g. IBP, PRC, etc.), or regulatory body (e.g. SEC, BSP, IC, etc.) for negligence, incompetence or mismanagement, or dismissed or requested to resign from any position or office for negligence, incompetence or mismanagement, or be subject to any other disqualification under Section 29 of the Code.
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v. Any applicant applying for registration as a salesman or associated person for the first time, must have taken and passed the applicable examination within the last three (3) years immediately preceding the date of his application.
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vi. Any applicant applying for a license in the year subsequent to his original registration must have a minimum of three (3) years experience as a registered salesman or associated person or passed the applicable examination, within the last three (3) years immediately preceding the date of his application. Any applicant who has not been engaged as a salesman or associated person for a continuous period of at least three (3) years prior to the date of his application, shall not be allowed to renew his license until he has undergone training and a refresher course and passed the related examination; provided, further, that all applicants must be able to demonstrate an understanding of the Code and rules and regulations adopted thereunder, the particular Exchange and/or clearing agency rules that apply to the functions that they would perform, any obligations imposed by those provisions and rules, and the fiduciary obligations owed to clients and the general obligations owed to employers.
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G. Duties of an Associated person. Taken in conjunction with SRC Rule 30.2 (6), an Associated person shall:i. Have a general knowledge of the operations of the Broker Dealer without necessarily engaging or actively participating in the day-to-day operations of the firm;H. As a condition for continuing registration, registered salesmen and associated persons shall:
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ii. Supervise and provide trainings as prescribed under SRC Rule 30.2 (7) to other employees, agents, salesmen, officers, directors, clerks and stockholders of the Broker Dealer for compliance with the Code and rules and regulations adopted thereunder;
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iii. Oversee compliance with legislative and other regulatory requirements (such as notifying the Commission of material changes in information previously filed, maintaining registers, books of accounts and other records, compliance with rules, orders and laws relating to trading, issuing confirmation receipts, compliance with margin rules, net capital and other financial requirements);
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iv. Ensure that all salesmen of the Broker Dealer are registered and that the Commission is notified when any salesman is no longer employed by the Broker Dealer;
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v. Develop procedures and monitor on a daily basis compliance with financial resource requirements; and
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vi. Ensure that there is an audit trail which enables compliance with applicable laws, Exchange, clearing agency and other SRO rules.i. Report any change in the information provided in the application form to the Commission in writing within seven (7) days of such changes, using SEC Form 28AMD;I. Every registered salesman or associated person who shall change his registration category during the year (i.e., salesman to associated person and vice versa) shall be assessed the appropriate fee for the issuance of a new license.
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ii. Observe at all times the provisions of this Code, all rules and regulations adopted thereunder, and applicable Exchange, clearing agency and other SRO rules; and
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iii. Demonstrate an on-going understanding of applicable regulatory requirements and Exchange, clearing agency, and other SRO rules.
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J. Every registered salesman and associated person shall apply for issuance of annual license in November of each year. Upon filing and payment of the required annual fee, the Commission will issue a new license which shall be effective for one (1) year provided, however, that the applicant is cleared of all derogatory reports and cases by the Commission and/or any duly recognized professional or regulatory body or, in appropriate cases, the SRO,. The filing and payment of the required annual fee after the prescribed period will be treated as a new application and the applicant shall be charged the filing fee of a new registrant.
The amount of surety bonds required to be filed pursuant to SRC Rule 28.1, paragraph 1 by Broker Dealers who have elected to defer compliance with the One Hundred Million (P100,000,000.00) unimpaired paid up capital requirements pursuant to that Rule is fixed at not less than Five Million Pesos (P5, 000,000.00) for Brokers and not less than One Million Pesos (P1, 000,000.00) for Dealers, or such other amount which the Commission may prescribe. Such bonds shall be conditioned upon the faithful compliance with the provisions of the Code and rules and regulations adopted thereunder by said Broker Dealer and by all salesmen and Associated Persons while acting for him. Such bond shall be executed by a surety company authorized to do business in the Philippines. In lieu of such bond, the Broker Dealer may file bonds of the Government of the Philippines. If a bond is filed, any person damaged by the failure of such Broker Dealer or of any salesman or Associated Person while acting for him, to comply with the provisions of this Code and rules and regulations adopted thereunder shall be entitled to sue the sureties under such bond and to recover the damages so suffered thereunder. If other securities are filed in lieu thereof, such person may subject such securities to the payment of such damage.6. Any registered transfer agent existing prior to the effectivity of these Rules shall, within 45 days from effectivity of these Rules, comply with all the requirements provided under this Rule, which were not provided for in its original registration.
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With the adoption of the risk based capital adequacy model as required under SRC Rule 28.1, paragraph 1 (E) (v) (d), the Commission may prescribe Broker Dealers to file the required surety bonds pursuant to SRC Rule 28.1-1 paragraph 1(e) (v) (b).
Nothing in this Rule shall be construed as precluding the Commission from requiring an applicant for registration or a registered Broker Dealer, Salesman, Associated Person to submit other requirements it may deem reasonably necessary to effectively regulate and supervise these persons and/or to protect the interest of the investing public.
1. Where such Broker Dealer is a Member of an Exchange (or an Exchange Trading Participant), the Exchange shall immediately arrange for another Member (or Exchange Trading Participant) to take over any outstanding contracts relating to securities and simultaneously notify the Commission in writing of such transfer and the affected customers that said contracts have been transferred.
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2. Where such Broker Dealer is not a Member of an Exchange (or an Exchange Trading Participant), the Commission shall notify the affected customers, if any, of such suspension or revocation and require that they transfer their account to another Broker Dealer.
SRC
Rule 30.2 - Transactions and Responsibilities of Brokers and Dealers
[formerly,
SRC Rules 30.2-1, 2, 3, 4, 5, 6, 7, 8, and 9]
A. Every Broker Dealer, associated person and salesman of a Broker Dealer (hereinafter referred to as a “registered person”), in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.2. Confirmation of Customer Orders
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B. In considering whether a registered person is conducting his business in an ethical and fair manner, the Commission, in addition to requirements imposed under other SRC rules, will be guided by the following principles and requirements which incorporate International Organization of Securities Commission standards:i. Honesty and fairness - In conducting his business activities, a registered person should act honestly, fairly and in the best interest of his client and for the integrity of the market.C. This rule applies to all registered persons, although the Commission recognizes that certain requirements of the Code and rules adopted thereunder may not be within the control of an associated person. In considering the conduct of an associated person, the Commission will consider such person’s level of responsibility within the Broker Dealer firm, and the level of control or knowledge he may have considering any failure by his firm or persons under his supervision to follow the Code.
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Where a registered person advises or acts on behalf of a client, he shall ensure at all times that any representations or other communications made and information provided to the client are accurate and not misleading and do not violate SRC Rule 24.1 (d), paragraph 1.
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ii. Diligence - In conducting his business activities, a registered person should act with due skill, care and diligence, in the best interest of his clients and for the integrity of the market.a. A registered person shall take all reasonable steps to promptly execute client orders and in conformity with the instruction of the client.iii. Capabilities -A registered person should have and employ effectively the resources and procedures which are needed for the proper performance of his business activities.
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b. A registered person when acting for or with a client shall always execute client orders on the best available terms in compliance with SRC Rule 32.2 (a).
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c. A registered person shall ensure that transactions executed on behalf of clients are promptly and fairly allocated to the accounts of the clients on whose behalf the transactions were executed.
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d. When providing advice to a client, a registered person shall act diligently and ensure that his advice and recommendations in relation to clients are based on thorough analysis and take into account available alternatives.a. A registered person shall ensure at all times that any person he employs or appoints to conduct business for or with clients or other registered persons is qualified, including having relevant training or experience to act in the capacity so employed or appointed in compliance with SRC Rules 28.1, paragraph 4 and 28.2.iv. Information about clients
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b. A registered person shall ensure that at all times, pursuant to SRC Rule 30.2, paragraph 7, he has:(1) Adequate resources to diligently supervise and does diligently supervise his employees and all persons appointed by him to conduct business for or with clients or any other registered persons; and
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(2) Satisfactory internal control procedures and financial and operational capabilities which can be reasonably expected to protect his operations, his clients and other registered persons from financial loss arising from the theft, fraud and other dishonest acts, or professional misconduct or omissions of all company officers, employees and authorized representatives.a. A registered person should seek from his clients, information about their financial situation, investment experience and investment objectives relative to the services to be provided pursuant to SRC Rule 52.1, paragraph 6 and other applicable laws.v. Information for clients - A registered person shall make adequate disclosure of material information in his dealings with his clients.
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b. A registered person shall take all reasonable steps to establish the true and full identity of each of his clients, their financial situation, investment experience, and investment objectives.
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c. Having regard to information disclosed by a client and other circumstances relating to the client which the registered person is or should be aware of through the exercise of due diligence, the registered person shall ensure that such recommendation or solicitation for that client is reasonable and suitable in all circumstances pursuant to SRC Rule 30.2, paragraph 4.
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d. A registered person providing services to any client, in relation to derivatives, including options and warrants, or any leveraged transaction, shall assure himself that the client understands the nature and risks of these instruments and has sufficient net worth to be able to assume the risks and bear the potential losses of trading in such instruments.
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e. A registered person should be reasonably satisfied about the identity, address and contact details of the person ultimately responsible for originating the instruction in relation to a transaction, the person who stands to gain the commercial or economic benefit of the transaction and/or bears the commercial or economic risk; provided, however, that in relation to an investment company, or discretionary account, the person referred to above is the investment company or account, not those who hold a beneficial interest therein.
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f. A registered person shall keep in the Philippines a record of the details referred to above and provide the Commission with access to those records upon request pursuant to Section 52 of the Code and SRC Rule 52.1, paragraph 1.
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g. A registered person shall not do anything to effect a transaction unless he has first complied with the requirements of this rule, as required in SRC Rule 30.2, paragraph 4a. A registered person shall ensure that a written agreement which complies with SRC Rule 30.2, paragraph 3 is entered into with a client before any services are provided to that client.vi. Conflicts of Interest - A registered person should avoid conflicts of interest and when they cannot be avoided, should ensure that his clients are fairly treated and properly informed of such conflicts of interest.
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b. A registered person shall provide clients with adequate information about his firm, including his business address, any relevant conditions or restrictions under which the registered person conducts his business, and the identity or status of employees and others acting on his behalf with whom the client may have contact.
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c. After a registered person has effected a transaction for a client, he shall endeavor to confirm promptly with the client, in writing, the essential features of the transaction pursuant to SRC Rule 30.2.
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d. A registered person shall comply with SRC Rule 52.1, paragraph 8, regarding customer account statements.
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e. A registered person shall disclose the financial condition of his business to a client upon request by providing a copy of the most recent report required to be filed with the Commission under SRC Rule 52.1, paragraph 5 (Audited Financial Statements) and SRC Rule 49.1 paragraph 1 (A) (iii) (Net Capital) and disclose any material changes which adversely affect the registered person’s financial condition after the date of such filing.a. Client priority - A registered person shall handle orders of clients fairly and in the order in which they are received in compliance with SRC Rule 34.1, paragraph 1.vii. Compliance - A registered person shall comply with all regulatory requirements applicable to the conduct of his business activities so as to promote the best interest of clients and the integrity of the market.(1) Orders of clients, or transactions to be undertaken on behalf of clients, shall have in all cases priority over orders for the account of the registered person, and otherwise comply with SRC Rule 34.1, paragraph 1 where the Broker is a Member of an Exchange;b. Conflicts of interest - Where a registered person has a material interest in a transaction with or for a client, or a relationship which gives rise to an actual or potential conflict of interest in relation to such transaction, he shall neither advise, nor deal in relation to the transaction unless he has disclosed that material interest or conflict to the client and has taken all reasonable steps to ensure fair treatment of the client.
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(2) A registered person shall, where he has aggregated an order for a client with an order for another client, or with an order for his own account, give priority to satisfying orders of clients, in any subsequent allocation, if all orders can not be filled;
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(3) A registered person shall not deal in any securities for himself or for any account in which he has an interest based upon advance knowledge he possesses of pending transactions for or with clients or any other non public information, the disclosure of which would be expected to affect the price of such securities and violate Section 27 of the Code (insider trading prohibition);
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(4) A registered person who withdraws in whole or in part from providing any investment or related service shall ensure that affected clients are promptly notified of such action and that any business which remains outstanding is promptly completed or transferred to another registered person in accordance with SRC Rule 29 and any instruction of the affected clients.
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c. Client assets -A registered person shall, in the handling of client transactions and assets, act to ensure that client assets are accounted for properly and promptly and comply with SRC Rule 52.1, paragraph 10. Where the registered person, or a third party on behalf of the registered person, is in possession or control of client positions or assets, the registered person shall ensure that client positions or assets are adequately safeguarded.a. A registered person shall comply with the Code, rules and regulations adopted thereunder, and rules of any Exchange, clearing agency, or other SRO, of which he is a member of or participant in.
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b. A registered person shall have a policy, which has been communicated to employees in writing, on whether employees are permitted to deal for their own accounts in securities. If employees are permitted to deal, the conditions on which they may do so, including those imposed under SRC Rule 34.1, paragraph 1, shall be set out in writing and communicated to each employee.
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c. A registered person shall ensure that complaints from clients relating to his business are adequately addressed in compliance with SRC Rule 30.2, paragraph 6 (B) (vii) and sufficient records of such complaints are made in compliance with SRC Rule 52.1, paragraph 9.
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d. A registered person shall at all times be responsible for the acts or omissions of his employees and agents in respect to the conduct of his business, pursuant to Section 51 of the Code.
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e. All registered persons, as a condition of their registration, shall undertake in writing to uphold the Code, and rules and regulations adopted thereunder.
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D. Where the Commission makes an inquiry under Section 53 of the Code, the Commission will refer to the requirements set forth in this Rule in considering whether any person is guilty of a violation of this Code and should remain registered.
A. A Broker Dealer shall report to its customers all transactions entered into for the customer's account, and to this end, shall send the customer a written confirmation of purchases and sales as promptly as possible on the day on which they are made. An employee or salesman of a Broker Dealer shall not be authorized to accept a confirmation for or on behalf of a customer.3. Client Agreement
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B. The Broker Dealer shall give its clients the option to choose whether confirmation of customer orders will be done by way of courier, facsimile transmission or electronic mail and such preference should be clearly stated in the Customer Account Information Form (CAIF). The confirmation shall be sent to the customer at the address indicated in the CAIF. Parties subscribing to facsimile transmission or electronic mail confirmation of customer orders are governed by the special procedure provided in the immediately succeeding paragraph.
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C. Broker Dealers shall send to their clients, during office hours and on the day of the transaction, their confirmations. Clients subscribing to such arrangements are required to attest to the accuracy of the information communicated by replying via facsimile transmission or electronic mail to the Broker Dealer, not later than 12:00 noon of the next business day. The Broker Dealer shall then keep a printout of such reply together with the file notifications and transaction data being confirmed.
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D. The confirmation required by paragraph 2A above shall contain at least the following information:i. A statement as to whether the Broker Dealer is broking for a customer or another Broker Dealer or is dealing for himself pursuant to Section 34.1 (a) to (d) of the Code and SRC Rule 34.1, paragraph 1;E. The Commission, when it deems necessary, may require a Broker Dealer to submit a report of his commission or remuneration on a particular transaction.
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ii. That the Broker Dealer is controlled by, or controls, or is under common control with the issuer of such security if such be the fact;
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iii. Whether the transaction was solicited or unsolicited by the Broker Dealer or whether the transaction was executed pursuant to the exercise of discretionary power; and
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iv. For facsimile transmission and electronic confirmations, the reminder that clients must confirm their orders, not later than 12 noon of the next business day.
A. A Broker Dealer and its registered persons who deal directly with clients shall ensure that a written agreement (hereinafter “Client Agreement”) is entered into with a client before any service is provided to that client.4. Suitability Rule
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B. The Client Agreement shall be in a language understood by the client. The registered persons who deal directly with clients shall explain to the client the contents of the agreement.
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C. A Client Agreement shall contain, among others, the following information:i. the full name and address of the client, as evidenced by a retained copy of the identity card, relevant sections of the passport, business registration certificate, corporation documents, or any other official document which uniquely identifies the client;D. A registered person shall ensure that he complies with his obligations under this rule and the Client Agreement and that the Client Agreement does not operate to remove, exclude, or restrict any rights of a client or obligations of a Broker Dealer under the Code.
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ii. the full name and registered address of the Broker Dealer;
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iii. the Broker Dealer’s registration status with the Commission;
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iv. undertakings by the Broker Dealer and the client to notify the other in the event of any material change to the information provided in the agreement;
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v. a description of the nature of services to be provided to or available to the client, such as securities cash account, securities margin account, discretionary account, portfolio management, investment advice, derivatives trading;
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vi. a description of any remuneration (and the basis for payment) that is to be paid by the client to the Broker Dealer, such as commission, brokerage, and any other fees and charges;
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vii. a statement indicating the circumstances under which the Broker Dealer will be acting as principal in relation to the client and that in all other circumstances the Broker Dealer will be acting as agent for the client;
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viii. if the Broker Dealer is acting as a Dealer in relation to securities and is a member of an Exchange (or an Exchange Trading Participant), a statement explaining the application of Section 34 of the Code, and if the client specifically authorizes the Dealer to pledge the client’s securities or subject such securities to liens of third parties;
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ix. if margin or short selling facilities are to be provided to the client, details of margin requirements, interests charges, margin calls, and the circumstances under which a client’s position may be closed without the client’s consent; and
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x. risk disclosure statement as set forth in Annex 30.2-A
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E. A Broker Dealer shall not effect a transaction on behalf of a client unless before the transaction is effected, the client, or a person designated by the client, specifically authorizes the transaction, or the client has authorized in writing the Broker Dealer to effect transactions on behalf of the client without the client’s specific authorization. If the Broker Dealer has obtained such an authorization, the Client Agreement shall specify that the account is a discretionary account.
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F. A copy of the required Client Agreement is set forth in Annex 30.2-B.
A. In recommending to a customer the purchase, sale or exchange of any security, a Broker Dealer or an associated person or salesman of a Broker Dealer, shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts disclosed by such customer as to his other security holdings and as to his financial situation and needs.5. Commissions and Charges for Services Performed by a Broker Dealer
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B. Except as provided in SRC Rule 52.1, paragraph 6, prior to the execution of a transaction recommended to a customer, a Broker Dealer shall execute a customer account information form which complies with SRC Rule 52.1, paragraph 6.
A. Charges by a Broker Dealer for services performed, including:6. Supervisioni. miscellaneous services such as collection of monies due for principal, dividends or interest;B. All Broker Dealers, in compliance with existing laws, shall file a schedule of their minimum commission rates with the Commission. No discounts and/or rebates shall be permitted from the minimum rates.
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ii. exchange or transfer of securities; and
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iii. appraisals, safekeeping or custody of securities, and other services, shall be reasonable.
A. The management of every Broker Dealer shall establish and maintain an appropriate and effective compliance function within the firm which is independent of all operational and business functions. The compliance function shall be performed by an Associated Person who shall be registered with the Commission and required to report directly to the board of directors and the company President. The management shall ensure that the Associated Person/s performing the compliance function possesses sufficient training and experience in securities regulation matters and an understanding of the securities activities of the firm enabling them to effectively execute their duties.7. Internal or Accredited Training Program
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B. Associated Persons shall be responsible, in addition to the duties enumerated under SRC Rule 28.1 (4) (G) for maintaining a system to supervise the activities of all persons employed by the Broker Dealer who are directly or indirectly related to the conduct of its securities business. The supervisory system shall be reasonably designed to achieve compliance with the Code and rules and regulations adopted thereunder, with the rules of any self regulatory organization which the Broker Dealer is a member of or participant in, other applicable laws, including, but not limited to, the Anti-Money Laundering Act (RA 9160, as amended), and the Broker Dealer’s own internal policies and procedures. A firm’s supervisory system shall include at least the following:i. establishment and maintenance of written supervisory procedures;C. Although final responsibility for proper supervision shall rest with the Broker Dealer firm, diligence of a good father of the family is required from the Associated Person/s in the conduct of their compliance function.
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ii. designation of one or more Associated Persons with the authority and responsibility to carry out the supervision of each type of business in which it engages;
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iii. titles, registration status and locations of the required Associated Person/s and the responsibilities of each Associated Person as these relate to the types of business engaged in;
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iv. written documentation to prove that all Associated Persons are qualified by virtue of experience or training to carry out their assigned supervisory responsibilities;
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v. written documentation to prove that each person engaged in securities transactions, either collectively or individually, has participated no less than annually in an interview or meeting conducted by the Associated Person/s designated by the firm at which compliance matters relevant to the activities of these persons are discussed. There shall be prompt notification in writing to each such person of new or modified compliance obligations;
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vi. establishment of an effective management and organizational structure which ensures that the operations of the business are conducted in a sound, efficient and effective manner; and
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vii. establishment, maintenance and enforcement of policies and procedures to ensure the proper handling of complaints from clients and that appropriate remedial action is promptly taken. Where possible, complaints should be investigated by the Associated Person performing the compliance function who is not directly involved in the subject matter of the complaint. Where a complaint is not remedied promptly, the client shall be advised of any further steps which may be available to the client under the law.
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D. Associated Person/s shall promptly report to management all occurrences of material noncompliance by the firm or its staff with legal and regulatory requirements, as well as with the firm’s own policies and procedures. Management shall then promptly notify the Commission and any self regulatory organization of which such Broker Dealer is a trading participant of such findings and action taken. For this purpose, the Associated Person must maintain a logbook of all material non-compliance reports with the appropriate notation of the action taken by management on the said occurrences. Such logbook must be duly registered with the Commission within fifteen (15) days from issuance of the Associated Person/s new/renewal license.
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E. Notwithstanding the requirement in the immediately preceding paragraph, all Associated Persons must prepare, sign and file with the Commission not later than fifteen (15) days after the end of each calendar quarter, a Compliance Report on the firm’s compliance and /or non-compliance with the provisions of the Code and its implementing rules and regulations including, but not limited to, the following concerns:i. whether the firm complies with the requirements of the Code and the implementing rules;Said Report shall also include a summary of all occurrences of material non-compliance by the firm or its staff with legal and regulatory requirements and the actions taken by management on such violations.
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ii. the significant findings of non-compliance; and
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iii. information on the action taken by management to address the issue.
A. Every Broker Dealer shall establish, implement and maintain a reasonably comprehensive system of training towards –8. Block Salei. ensuring the continuing improvement in critical areas of its principal activities and operations; andB. Such system of training shall be properly documented in a manual which shall:
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ii. enhancing the technical knowledge of its employees to enable them to understand the operational and internal control policies and procedures of that Broker Dealer and all applicable legal and regulatory requirements.i. set out details of the training programs that the Broker Dealer proposes to implement; andC. All Broker Dealers shall submit to the Commission at the time of renewal of their license a yearly schedule/timetable of the implementation of its training program. At a minimum, such report should contain the following information:
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ii. be regularly updated in line with the development in the securities industry.i. The implementation of the previous year’s internal training program with details on seminar dates, number of participants, and other pertinent information; andD. The Broker Dealer may, at its option, substitute its internal training program submitted at the time of renewal of its license by enrolling in training programs sponsored by associations or organizations duly accredited or recognized by the Commission, provided, however, that proper approval is obtained from the Commission on such substitution. It is the responsibility of Broker Dealers, through its Associated Person, to provide periodic training to its officers and employees whether externally or internally, the occurrence of which shall not be dependent solely on the expectation that an external seminar will be sponsored at a later time.
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ii. Current year’s seminar topics (with description), projected dates, target market, and planned speaker.
A. A Broker Dealer may engage in block sales on an Exchange, and an Exchange may execute block sales, provided that:9. Submission of Names of Stockholders, Members, Participants, Clients and Related Information
i. such transaction complies with Exchange rules, which have been approved by the Commission; and
ii. the Exchange notifies the Commission in writing, not later than one business day after the date such transaction has been executed, of the price and volume thereof or in such form and manner that the Commission may prescribe.
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B. A block sale shall mean a matched trade that does not go through the automated order matching system of an Exchange trading system but instead has been prearranged by and among the Broker Dealer’s clients and is then entered as a done deal directly into the trading system.
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C. Other transactions such as but not limited to options, warrants or those emanating from a tender offer, rights offering, and conversion of a security with convertibility features, shall be allowed to be consummated within the Exchange trading system using the block sale facility of an Exchange, and in accordance with the relevant rules of the Exchange as approved by the Commission.
Every Exchange, clearing agency, Broker Dealer, transfer agent, other self regulatory organization, and every other person required to register under the Code (hereinafter “registered person”) shall immediately report to the Commission and any person deputized and/or duly authorized by the Commission pursuant to Section 5(h) of the Code, the names of their owners/stockholders, members, participants, and clients, and other related information in its or his possession, upon order of the Commission, or as required by the rules of a self regulatory organization in which he is a member or participant, in pursuance of an investigation, examination, official inquiry or as part of a surveillance procedures, and/or in compliance with other pertinent laws.
SRC
Rule 32.1 – Trading Limited to Listed Securities and Exchanges
Registered
under the Code
[formerly
SRC Rule 32.1-1]
A. The Exchange Controller shall become registered with the Commission as a Self Regulatory Organization under Section 40 of the Code and comply with its duties regarding rulemaking under this section and rules adopted thereunder; provided, however, that for purposes of Section 40 and SRC Rule 30.1, paragraph 1, the enforcement responsibilities of an SRO shall be delegated to the Exchange which is being controlled by the Exchange Controller or to another entity which the Commission may order.2. For purposes of Section 33.2 (c) of the Code, an industry or business group shall include the following sectors which are based on the Philippine Standard Industrial Classification Code:
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B. The Board of an Exchange Controller shall include in its composition the president of the Exchange Controller, and unless the Commission otherwise agrees to a different governance structure based on findings that the Exchange Controller can operate the Exchange in the public interest and that the Exchange can effectively operate as an SRO, no less than fifty one (51%) percent of the remaining members of the Board shall be comprised of three (3) independent directors and persons who represent the interest of issuers, investors and other market participants who are not associated with any Broker Dealer, member or participant of the Exchange controlled by the Exchange Controller, for a period of two (2) years prior to his/her appointment. No officer or employee of a Broker Dealer, its subsidiaries or affiliates or related interests may become an independent director.
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C. Unless the Commission prescribes otherwise, no person shall beneficially own or control, directly or indirectly, more than five percent (5%) of the voting rights of the Exchange Controller and no industry or business group shall beneficially own or control, directly or indirectly, more than twenty percent (20%) of the voting rights of the Exchange Controller; Provided that pursuant to paragraph 3 below, the Exchange Controller shall disclose the names of its beneficial owners, their business or industry affiliation, and share ownership to the Commission and, no less than once a month, update such disclosure.
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D. An Exchange Controller shall obtain prior Commission approval regarding share ownership or any other investment in any clearing agency, other securities related business, or any other non-related business.
A. Agriculture, Hunting, Forestry, Fishing, Mining and Quarrying3. To insure diversification of ownership of an Exchange or that of the Exchange Controller, the Commission may consolidate different industry or business groups into one group or divide one group into several groups or redesignate the industry classification chosen by a business group; provided, however that where the shares of stock of the Exchange or Exchange Controller are not yet listed or traded in an exchange or any other trading market, prior to the sale of shares of an Exchange or Exchange Controller to any person, the Exchange or Exchange Controller shall disclose in writing to the Commission the proposed ownership to ensure compliance with ownership restrictions. No shares of an Exchange or Exchange Controller may be transferred without prior Commission approval.
B. Manufacturing
C. Electricity, Gas, Water Supply, and Construction
D. Wholesale and Retail Trade, Hotels and Restaurants
E. Transport, Storage and Communications
F. Banking and other Financial Institutions
G. Brokers and Dealers
H. Compulsory Social Security (Government)
I. Real Estate including leasing
J. Education, Health, Social Work and other community, social and personal services
A. Suspend such Failed Member Firm’s membership immediately arrange for another Member to take over the outstanding contracts relating to securities, and simultaneously notify the Commission of such suspension and take-over;
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B. Promptly notify customers of the Failed Member that their accounts have been transferred to another Member and provide such customers with the opportunity to re-transfer their accounts to another Member of their choice;
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C. Settle the Failed Member’s (or Trading Participant’s) liabilities to customers through the sale of the Member’s trading rights and other trade-related assets as may be prescribed by the Commission; liquidation of paid up capital; and/or overseeing the payment of claims against the surety bond.
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D. Simultaneously inform the Accredited Trust Fund referred to in Sec. 36.5 of the Code, where such Failed Member (or Trading Participant) is a Member or Participant, of such takeover and inform the customers that they may also claim compensation for losses from the Trust Fund, subject to the validation of their claims by the Exchange and the Trust Fund;
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E. Where after such settlement and liquidation of the Failed Member Firm’s trade-related assets, there are outstanding liabilities to customers of the Failed Member (or Trading Participant), refer the same to the Accredited Trust Fund and inform the customers of the further steps necessary for claiming compensation for unsatisfied losses; and
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F. The Accredited Trust Fund, based on its rules and regulations or upon order of the Commission, shall release payments to the Failed Member’s (or Trading Participant’s) customers even before the Exchange has finalized the settlement of the Failed Member Firm’s liabilities, subject to the validation as provided in subsection D herein; Provided, however, that the Trust Fund shall be subrogated to the customers’ rights to claim before the Exchange to the extent that it has paid the customers’ claims before final settlement of the Failed Member’s liabilities by the Exchange.
A. A Member Broker of an Exchange (herein referred to as “Member Broker”) shall not effect any transaction on such Exchange for its own account, the account of an associated person, salesmen, or any other person associated with the Member Broker, including affiliated persons, or an account with respect to which an associated person exercises investment discretion, unless it complies with the “Customer First” Policy as prescribed below:2. Segregation of Functions (Chinese Walls)1. The Member-Broker gives priority to the execution of customer orders over its orders at the same price according to the following rules:B. A dealer or proprietary account when traded though another Member-Broker (hereinafter referred to as “Executing Member Broker”) shall be treated by the Executing Member Broker as another customer.a. When the Member Broker’s Order is pre-existing (and has priority in terms of time) and thereupon the Member-Broker receives a customer’s order and/or holds a wholly or partially unexecuted customer’s Order, then the Member-Broker shall surrender priority and give precedence to his client’s order;2. The Procedures for executing the above-referenced priority rule shall be programmed into the Exchange trading system so that full compliance can be achieved prior to the execution of any Member Broker’s Order under this interpretation, in accordance with SRC Rule 34.1, paragraph 1 (B).
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b. When the Member-Broker holds an unexecuted customer’s Order with priority (pre-existing order), then any Broker’s Order that intends to improve the price shall do so by at least three (3) fluctuations better than the pre-existing highest bid or lowest offer from a customer.
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3. Orders of stockholders, officers, directors, associated persons, and salesmen, or any other person associated with the Member-Broker, including affiliated persons, traded within the Member-Broker shall be treated as the proprietary account of the Member Broker’s account, in which case, the “Customer First” Policy shall apply.
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4. The order ticket shall indicate that the order is for the account of the Member-Broker, associated person or other employee thereof, owner, officer or director of the Member-Broker
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5. The Member-Broker retains a copy of the order ticket with the date and time of its transmittal, which shall be time stamped thereon.
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6. The Member-Broker dates and time stamps the order ticket to reflect the time that the order was received or made in compliance with SRC Rule 52.1, paragraph 7.
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7. The Member-Broker retains all order tickets in chronological order containing the date, time, price and other significant details of the order, in accordance with SRC Rule 52.1, paragraph 2.chan robles virtual law library
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8. The Member-Broker may adopt an alternative method (e.g. tape recorded with timing instrument) in capturing the time stamping requirements prescribed by the aforementioned sub-section (5) and (6) and by SRC Rule 52.1, paragraph 7; provided that it conforms with the rules and procedures of the Exchange governing such alternative method; provided further, that such alternative method and relevant rules and procedures have been approved by the Commission.
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9. Procedures for monitoring Member Orders, as set forth in SRC Rule 34.1, paragraph 1 (G) and (H) shall be complied with.
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C. Stockholders, officers, directors, associated persons, or any other person associated with the Member-Broker or affiliated persons other than a Salesman (hereinafter referred to as “Associated Persons” cannot trade outside the employing Member-Broker (hereinafter referred to as “Employing Member Broker”) unless they obtain the permission of the Employing Member Broker and inform such Broker that they have opened such account with the Executing Member Broker, and provided further that the Executing Member Broker agrees to send duplicate account statements to the Associated Person’s Executing Member Broker.
If the account of the Associated Person of the Employing Member Broker is with a non-Member Broker, such Associated Person shall receive permission from that Non-Member Broker for access to that account by the Exchange and the Employing Member Broker.
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Salesmen are prohibited from transacting with Member-Brokers other than their employing Member Broker.
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D. Non-Exchange Broker Dealers shall likewise observe the “Customer First” Policy whenever applicable.
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E. For purposes of this Rule:i. Affiliated person of a Member Broker is any person who (a) controls, is controlled by, or is under common control with the Member Broker, (b) has officers, directors, or associated persons who are also officers, directors, or associated persons of the Member Broker, (c) directly or indirectly controls more than ten percent (10%) of the equity interest in the Member Broker, or (d) has more than ten percent (10%) of its equity interest owned by the Member Broker and/or associated persons of the Member Broker.F. A Member Broker can have a subsidiary or affiliate which is a Member Dealer, and/or non Member Broker Dealer, and/or Investment House, provided that where there are interlocking directors or officers, such fact must be disclosed to the Commission and measures instituted to prevent conflict of interest.
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ii. A Member Broker effects a securities transaction when it performs any function in connection with the processing of that transaction, including, but not limited to, (a) transmission of an order for execution, (b) execution of the order, (c) clearance and settlement of transaction, and (d) arranging for the performance of any such function.
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iii. Compensation in connection with effecting the transaction refers to compensation directly or indirectly received or calculated on a transaction-related basis for the performance of any function involved in effecting securities transactions.
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G. A Member Broker, and any other Broker or Investment House, with securities accounts of Member Brokers, and/or their associated persons, other employees, owners, directors and/or officers, including discretionary accounts on behalf thereof, for transactions executed in accordance with paragraph 1 (A) (ii) (h) of this rule, shall, when receiving and executing such transactions, identify such accounts as employee, owner, director, officer or Member broker accounts, or discretionary accounts on behalf thereof (along with the name of the related Member Broker), and require the firm’s responsible Associated Person or, in the case of an Investment House a person responsible for compliance, to review such accounts on a daily basis.
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H. No Broker Dealer shall execute for its own account, or the account of its customers, listed securities issued by an affiliated company identified under Section 30.1 of the Code unless the conditions setforth in SRC Rule 30.1 are complied with.
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I. For purposes of paragraph 1 (l) (C) of this rule, affiliated company means a company in which any director, president, vice president, manager, treasurer, comptroller, secretary, any other officer of trust and responsibility, or other control person is also a stockholder, director, associated person, or salesman, or a clerk of any Broker Dealer, or a relative of any of the foregoing within the fourth degree of consanguinity or affinity.
A. Any Broker Dealer which assumes more than one function whether as a dealer, adviser, or underwriter, or which engages in market making transactions, shall maintain proper segregation of those functions within the firm to prevent:i. the flow of information between the different parts of its organization which perform each function; andB. For purposes of this rule, information means matter:
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ii. any conflict of interest which may result.i. of a specific nature which has not been made public;C. A Broker Dealer shall at all times ensure that its trading functions and back-office settlement functions and physical setup are properly segregated and shall establish written procedures to ensure compliance with this rule.
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ii. relating to one or more public companies or securities of a public company; and
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iii. which, if it were made public, would likely affect the market price of the securities.
A. No person shall act as a transfer agent for a security which is listed or traded on an Exchange, over-the-counter, or any other trading market without being registered with the Commission in accordance with the provisions of this Rule. Any registered transfer agent existing prior to the effectivity of these Rules shall, within 45 days from effectivity of these Rules, comply with all the requirements provided under this Rule, which were not provided for in its original registration.
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B. To apply for registration under this Rule, a transfer agent shall:i. be a corporation;C. An application for registration as a transfer agent, or an amendment to any such application, shall be filed with the Commission on SEC Form 36-TA, in accordance with the instructions contained therein.
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ii. have unimpaired paid-up capital of at least One Million Pesos (P 1,000,000.00) or such amount as the Commission may determine;
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iii. have an officer who is a certified public accountant; and
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iv. submit an undertaking that it shall comply with the rules and regulations, orders, memorandum circulars and policies promulgated by the Commission, and of other rules, procedures, standards and policies set by other market participants and duly approved by the Commission, and its own internal rules and procedures.
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D. If any of the information reported on SEC Form 36-TA becomes inaccurate, misleading, or incomplete or requires updating for any reason, such as changes in operating procedures and/or the list of directors and officers, the registrant shall file an amendment within seven (7) days after the date on which the information in the application became inaccurate, misleading, or incomplete.
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E. After reviewing an application for registration as a transfer agent, or an amendment thereto, the Commission shall, by order,i. grant registration or approve the amendment; orF. A transfer agent can not be the auditor of an issuer for whom it acts as transfer agent.
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ii. deny registration or the amendment, place limitations on the activities, functions or operations of, suspend or revoke registration, if the Commission finds, after notice and opportunity for hearing,a. that such order is in the public interest;
b. that the registrant does not meet applicable qualifications;
c. that the application is incomplete, inaccurate or misleading; or
d. that the transfer agent has been found to:(1) be insolvent or not in sound financial condition;
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(2) have violated or have not complied with the applicable provisions of the Code or the rules and regulations adopted thereunder, or any order of the Commission;
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(3) have engaged in, or be engaged in, or is about to engage in fraudulent transactions;
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(4) be in any other way dishonest or not of good repute;
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(5) have not conducted its business in accordance with law or be engaged in a business that is illegal or contrary to government rules and regulations;
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(6) have an officer, member of the board of directors, or principal shareholder who is disqualified to be such an officer, director or principal shareholder;
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(7) have a backlog of share certificate transfers which indicates an inability of the registrant to fulfill its responsibilities as a transfer agent;
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(8) have repeatedly or materially failed to comply with its procedures or those of a registered clearing agency; or
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(9) have filed an application for registration or an amendment thereto which is incomplete or inaccurate in any material respect or which 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 application or amendment not misleading.
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