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This page contains the full text of
IMPLEMENTING RULES AND REGULATIONS OF THE SECURITIES REGULATION CODE.



Read full text of:chanroblesvirtuallawlibrary
Securities Regulation Code
Amended Implementing Rules and Regulations of the Securities Regulation Code
Implementing Rules and Regulations of the Securities Regulation Code (Old)
SRC Rule 68, as Amended
Rules and Regulations Covering Form and Content of Financial Statements
SRC Rule 68.1
Special Rule on Financial Statements of Reporting Companies Under Section 17.2 of the Securities Regulation Code
Guidelines on Intra-Corporate Cases Pending Before the SICD and the Commission En Banc of the Securities and Exchange Commission
 SEC Notice on Transfer of Jurisdiction from SEC to RTC
Supreme Court Resolution Designating Certain Branches of Regional Trial Courts to Try and Decide Cases Formerly Cognizable by the SEC
Interim Rules of Procedure on Corporate Rehabilitation
Interim Rules of Procedure Governing Intra-Corporate Controversies Under R. A,. No. 8799

 

_______________________________________________________

 
SECURITIES AND EXCHANGE COMMISSION
SECURITIES INVESTIGATION AND CLEARING DEPARTMENT
SEC Building, EDSA, Greenhills, City of Mandaluyong

IMPLEMENTING RULES AND REGULATIONS OF THE SECURITIES REGULATION CODE
(Republic Act No. 8799)


SRC Rule 1
Title of Rules


 
These Rules shall be referred to as the “Implementing Rules and Regulations of the Securities Regulation Code, or SRC Rules.
 
 SRC Rule 2
Interpretation of Rules

 
 Any doubt in the interpretation of these Rules shall be resolved by the Commission in a manner which would establish a socially conscious free market that regulates itself, encourage the widest participation of ownership in an enterprise, enhance the democratization of wealth, promote the development of the capital market, protect investors, ensure full and timely disclosure of material information, and/or minimize if not eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market.
 
SRC Rule 3
Definitions of Terms Used in the Rules and Regulations

 
1. As used in the rules and regulations adopted by the Commission under the Code, unless the context otherwise requires:chanroblesvirtuallawlibrary
     a. Commission  means the Securities and Exchange Commission.
     b. Code  means the Securities Regulation Code.
     
     c. Section  refers to a section of the Code.
     
     d. 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:chanroblesvirtuallawlibrary
      i. held by members of his immediate family sharing the same household;
      ii. held by a partnership in which he is a general partner;
       
      iii.  held by a corporation of which he is a controlling shareholder; or
       
      iv. subject to any contract, arrangement or understanding which gives him voting power or investment power with respect to such securities: Provided however, 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:chanroblesvirtuallawlibrary
        A.  A Broker Dealer;
        B. An investment house registered under the Investment Houses Law;
         
        C. A bank authorized to operate as such by the Bangko Sentral ng Pilipinas;
         
        D. An insurance company subject to the supervision of the Office of the Insurance  Commission;
         
        E. An investment company registered under the Investment Company Act;
         
        F. A pension plan subject to regulation and supervision by the Bureau of Internal Revenue and/or the Office of the Insurance Commission; and
         
        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.
       
       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.
       
    e. Material  information means information which a reasonable investor would consider important in determining whether to buy, sell or hold securities, or in connection with the exercise of related voting rights.
    f. Control, controlling, controlled by, and under common control with, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.
    g. Member of an Exchange  means any Broker Dealer who has the right, pursuant to Exchange rules, to trade on that Exchange.
    h. Transfer agent  means any person who engages on behalf of an issuer of securities, or itself as an issuer of securities, in:chanroblesvirtuallawlibrary
      i. countersigning such securities upon issuance;
      ii. monitoring the issuance of such securities with a view toward preventing unauthorized issuance, a function commonly performed by a person called a registrar;
       
      iii. registering the transfer of such securities;
       
      iv. exchange or converting such securities; and/or
       
      v. transferring record ownership of securities by bookkeeping entry without physical issuance of securities certificates.
       
      i. 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.
      j. Self Regulatory Organization  or SRO means an organized Exchange, registered clearing agency and 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.
    k. Rules and regulations  refers to all rules and regulations adopted by the Commission pursuant to the Code, including the forms for registration and reports and accompanying instructions thereto.
2. Unless otherwise specifically stated, the terms used in the rules and regulations shall have the meanings defined in the Code.
3. A rule or regulation which defines a term without express reference to the Code or to the rules and regulations, or to a portion thereof, defines such term for all purposes as used in both the Code and in the rules and regulations, unless the context otherwise specifically requires.
 
SRC Rule 3.1-1
Definition of Investment Contract and Derivative

 
  1. 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.
    a. A presumption that a contract is an investment contract arises whenever a person seeks to use the money of others on the promise of profits.
    b. When two or more investors “pool” their resources, there is a common enterprise, even if the promoter does not do more than receive a broker’s commission.
  2. Derivative  with respect to equity securities, means a financial instrument, including options and warrants, whose value depends on the interest in or performance of an underlying security, but which does not require any investment of principal in the underlying security.
    a. 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 in accordance with Exchange rules.

    b. Call options  are rights to buy and put options are rights to sell.



    c. 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 Exchange rules. Warrants generally have a longer exercise period than options.
 SRC Rule 3.3-1
Definition of Broker Dealer

 
 Broker Dealer  means any broker and/or dealer registered under Section 28 of the Code to engage in broker and/or dealer activities.
 
SRC Rule 3.6
Definition of Clearing Agency

 
  1. Clearing agency  means any person that provides a facility to a Broker Dealer, salesman, associated person of a Broker Dealer or another clearing agency and whose facility performs any or all of the following activities:chanroblesvirtuallawlibrary
    a. makes deliveries in connection with transactions in securities;
    b. reduces the number of settlements of securities transactions or to allocate securities settlement responsibilities;
    c. provides for the central handling of securities so that transfers, loans, and pledges and similar transactions can be made by bookkeeping entry or otherwise to facilitate the settlement of securities transactions without physical delivery of securities certificates.
  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 of the activities set forth in paragraph 1 of this Rule.
  3. A registered clearing agency may perform only the activity or activities that the Commission has previously approved.


SRC Rule 3.7.1
Definition of Facility of an Exchange

 
 Facility  of an Exchange includes systems, processes or services, tangible or intangible property, whether or not in a specific physical location or in an Exchange, for the purpose of effecting transactions between buyers and sellers in a securities trading market, and conveying any information required by the participants to effect such transactions.

  SRC Rule 4
Securities and Exchange Commission

  These Rules shall be implemented by the Commission as a collegial body, composed of a Chairperson and four (4) Commissioners.
 1. The Commission shall have five (5) principal departments each to be headed by a director. Its core functions of capital markets regulation shall be performed by the Market Regulation Department, Corporation Finance Department, and Non-traditional Securities and Instruments Department, while 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 is responsible for developing the registration criteria for all market participants and supervising them to ensure their compliance with registration requirements and endorsing infractions of the Code and rules and regulations to the Compliance and Enforcement Department.
    b. The Corporation Finance Department is responsible for registering securities before they are offered for sale or sold to the public and ensuring that adequate information is available about the said securities. It will also ensure that investors have access to all material disclosures regarding the said offering and the securities of public companies. It will likewise monitor compliance by issuers with the Code and rules and regulations adopted thereunder and endorse infractions thereof to the Compliance and Enforcement Department.
    c. The Non-traditional Securities and Instruments Department is responsible for registration and licensing of non-traditional securities and instruments including but not limited to pre-need plans, commodity futures contracts proprietary or non-proprietary membership certificates and other similar instruments and for monitoring compliance with related rules and endorsing infractions thereof to the Compliance and Enforcement Department.
    d. The Company Registration and Monitoring Department is responsible for the registration of domestic corporations, partnerships and associations, including representative offices and foreign corporations intending to do business in the Philippines. It is also responsible for the supervision and monitoring of such entities relative to their compliance with laws, rules and regulations administered by the Commission.
    e. The Compliance and Enforcement Department is responsible for ensuring compliance by all market participants, issuers and individuals, and taking appropriate enforcement action against them for legal infraction of the Code and other relevant laws, rules and regulations implemented by the Commission.
2. The Commission shall have support services departments, namely Human Resource and Administrative Department, Economic Research and Information Management  Department and Financial Management Department.
    a. The Human Resource and Administrative Department is responsible for all activities relating to personnel and human resource management, including benefits, training and development.   It will also handle the central receiving, records management, general administrative and maintenance services of the Commission.
    b. The Economic Research and Information Management Department is responsible for providing 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.
    c. The Financial Management Department is responsible for the internal financial management of the Commission which includes budgeting, accounting and cash management.
3. The Commission shall have special offices, namely the Office of the General Counsel and the Office of the General Accountant.
    a. The Office of the General Counsel, headed by the General Counsel, shall serve as the lead legal adviser to the Commission. It shall also serve as legal liaison for the Commission with other government agencies, self-regulatory organizations, and foreign government regulators and agencies. It shall oversee all non-enforcement litigation and all appeals to the Commission en banc. It shall likewise oversee the office of the Commission Secretary.
    b. The Office of the General Accountant, headed by the General Accountant, shall be responsible for providing advice to the Commission and the private sector in the area of accounting standards and on issues of accounting treatment for public offerings and disclosures. It shall also coordinate with any board or council in the development of accounting standards for the Philippines and its capital market.
4. The Commission shall have Extension Offices in key cities, each to be headed by a Director. The Extension Offices shall perform the company registration, supervision, monitoring and other delegated functions of the Commission within its geographical jurisdiction. The Directors are responsible for executing the programs of the Commission in their respective geographical jurisdictions, subject to the supervision of the Commission.
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, notice of the meeting shall be given to all Commissioners and the presence of three (3) Commissioners shall constitute a quorum. In the absence of the Chairperson, the most senior Commissioner present shall act as the presiding officer of the meeting.

 6. The Commission may, for purposes of efficiency, delegate any of its functions to any department or office of the Commission, an individual Commissioner or staff member of the Commission except its review or appellate authority and its power to adopt, alter and supplement any rule or regulation.

 
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.
 
The petition for review shall be filed with the Office of the General Counsel within fifteen (15) days from receipt of the order, resolution, decision or any document evidencing the action taken which is the subject of the review. The petition shall contain, among other things, its factual and legal basis and shall be signed by the petitioner or counsel.


 SRC Rule 5.1(e)
Clarification of Commission Powers to Take-Over an Exchange

 Procedures for implementing the Commission’s power to suspend or take-over an Exchange are set forth in SRC Rule 40.5.1.


SRC Rule 6.2
Rules of Conduct for Commissioners, Officers and Employees

1. The Commissioners, including the Chairperson, officers and employees of the Commission (hereinafter collectively referred to as officers or officer), in the execution of their duties owe their undivided loyalty to the Commission and shall observe the highest standards of honesty, integrity and good faith in the performance of their duties.
    a. Officers shall not pursue private activities in any manner which may conflict with their duties and 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.
    b. Every officer who has discretionary authority shall be free from any conflicting interest or influence of such nature and importance as would make it difficult for him to provide his best efforts and loyalty to the Commission.
2. The interest of officers shall include the interest of his or her spouse, children under the age of eighteen (18) and trusts for the benefit of himself, his or her spouse or children.

3. Officers shall provide the Commission with complete information with respect to any actual or conflicting interest by completing SEC Form 6 and submitting such form to the Commission Secretary no later than thirty (30) days from the effective date of this Rule. New officers shall fill up this form and submit the same to the Commission Secretary thirty (30) days prior to the first day of employment.

 4. Even where not specifically required to be disclosed in SEC Form 6, officers shall report any other circumstances which, in their judgment, they regard as being of possible concern to the Commission. It is to such officer’s advantage, as well as the Commission’s, that any unclear situation be reported in order that a policy judgment can be made. Questions of conflict will be referred to the Office of the General Counsel. If the Office of the General Counsel determines that such officer can not properly retain his outside interest or relationship and still be employed by the Commission, the Office of the General Counsel (after advising those to whom the officer reports to of the circumstances) shall require action to eliminate the conflict, such as the disposition by the officer of his conflicting interest or relationship, or the narrowing of responsibilities of the officer.
 5. SEC Form 6 shall be kept current and accurate. Any change to the information contained therein shall be reported and filed with the Commission Secretary on SEC Form 6-A no later than ten (10) days from the date of such change.
 6. Set forth below is a description of the types of activities which may give rise to a conflict of interest in violation of this Rule and should be disclosed; provided, however, this is not a comprehensive list:chanroblesvirtuallawlibrary
    a. All officers, directorships, trusteeships or partnership interests in any organization or association, whether registered with the Commission or not (except charitable and civic organizations).
    b. Interest in any securities or investment in any corporation, partnership or association registered under and/or required to report under the Code.
    c. The receipt of compensation, wages, bonuses, benefits or privileges with monetary value for services 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.
    d. Employment of officers 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. employment as an officer, employee, consultant, counsel, broker, agent, trustee or nominee in any person or enterprise regulated by the Commission under the Code;
      ii. private practice of their profession where such practice conflicts or tends to conflict with their official function (e.g. where such practice is in connection with any matter before the office of the Commission such officer works in or used to work in);
       
      iii. the recommendation of any person to any position in a private enterprise which has a regular or pending official transaction with their office or the office such officer used to work with.
       
    e. Solicitation or acceptance of any gift, loan, or other benefit from any corporation, partnership or association registered, applying or contemplating registration with the Commission, including any person or firm, though not so registered, applying or contemplating registration and/or having current or prospective dealings with the Commission as a supplier or contractor or the like, if the acceptance would influence or would create the appearance of influencing him to act other than solely in the best interest of the Commission.
      i. Any gift having more than a nominal value, even if given on occasions of rejoicing or celebration such as birthdays, anniversaries or Christmas, shall not be permitted.
      ii. Each officer should disclose the amount and terms (though not necessarily the purpose) of his personal transactions with any financial or lending individual or firm from which he has incurred loans of more than Pesos 250,000 at any time during the past calendar year, or if he is involved, by virtue of his position, in significant relationships with any financial or lending individual or firm.
      iii. No entertainment should be accepted by any officer of a kind or amount which would influence, or would create the appearance of influencing him to act other than solely in the best interest of the Commission.
SRC Rule 7
Periodic Review of Commission Structure

 
 The Commission shall conduct, once every two (2) years, a review of its organization and structure to achieve the goals of the Code and more efficiently and effectively exercise its powers and functions thereunder, without prejudice to its power to conduct yearly merit reviews and provide increases in compensation based on productivity and efficiency.


SRC Rule 8
Requirement to File Registration Statement

 1. Filing of Registration Statement and Effectivity of Offering
    a. No securities, except of a class exempt under Section 9 of the Code or unless sold in any transaction exempt under Section 10 thereof, shall be sold or distributed by any person within the Philippines unless such securities shall have been registered with the Commission on SEC Form 12-1 and the registration statement has been declared effective by the Commission. Moreover, no securities shall be offered unless a registration statement has been filed with the Commission.
    b. If the securities which are the subject of the registration statement are intended to be listed on an Exchange, a copy of the registration statement and all other pertinent documents shall simultaneously be filed with that Exchange. All amendments to the registration statement shall also simultaneously be filed with that Exchange. Upon filing of the application for listing on that Exchange, two (2) copies of the application shall be filed with the Commission.
     
    c. Upon the registration statement being declared effective by the Commission, the sale of the securities subject thereto shall be commenced within two (2) business days and be continued until they have been completely sold or until the sale has been terminated by action of the issuer. Upon completion or termination of the offering by the issuer, notification of such shall be promptly given to the Commission. Such notification shall include the number of securities sold. If attempts to sell the securities which are the subject of the registration statement have ceased, the issuer shall terminate the offering.
    d. After termination of the offering, the sale or offering for sale of additional securities shall be effected through a separate registration statement relating to the additional securities irrespective of whether they had been previously registered but not sold.
2. Publication of Notice of Filing
    a. The registrant shall prepare and file with its registration statement a notification of the filing which shall recite that a registration statement for the sale of the subject security has been filed with the Commission, that the registration statement is open to inspection by interested parties during business hours at the Commission and that copies thereof shall be furnished to everyone requesting such at a reasonable charge. The Code requires the issuer immediately to publish the notification, at its own expense, in two newspapers of general circulation in the Philippines, once a week for two consecutive weeks. The required format for this publication appears as “Annex A.”
     
    b.  The registrant shall submit to the Commission, as part of its filing of the registration statement, an affidavit with a copy of the publication that was, or is to be made, attesting that such action has been or will be immediately taken.
  SRC Rule 8.1-1
Prospectus Delivery Rule

 
1. Prospectus Required. - Securities required to be, and which are, registered pursuant to Sections 8 and 12 of the Code shall not be sold unless a prospectus, which has been filed with the registration statement in the form and containing the information hereinafter described, is widely disseminated and sufficient copies have been made available so that all who desire may obtain one.
2. Prospectus Requirements. - In addition to the requirements of this Rule, a prospectus, including a preliminary prospectus, shall contain information as required by SRC Rule 12 and SEC Form 12-1 and shall be prepared in accordance with the requirements of SRC Rule 72.1.
3. Preliminary Prospectus. - 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 effectiveness of the registration statement if the following requirements have been met:chanroblesvirtuallawlibrary
    a. it meets all the requirements for a prospectus contained in paragraph 2 hereof;
    b. it contains the following statement in bold face print, at least 12 point type prominently displayed:chanroblesvirtuallawlibrary
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, and any such offer may be withdrawn or revoked, without obligation or commitment of any kind, at any time prior to notice of its acceptance given after the effective date. 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 the solicitation of an offer to buy.
    a. it is the only selling document utilized in the pre-offering period, with the exception that the information contained in SRC Rule 8.3-1 may be disseminated in whole or in part to summarize the offering;
    b. its use is such that wide dissemination is assured;
    c. sufficient copies are made available so that all who desire may obtain one; and
    d. 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 refunding, or both.
4. Wide Dissemination of Preliminary and Final Prospectus. - A preliminary or final prospectus shall be presumed to have been widely disseminated pursuant to paragraphs 1 and 3 of this Rule if copies have been distributed initially and additional copies have been furnished promptly, upon request, to at least the following:chanroblesvirtuallawlibrary
    a. each participant in the distribution (e.g., underwriters and brokers);
    b. the main and extension offices of the Commission;
     c. an Exchange if the securities will be listed thereon;
     d. the issuer; and
     e. to more than twenty (20) persons who are not qualified buyers under Section 10.1(l) of the Code.
5. Notice of Availability of Prospectus and Preliminary Prospectus. -
     a.  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 copies if requested.
     b. 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.
    c. Information required in subparagraphs a and b above concerning where 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, and the issuer company, and the telephone number and the person to be contacted at each such location. A statement shall also be made that preliminary prospectuses and final prospectuses are available from all underwriters and brokers participating in the distribution.
6. Selling Documents During Offering Period. - The use of selling documents other than the final prospectus during the offering period is prohibited, with the exception that the information contained in SRC Rule 8.3-1 may be disseminated in whole or in part to summarize the offering.
7. Limitations on Use of Preliminary or Final Prospectus. - A preliminary or final prospectus shall not be used unless all information contained therein is up to date and accurately reflects 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:chanroblesvirtuallawlibrary
    a. 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);
    b. the financial statements contained therein are over 225 days old.
 8. Format of Prospectus. -
    a. Appearance - 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 not be presented in a manner that will obscure required information or information that is necessary to keep required information from being incomplete or misleading.
    b. Captions of Headings - All information included in the prospectus should 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).
    c.  Condensed or Summarized Form - Except as to information required in tabular form and financial statements, the information included in the prospectus may be expressed in condensed or summarized form.   Reference may be made to information in other parts of the prospectus instead of repeating the information in the form of notes to the financial statements.
     
    d. Date of Prospectus - Each prospectus used after the effective date of the registration statement shall be dated as of the effective date of the prospectus. An amended or revised prospectus used thereafter shall bear the date of its issuance.
     Language Clear and Understandable - All information that is required to be included in the prospectus shall be clearly understandable without the necessity of referring to SEC Form 12-1 or to the general rules and regulations. The chief goal of registration (disclosure for the benefit of investors) involves, among other things, the use of language that can be understood readily by the persons to whom it is addressed. Failure to use language that is clear and understandable to the investor may operate to defeat the purpose of the prospectus.
SRC Rule 8.3-1
Written Communication Not Deemed an Offer for Sale
1. Any notice, circular, advertisement, letter, or other communication shall not be deemed an offer for sale in violation of Section 8 of the Code if it is published or transmitted to any person after a registration statement has been filed and contains any or all of the following information:chanroblesvirtuallawlibrary
     a. the name of the issuer of the security;
     b. the full title of the security and the amount being offered;
     c. a brief indication of the general type of business of the issuer;
     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;
     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;
     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;
     g. the names of the underwriters;
     h. the approximate date upon which it is anticipated the proposed sale to the public will commence;
     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;
     j. with respect to any class of debt securities, any class of convertible debt securities or any class of preferred stock, the security rating or ratings assigned to the class of securities by any credit rating agency recognized or accredited by the Commission and the name of such rating agency/ies which assigned such rating/s.
2. Every communication used pursuant to this Rule shall contain the following:chanroblesvirtuallawlibrary
    a. If a registration statement has not yet become effective, the following statement in bold face prominent type:chanroblesvirtuallawlibrary
     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 may offers to buy be accepted prior to the time the registration statement becomes effective. This communication shall not constitute an offer to sell or the 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 refunding or both;
    c. The name and address of a person or persons from whom a written prospectus meeting the requirements of Section 12 of the Code may be obtained.
SRC Rule 9.2
Exempt Securities
Any security issued by a financial institution licensed by the Bangko Sentral ng Pilipinas to engage in quasi-banking, other than its own shares of stock, shall be exempt from registration under Section 8.1 of the Code; provided, however, that the purchase and sale of any such security shall not be exempt from antifraud, civil liability or other provisions of the Code.

 
SRC Rule 10-1
Exempt Transactions

 
1.  Disclosure to Investors. - Any person claiming exemptive relief under Section 10.1 of the Code shall provide to any person to whom they offer for sale or sell securities in reliance on such exemption written disclosure containing the following information:chanroblesvirtuallawlibrary
    a. The provision of Section 10 of the Code under which exemption from registration is claimed;
    b. Whether the Commission’s confirmation that such offer and sale qualifies as an exempt transaction has been obtained; and
    c. The following statement in bold face, prominent type:chanroblesvirtuallawlibrary
      The securities being offered or sold 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.
 3. Exemptive relief under Section 10.1(c) (isolated transaction) shall not be available to an issuer of securities which shall not be considered as an “owner” thereof.
 4. Exemptive relief under Section 10.1(k) (Private Placement) shall be subject to the following terms and conditions:chanroblesvirtuallawlibrary
    a. The issuer claiming such relief shall not engage in any form of general solicitation or advertising in connection therewith;
     b. Securities sold in any such transaction may only be sold to persons purchasing for their own account;

    c. Sales 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, if that 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;

    d. The issuer provides any person to whom they offer for sale or sell securities pursuant thereto with the following information:chanroblesvirtuallawlibrary
       i. the exact name of the issuer and its predecessor, if any;
       ii. address of its principal executive offices;
       iii. place of incorporation;
       iv. exact title and class of the security;
       v. par or stated value of the security;
       vi. number of shares or total amount of securities outstanding as of the end of the issuer’s most recent fiscal year;
       vii. name and address of the transfer agent;
       viii. nature of the issuer’s business;
       ix. nature of products or services offered;
       x. nature and extent of the issuer’s facilities;
       xi. name of the chief executive officers and members of the board of directors;
       xii. issuer’s most recent balance sheet and profit and loss and retained earnings statement for each of the two preceding fiscal years or such shorter period as the issuer (including its predecessor) has been in existence;
       xiii. whether the person offering or selling the securities is affiliated, directly or indirectly, with the issuer;

       xiv. 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

       xv. information required under paragraph 1 of this Rule.

      Provided, however, 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.

    e. The issuer files with the Commission a notice of exemption from registration requirements under Section 8 of the Code on SEC Form 10-1, including as an exhibit thereto, information furnished to investors in connection therewith pursuant to this paragraph, within ten (10) days after the initiation of any efforts to sell the securities which are subject thereto.

 5. Confirmation of Availability of Exemption - Any person may apply to the Commission for confirmation that an exemption under Section 10 is available, in which case SEC Form 10-1 shall be filed not later than ten (10) days prior to the initiation of any efforts to sell the securities which are subject thereto, and include the prescribed filing fee; provided, however that a confirmation of an exemption under Sections 10.1(k) or (l) shall only be given where the securities sold pursuant to such exemption are purchased by persons purchasing for their own account and who shall not sell the same for a period of at least one (1) year (restriction period) from the date of such acquisition.
     a. In connection with a transaction under Subsection 10.1(i), any fee paid pursuant to requirements under the Corporation Code may be applied in satisfaction of fees owed under this Rule.
     b.  The Commission shall not be precluded from acting on any application for confirmation filed after the initiation of any efforts to sell the securities.
 6. Burden of Proof that Such Exemption is Available. -
    a. Unless confirmation that such exemption is available is applied for under paragraph 5 of this Rule, any person claiming an exemption under Section 10 has the burden, if challenged, of establishing that the exemption is available. The Commission may challenge such exemption at any time.
    b. A presumption that an exemption is not available may arise from the failure to file a notice as required by paragraph 4 (e) of this Rule. Failure to file such notice shall also subject a person claiming an exemption under Section 10 to administrative sanctions.
 7. The sale or offer for sale of a security in any transaction exempt under Section 10 is not exempt from antifraud, civil liability or other provisions of the Code.
 8. In view of the objective of full and fair disclosure under the Code, exemptive relief under Section 10 of the Code is not available to any issuer or other person for any transaction or chain of transactions that, although in technical compliance with the Code and this Rule, is part of a plan or scheme to evade the registration provisions of the Code. In such cases, registration under the Code is required.


 SRC Rule 11.1
Definition of Commodity Futures Contracts

1. Commodity futures contract means a contract providing for the making or taking delivery at a prescribed time in the future of a specific quantity and quality of a commodity or the cash value thereof, which is customarily offset prior to the delivery date, and includes standardized contracts having the indicia of commodities futures, commodity options and commodity leverage, or margin contracts.
2. Commodity  means any goods, articles, services, rights and interests, including any group or index of any of the foregoing, in which commodity interests contracts are presently or in the future dealt in.
3. Forward  means a contract between a buyer and a seller whereby the buyer is obligated to take delivery and the seller is obliged to make delivery of a fixed amount of an underlying commodity at a pre-determined price and date. Payment in full is due at the time of delivery.

 Without prejudice to applicable Bangko Sentral ng Pilipinas rules and circulars, the public trading of commodities futures contracts and pertinent Commission rules shall remain suspended until further orders of the Commission.

 
SRC Rule 12
Requirements for Filings Pursuant to the Securities Regulation Code
and the Corporation Code of the Philippines
 1. This Rule sets forth the requirements applicable to the content of issuers' non-financial statement portions of:chanroblesvirtuallawlibrary
    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 thereunder. Registration Statements under Section 12 of the Code shall be filed on SEC Form 12-1;
    b. Prospectuses to be used in connection with the public distribution of securities pursuant to Section 8 of the Code and SRC Rule 8-1.1 thereunder;
    c. Periodic and other reports required to be filed with the Commission under Section 17 of the Code as provided in SRC Rules 17 and 17-1 and SEC Forms 17-Q, 17-A, 17-C, and 17-L, as appropriate, unless exempt from the provisions thereof; and
     d.  Proxy Statements required by Section 20 of the Code and SRC Rule 20 adopted pursuant thereto, and Information Statements pursuant to Section 17.1(b) and SRC Rule 17.1(b) adopted pursuant thereto. Filings under this paragraph shall be made on SEC Forms 20-A and 17-IS.
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 furnished to security holders pursuant to SRC Rule 20 and SRC Rule 17.1(b)(4) shall be deemed to satisfy Section 75 of the Corporation Code of the Philippines.
3. Registration Statements filed pursuant to Section 12 of the Code shall be accompanied by the prescribed fee.
 
4. The issuer shall comply with Section 12.5(b) of the Code and paragraph 2 of SRC Rule 8 regarding the public notification of the offer for sale. The prescribed format for publication is contained in “Annex A”.
5. In addition to the requirements of this Rule, the filing of forms with the Commission is governed by the provisions of SRC Rule 72.1, "General Rules and Regulations For Filing of SEC Forms With the Securities and Exchange Commission." The definitions contained in that Rule and SRC Rule 38-1, to the extent that they are not defined in “Annex B” shall govern the meanings of similar terms used herein.
6. Information required to be disclosed under this Rule is set forth in “Annex C”
7. Definitions of terms used in the forms described in paragraph 1 of this Rule are set forth in “Annex B”.


SRC Rule 12-2
Incorporation by Reference

1. Incorporation of Information by Reference. - Except for information filed as an exhibit, which is subject to provisions of paragraph 3 hereof, or which is required to be contained in a prospectus which is subject to paragraph 4 hereof, information may be incorporated by reference in answer, or partial answer, to any item of a registration statement filed pursuant to SRC Rule 8 or report filed pursuant to SRC Rule 17 subject to the following provisions:chanroblesvirtuallawlibrary
     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 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 is given;
     b. Information in any part of the registration statement or other report may be incorporated by reference in answer, or partial answer, to any other item of the registration statement or other report; and
     c. 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.
 2. Identification of Incorporated Material. - 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. Matter shall not be incorporated by reference in any case where such incorporation would render the statement or report incomplete, unclear or confusing.
 3. Incorporation of Exhibits by Reference. -
    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.
    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.
 4. Prospectus. - Information shall not be incorporated by reference in a prospectus.

SRC Rule 13
Obligation of Issuers Where Registration of Securities Has Been
Suspended or Revoked  During a Public Offering

 If, during a public offering, the Commission revokes the effectivity of a registration statement under Section 13 of the Code, or suspends registration under Section 15 thereof:chanroblesvirtuallawlibrary
    1. The Commission shall publish a notice of such revocation or suspension in a newspaper of general circulation in the Philippines or on the Commission’s web page along with a statement that the offering in its current form has been cancelled and the duty of the issuer subject to such order, or any person acting on behalf of the issuer in the distribution of the subject securities, pursuant to paragraph 2 hereof to return any and all payments made by purchasers of the subject securities within ten (10) days of such publication, and simultaneously furnish a copy of this notice to the issuer.

    2. Upon receipt of a notice under paragraph 1 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.
 
SRC Rule 14
Amendments to the Registration Statement
 1. If a prospectus filed 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:chanroblesvirtuallawlibrary
     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;
     b. where the registration statement has been declared effective by the Commission, publish a notice in two newspapers of general circulation in the Philippines stating that the offering in its current form has been cancelled, citing the reasons for such proposed changes to the offering, and offering to rescind all transactions that have been completed for sale to date, without making any deduction pursuant to paragraph c below and wait thirty (30) days for purchasers to respond to the rescission offer before initiation of the amended offering; and
     c. where material amendments have been made to the prospectus after the effective date thereof, 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 of receipt of notification of such election, return the contributions paid by such purchasers without making any deductions. Purchasers who decide not to renounce their purchase of securities shall be subject to the terms of the amended offering.
  2.  An amendment containing information regarding the volume of securities being offered, the public offering price, underwriters (including discounts and commissions), amount of proceeds, and other items dependent on the offering price (pricing amendment), shall not generally be deemed to be a material amendment and will not recommence the forty five (45) day period under Section 14.2 of the Code as long as any change in the volume of securities being offered or the bona fide estimate of the maximum offering price range, if previously indicated, would not materially change the disclosure contained in the prospectus.
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 1 above or suspend or revoke registration under Section 13 or 15 of the Code.
 4. If, during a public offering, information other than material information in the prospectus changes, the issuer shall file a copy of the new information/changes with the Commission prior to making such changes in the registration statement, explaining all proposed changes thereto. Unless, within twenty (20) days of receipt of such changes, the Commission provides a written response to the issuer regarding such disclosure, the proposed changes shall be deemed to be part of the original disclosure: Provided, however, that a pricing amendment when filed pursuant to paragraph 2 of this Rule shall, upon such filing, be deemed to be part of the original disclosure.
 5. Every amendment to a registration statement shall be signed by the persons specified in Section 12.4 of the Code.
 6. There shall be filed with the Commission five (5) complete, unmarked copies of every amendment, including exhibits and other papers and documents filed as part of the amendment and three (3) additional copies marked to indicate clearly and precisely, by underlining or in some other appropriate manner, the changes effected in the registration statement by the amendment.
 7. Every amendment which relates to the prospectus shall include copies of the prospectus, as amended.   Only copies of the changed pages of the prospectus need to be included in the amendment.
 8. Every amendment of a financial statement which is not included in the prospectus shall include copies of the financial statement as amended. A copy of every amendment relating to a certified financial statement shall include the consent of the certifying accountant to the use of his certificate in connection with the amended financial statement in the registration statement or prospectus and to being named as having certified such financial statement.
 9. The date on which amendments are actually received by the Commission shall be the date of filing thereof if all of the requirements of the Code, and rules adopted thereunder, with respect to such filing have been complied with.
 
SRC Rule 16.1-1
Transition Rule for Pre-Need Plans

Rules and related Commission circulars governing pre-need plan companies and persons involved in the sale and distribution thereof adopted under the Revised Securities Act shall continue in force and effect until new rules are adopted under the Code.

SRC Rule 17
Requirements to File Annual, Quarterly, Current, Predecessor and Successor Reports

1. Applicability of Filing Requirements. - The reportorial provisions of  this Rule shall apply to the following issuers:chanroblesvirtuallawlibrary
     (a) issuers which have sold a class of their securities pursuant to a registration under Section 12 of the Code; provided, however, the obligation of such issuers to file reports shall be suspended for any fiscal year after the year such registration became effective if such issuer, as of the first day of any such fiscal year, has less than one hundred (100) holders of such class of securities and the Commission is duly notified of such; and
     (b) public companies as defined in SRC Rule 3.
2. Required Reports. -  Every issuer set forth in paragraph 1 hereof, shall file with the Commission:chanroblesvirtuallawlibrary
     (a)  an annual report on SEC Form 17-A for the fiscal year in which the registration statement approved by the Commission became effective, and for each fiscal year thereafter, within 105 days after the end of the fiscal year;
     (b)  a quarterly report on SEC Form 17-Q, within forty five (45) days after the end of each of the first three quarters 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;
     (c) (i) a 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.
     (ii) The disclosure required by subparagraph (c)(i) above shall be made by the issuer:chanroblesvirtuallawlibrary
       (A) promptly to the public through the news media;
       (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;
       (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.
     (iii) An illustrative, non-all inclusive, list of the kinds of events which shall be reported pursuant to this paragraph is contained in SEC Form 17-C. Merely because an event does not appear on that list does not mean that it does not have to be reported if, in fact, it is material.
 3. Annual Reports of Predecessors. – 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 registrants 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.
 4. Reporting by Successor Issuers. – In the event that a non-reporting issuer (in connection with a 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.


SRC Rule 17.1(b)
Information Statement Rule

1. Applicability of SRC Rule 17.1(b). -  The provisions of this Rule shall apply to issuers required to file reports pursuant to Section 17 of the Code and SRC Rule 17 thereunder.
2. Definitions. - As used in this Rule and in SEC Form 17-IS the following terms shall have the meaning indicated:chanroblesvirtuallawlibrary
     (a) Associate, when used to indicate a relationship with any person shall have the same meaning as that term is defined in “Annex B”.
     (b) Employee Benefit Plan means any purchase, savings, option, bonus, profit sharing, incentive, pension or similar plan primarily for employees, directors, trustees or officers.
     (c)  Entity that exercises fiduciary powers means any entity that holds securities in nominee name or otherwise on behalf of a beneficial owner.
     (d) Information statement means the statement required by paragraph 3 of this Rule
     (e)  Last fiscal year of the registrant means the last fiscal year of the registrant ending prior to the date of the meeting for which proxies are to be solicited.
     (f) Proxy includes every proxy, consent or authorization within the meaning of Section 20 of the Code.
      (g) Record date means the date as of which the record holders of securities entitled to vote at the meeting or by written consent or authorization shall be determined.
     (h) Registrant shall have the same meaning as that term is defined in “Annex B”.
3. Distribution of Information Statement. -
    a. In connection with every annual or other meeting of stockholders, the registrant shall transmit a written information statement containing the information specified in Form 17-IS to every security holder of the class that is entitled to vote or give an authorization or consent in regard to any matter to be acted upon and from whom proxy authorization or consent is not solicited on behalf of the registrant pursuant to Section 20 of the Code.
    b. The information statement shall be sent or given at least fifteen (15) business days prior to the meeting date.
4. Annual Report to be Furnished to Stockholders. -
    a. If the information statement relates to an annual (or special meeting in lieu of the annual) meeting of stockholders at which directors are to be elected, it shall be accompanied or preceded by an annual report to such stockholders.
    b. The annual report shall contain the information specified in SRC Rule 20 paragraph 3(b)(i) through (vii).
    c. The report required by this paragraph 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.
 5. Filing Requirements. -
    a. Preliminary copies of the information statement shall be filed with the Commission along with the payment of the prescribed fee at least ten (10) business days prior to the date definitive copies of such material are first sent or given to stockholders.
     
    b. Definitive copies of the information statement and the annual report pursuant to paragraph 4 above, in the form in which such material is furnished to stockholders shall be filed with, or mailed for filing to, the Commission not later than the date such material is first sent or given to any security holder. One (1) copy of such material shall at the same time be filed with, or mailed for filing to, each Exchange upon which any class of securities of the registrant is listed for trading.
6. False or Misleading Statements. -
    a. No information statement shall contain 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 same meeting or subject matter which has become false or misleading.
    b. The fact that an information statement 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 stockholders. No representation contrary to the foregoing shall be made.
 7. Providing Copies of Material for Certain Beneficial Owners. -
    a. If the registrant knows that securities of any class entitled to vote at a meeting with respect to which the information statement 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 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:chanroblesvirtuallawlibrary
      i. 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; and
      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 annual report to security holders necessary to supply such report to beneficial owners to whom such reports are to be distributed by such record holder.
       
     b. The registrant 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 annual 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.
     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.
SRC Rule 17-1
Notification of Inability to Timely File All or Any Required Portion of an SEC FORM 17-A or 17-Q
1. If all or any required portion of an annual report (SEC Form 11-A) or quarterly report (SEC Form 17-Q) required to be filed pursuant to Section 17 of the Code and SRC Rule 17 thereunder is not filed within the time 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 disclosure in reasonable detail of its inability to file the report timely and the reasons therefore. All information which is available on the date of the required filing shall be filed.
2. With respect to any report or portion of any report described in paragraph 1 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:chanroblesvirtuallawlibrary
    a. The issuer files the SEC Form 17-L in compliance with paragraph 1 hereof and, when applicable, furnishes the exhibit required by paragraph 3 hereof;
    b. The issuer represents in the SEC Form 17-L that:chanroblesvirtuallawlibrary
       (i)  The reason(s) causing the inability to file timely could not be eliminated by the issuer without unreasonable effort or expense; and
       (ii)  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
       
     c.  The report/portion thereof is actually filed within the period specified by paragraph 2(b)(ii) hereof.
3. If paragraph 2 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, the 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.
4. Notwithstanding paragraph 2 above, a registration statement filed on SEC Form 12-1 pursuant to SRC Rule 8, 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 2(c) hereof.
5. If a SEC Form 17-L filed pursuant to paragraph 1 above relates only to a portion of a subject report, the issuer shall:chanroblesvirtuallawlibrary
    a. File the balance of such report and indicate on the cover page thereof which disclosure items are omitted; and
    b.  Include, on the upper right corner of the amendment to the report which includes the previously omitted information, the following statement:chanroblesvirtuallawlibrary
SRC Rule 18.1
Reports to be Filed by 5% Beneficial Owners
1. The provisions of this Rule shall apply to any person who acquires directly or indirectly the beneficial ownership of more than five (5%) percent of any class of equity securities of a company that satisfies the requirements of Subsection 17.2 of the Code.
2. For purposes of this Rule equity securities means securities which provide the holder thereof with voting rights and shall not include convertible securities and other derivatives except as provided in the definition of beneficial owner in SRC Rule 3.
Any person who qualifies under paragraph 1 of this Rule shall, within five (5) business days after such acquisition, submit to the Issuer, the Exchange where the security is traded, and to the Commission a sworn statement containing the information required by SEC Form 18-A.
3.a.  A person required to file a report on SEC Form 18-A may, in lieu thereof, file with the Commission, within forty five (45) days after the end of the year in which such person became so obligated, copies of a short form report on SEC Form 18-AS including all exhibits, and send one copy of such report to the issuer of the security at its principal executive office and to each Exchange where the security is listed for trading; Provided, that the percentage of the class of equity security beneficially owned as of the end of the calendar year is more than five (5) percent, and that:chanroblesvirtuallawlibrary
     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;
    ii. such person is:chanroblesvirtuallawlibrary
     
      A.  A broker or dealer registered under the Code;
      B.  A bank authorized to operate as such by the Bangko Sentral ng Pilipinas;
      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 Bureau of Internal Revenue and/or the Insurance Commission; or
      G.   A group where all of the members are persons specified above. and
    iii. such person has promptly notified any other person on whose behalf it holds, on a discretionary basis, securities exceeding five (5%) percent 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.  Any person who has reported an acquisition of securities on SRC 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 (5) percent of the class of equity securities.
5. 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.
6. If any material change occurs in the facts set forth in SEC Form 18-A, including, but not limited to, any material increase or decrease in the percentage of the class beneficially owned, the person or persons who were required to file such Form shall, within three (3) business days file, or cause to be filed with the Commission and send or cause to be sent to the issuer at its principal executive office, by registered or certified mail, and to each Exchange on which the security is listed for trading an amendment disclosing such change. An acquisition or disposition of beneficial ownership of securities in an amount equal to five (5%) percent or more of the class of securities outstanding and/or an acquisition that results in an increase in ownership to more than fifty percent (50%) of the class of securities outstanding shall be deemed “material” for purposes of this paragraph; acquisitions or dispositions of less than such amounts may be material, depending on the facts and circumstances.
7. Any person who has filed an SEC Form 18-AS, pursuant to the provisions of paragraph 3, shall amend such report within forty five (45) days after the end of each calendar year if, as of the end of such calendar year, there are any changes in the information reported in the previous filing on that Form. Copies of such amendment, including all exhibits, shall be filed with the Commission and one each sent to the issuer of the security at its principal executive office and to the Exchange on which the security is listed for trading.
8. Once an amendment to SEC Form 18-A or SEC Form 18-AS has been filed reflecting beneficial ownership of five (5) percent or less of the class of securities, no additional filings are required unless the person thereafter becomes the beneficial owner of more than five (5) percent of the class and is required to file pursuant to this Rule.
9. For purposes of Section 18 of the Code, “beneficial owner” shall have the same definition as set forth in SRC Rule 3, provided that:chanroblesvirtuallawlibrary
    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;
    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

    c. When two 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.
SRC Rule 19.1
Tender Offers
1. Definitions
    a. Beneficial owner shall have the same meaning as set forth in SRC Rule 3.
    b. Bidder means any person who makes a tender offer or on whose behalf a tender offer is made.
    c. Commencement means the date a tender offer is first published, sent or given to security holders.
    d. Equity securities shall have the same meaning as set forth in SRC Rule 18.1.
    e. Security holders means holders of record and beneficial owners of securities that are the subject of a tender offer.
    f. Target company means any issuer of securities that are sought by a bidder pursuant to tender offer.
     g. 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.
    h. Tender offer materials means:chanroblesvirtuallawlibrary
     
      (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.
    i. Termination means the date after which securities may not be tendered pursuant to the tender offer.
 2.  Mandatory tender offers
    a. Except as provided in paragraph 3 below, a person is required to make a tender offer for equity shares of a public company in an amount equal to the number of shares that the person intends to acquire in the following circumstances:chanroblesvirtuallawlibrary
      i. The person intends to acquire fifteen percent (15%) or more of the equity shares of a public company pursuant to an agreement made between or among the person and one or more sellers;
      ii. The person intends to acquire thirty percent (30%) or more of the equity shares of a public company within a period of 12 months; or
      iii. The person intends to acquire shares that would result in ownership of more than fifty percent (50%) of the equity shares of a public company.
    b. A person shall be presumed to have the intent that would mandate the making of a tender offer pursuant to paragraph (a) above when the person, respectively:chanroblesvirtuallawlibrary
      i. acquires 15% or more of the equity shares of a public company pursuant to an agreement made between or among the person and the seller or sellers;
      ii. acquires 30% or more of the shares of a public company within a period of 12 months; or
      iii. acquires shares that result in ownership of more than fifty percent (50%) of the equity shares of a public company.
       
    c. A mandatory tender offer shall be made in accordance with this Rule.
 3. Relief from Mandatory Tender Offer Requirement
    a. The Commission, upon written application, and consistent with the policies set forth in Section 2 of the Code and pursuant to its powers under Section 72.1 thereof, may exempt from the requirement to make a mandatory tender offer the following proposed purchases of equity shares of a public company:chanroblesvirtuallawlibrary
      i. the purchase of newly issued shares from unissued capital stock;
      ii.  in connection with foreclosure proceeding involving a duly constituted pledge or security arrangement where the acquisition is made by the debtor or creditor;
      iii. purchases in connection with privatization undertaken by the government of the Philippines; or
      iv. purchases in connection with corporate rehabilitation under court supervision.
       
    b.  Purchasers who are granted an exemption are required to comply with disclosure and other obligations under SRC Rule 18, SRC Rule 23, and Section 23 of the Code: Provided however, an exemption under paragraph 3(a) of this Rule shall not become effective until publicly disclosed by the purchaser in a newspaper of general circulation. Such disclosure shall describe the proposed transaction and indicate the subsection of paragraph 3(a) above under which exemption was claimed. Any person seeking an exemption under this paragraph may not rely upon the grant of a previous exemption and shall separately apply for such relief.
    c. Equity shares of a public company acquired through open market purchases at the prevailing market price shall be automatically exempted from mandatory tender offer requirements provided that such purchaser complies with disclosure requirements under Sections 18 and 23 of the Code and rules adopted thereunder.
4. Voluntary tender offers
    a. A person may make a voluntary tender offer.
    b. A voluntary tender offer shall be made in accordance with this Rule.
    c.  A person will be presumed to be making a voluntary tender offer where some or all of the following factors are present:chanroblesvirtuallawlibrary
      i. Active and widespread solicitation of public shareholders for the shares of a public company;
      ii.  Solicitation made for a substantial percentage of the issuer’s stock;
      iii. Offer to purchase is made at a premium over the prevailing market price, at firm rather than negotiable terms;
      iv.  An offer is contingent on the tender of a fixed number of shares; and/or
      v.  Offer is only open for a limited period of time.
5.  Any person making a tender offer shall make a public announcement of his intention, prior to the commencement of the offer; Provided, however, such announcement shall not be made until the bidder has the resources to implement the offer in full.
6. Tender Offer Statement
    a.  No bidder shall make a tender offer unless as soon as practicable on the date of the commencement of the tender offer such bidder:chanroblesvirtuallawlibrary
      i.  Files with the Commission copies of SEC Form 19-1, including all exhibits thereto; and
      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.
       
    b.  The bidder shall file with the Commission copies of any additional tender offer materials as an exhibit to the SEC Form 19-1 and, if a material change occurs in the information set forth in such SEC Form 19-1, copies of an amendment to such SEC Form. Copies of such additional tender offer materials and amendments shall be hand delivered to the company and to any Exchange as required above.
    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.
7. Disclosure Requirements with Respect to Tender Offers
    a. The bidder shall publish, send or give to security holders in the manner prescribed in this Rule, a report containing the following information:chanroblesvirtuallawlibrary
      i. Identity of the bidder;
      ii.  Identity of the target company;
      iii. Amount of class of securities being sought and the type and amount of consideration being offered therefor;
      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;
      v. The exact dates 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;
      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 of the 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;
      vii. Confirmation by the bidder’s financial adviser or another appropriate third party that resources are available to the bidder sufficient to satisfy full acceptance of the offer; and
      viii. The information included in SEC Form 19-1.
       
     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.
8.  Dissemination of Tender Offers
    a. A bidder may publish, send or make the tender offer by complying fully with one of the following methods of dissemination:chanroblesvirtuallawlibrary
      i. Long Form Publication. The bidder may publish in two newspapers of general circulation in the Philippines on the date of commencement of the tender offer and for two consecutive days thereafter the information required by paragraph 7 (a) of this Rule; or
      ii. Summary Publication. The bidder may publish in two newspapers of general circulation in the Philippines on the date of commencement of the tender offer and for two consecutive days thereafter the information required by paragraph 7 (a)(i) through (vii) of this Rule, including appropriate instructions for security holders regarding how to obtain promptly, at the expense of the bidder, the information included in SEC Form 19-1, and furnish promptly a copy of SEC Form 19-1 to any security holder who requests a copy of such information.
       
    b. 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.
9.  Manner of Making Tender Offer
    a. The tender offer, unless withdrawn, shall remain open until the expiration of:chanroblesvirtuallawlibrary
      i. 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 it is publicly announced; and
      ii. At least ten (10) business days from the date that 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.
       
    b. Where a mandatory tender offer is required, the bidder is required 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.
    c. During the course of a tender offer, or before the commencement thereof if the board of the target company has reason to believe that an offer might be imminent, it shall not engage in any of the following transactions, except 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:chanroblesvirtuallawlibrary
      i. Issue any authorized but unissued shares;
      ii. Issue or grant options in respect to any unissued shares;
      iii. Create or issue, or permit the creation or issue of, any securities carrying rights of conversion into, or subscription for, shares;
      iv. Sell, dispose of or acquire, or agree to acquire, any assets, the value of which amounts to five percent (5%) or more of the total value of assets prior to acquisition; or
      v. Enter into contracts otherwise than in the ordinary course of business.
       
    d. The bidder in a tender offer shall permit securities tendered to be withdrawn:chanroblesvirtuallawlibrary
      i.  At any time during the period such tender offer remains open; and
      ii. If not yet accepted for payment, after the expiration of sixty (60) business days from the commencement of the tender offer.
       
    e. If the tender offer is for less than all of the outstanding equity securities of a class, and if a greater number of securities is tendered pursuant thereto than the bidder is bound or willing to take up and pay for, the securities taken up and paid for shall be taken up and paid for as nearly as may be pro rata, disregarding fractions, according to the number of securities tendered by each security holder during the period such offer remains open.
     
    f. In the event the bidder in a tender offer increases 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.
    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 of withdrawal of the tender offer.
    h. No tender offer may be made unless:chanroblesvirtuallawlibrary
      i. The tender offer is open to all security holders of the class of securities subject to the tender offer; and
      ii. The consideration paid to any security holder pursuant to the tender offer is the highest consideration paid to any other security holder during such tender offer.
       
    i. The bidder in a tender offer may not extend the length of a tender offer 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.
10. Transactions on the Basis of Material, Non-Public Information
If a person becomes aware of a potential tender offer before the tender offer has been publicly announced, such person may not buy or sell, directly or indirectly, the securities of the target company until the tender offer is publicly announced. Such buying or selling shall constitute insider trading under Section 27.4 of the Code.

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 lapses, announce an offer for the target company nor acquire any equity 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.

 
Rule 20
The Proxy Rule
1. Applicability of SRC Rule 20
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.
2. Definitions
    a. As used in this Rule and SEC Form 20, the following terms shall have the same meaning as defined in SRC Rule 17.1(b): associate, employee benefit plan, entity that exercises fiduciary powers, last fiscal year, proxy, and record date.
    b. Proxy statement means the statement required by paragraph 3(a) of this Rule.
    c. Registrant means the issuer of the securities in respect of which proxies are to be solicited.
    d. Solicitation
      i. The terms solicit and solicitation include:chanroblesvirtuallawlibrary
        A. any request for a proxy whether or not accompanied by or included in a form of proxy;
        B. any request to execute or not to execute, or to revoke, a proxy; or
        C. the furnishing of a form of proxy or other communication to security holders under circumstance reasonably calculated to result in the procurement, withholding or revocation of a proxy.
         
      ii. The terms do not apply to:chanroblesvirtuallawlibrary
        A. The furnishing of a form of proxy to a security holder upon the unsolicited request of such security holder;
        B. The performance by any person of ministerial acts on behalf of a person soliciting a proxy; or
        C. Any solicitation made otherwise than on behalf of the registrant where the total number of persons solicited is not more than ten (10).
3. Information to be Furnished to Security Holders
    a. No solicitation subject to this Rule shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in SEC Form 20 which has been filed with the Commission.
    b.  If the solicitation is made on behalf of the registrant, and relates to an annual (or special meeting in lieu of annual) meeting of security holders at which directors are to be elected, each proxy statement shall be accompanied or preceded by an annual report to security holders as follows:chanroblesvirtuallawlibrary
      i. The report shall include, for the registrant and its subsidiaries, consolidated, audited financial statements as required by SRC Rule 68.
      ii. The report shall contain information concerning disagreements with accountants on accounting and financial disclosure required by Part III(b) of “Annex C”.
      iii. The report shall contain management’s discussion and analysis or plan of operation required by Part III(a) of “Annex C”.
      iv. The report shall contain a brief description of the general nature and scope of the business of the registrant and its subsidiaries.
      v. The report shall identify each of the registrant's directors and executive officers and shall indicate the principal occupation or employment of each such person and the name and principal business of any organization by which such person is employed.
      vi. The report shall contain the market price of and dividends on the registrant’s common equity required by Part II(a) of “Annex C”.
      vii. The proxy statement or the report shall contain 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 shall indicate 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.
      viii. Copies of the report sent to security holders pursuant to this rule shall be filed, or mailed for filing with, the Commission not later than the date on which such report is first sent or given to security holders.
      ix. This report 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.
4. Requirements as to Form of Proxy and Delivery of Information to Security Holders
    a. The form of proxy shall:chanroblesvirtuallawlibrary
      i. indicate in bold-face type on whose behalf the solicitation is made;
      ii. provide a specifically designated blank space for dating the proxy card;
      iii. identify clearly and impartially each separate matter intended to be acted upon;
      iv. be in writing, signed by the stockholder or his duly authorized representative; and
      v. be filed with the Corporate Secretary before the scheduled meeting.
       
    b. i. Means shall be provided in the form of proxy 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 elections 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.
      ii. A form of proxy 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:chanroblesvirtuallawlibrary
        A. a box opposite the name of each nominee which may be marked to indicate that authority to vote for such nominee is withheld;
        B. 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
        C. 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.
      iii. Any form of proxy 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 form of proxy so states in prominent bold-face type.
    c. A proxy may confer discretionary authority to vote with respect to any of the following:chanroblesvirtuallawlibrary
      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 proxy statement or form of proxy;
      ii. Approval of the minutes of the prior meeting if such approval does not amount to ratification of the actions taken at that meeting;
      iii. The election of any person to any office for which a bona fide nominee is named in the proxy statement and such nominee is unable to serve or for good cause will not serve; or
       iv. Matters incident to the conduct of the meeting
       
    d. No proxy shall confer authority
      i. to vote for the election of any person to any office for which a bona fide nominee is not named in the proxy statement;
      ii. to vote with respect to more than one meeting (and any adjournment thereof), unless a specific statement is made in the proxy 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
      iii. to consent to or authorize any action other than the action proposed to be taken in the proxy statement or matters referred to above.
    e. The proxy statement or form of proxy 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.
    f. The form of proxy, together with the proxy statement, shall be sent or given to security holders at least fifteen (15) business days prior to the meeting date.
5. Filing Requirements
    a. Preliminary copies of the proxy statement and form of proxy shall be filed with the Commission at least ten (10) business days prior to the date definitive copies of such material are first sent or given to security holders.
    b. Copies of the definitive proxy statement, form of proxy and all other soliciting material, in the form in which such material is furnished to security holders shall be filed with, or mailed for filing to, the Commission not later than the date such material is 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 upon which any class of securities of the registrant is listed for trading.
    c. If the solicitation is to be made in whole or in part by personal solicitation, copies of all written instructions or other material which discusses or reviews, or comments upon the merits of, any matter to be acted upon and which is furnished to 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 is made not later than the date any such material is first sent or given to such individuals.
    d. If any proxy statement, form of proxy or other material filed pursuant to this Rule is 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.
    e. At the time of filing the preliminary proxy solicitation material, the person upon whose behalf the solicitation is made, shall pay the Commission the prescribed fee.
6. Obligations of Registrant to Provide a List of, or Mail Soliciting Material to, Security Holders
    a. If the registrant has made or intends to make a proxy solicitation in connection with a stockholders’ meeting and 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 requesting stockholder’s material, the registrant may, at its option, provide the list or mail the material for the requesting stockholder.
    b. If the registrant elects to mail the material for the requesting stockholder, the registrant shall:chanroblesvirtuallawlibrary
      i. advise the requesting stockholder promptly of the number of record holders and beneficial holders to whom the soliciting materials will be sent;
      ii. advise the requesting stockholder of the estimated cost of mailing a proxy statement, form of proxy or other communication to such holders; and
      iii. mail the materials to the stockholders with reasonable promptness.
7. False or Misleading Statements
    a. No solicitation subject to this Rule shall be made by means of any proxy statement, form of proxy, notice of meeting or other communication, written or oral, 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.
    b. The fact that a proxy statement, form of proxy or other soliciting 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.
8. Prohibition of Certain Solicitations
    No person making a solicitation which is subject to this Rule shall solicit:chanroblesvirtuallawlibrary
      a. any undated or post-dated proxy, or
      b. 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.
9. Special Provisions Applicable to Election Contests
    a. This paragraph applies to any solicitation by any person or group of persons for the purpose of opposing a solicitation subject to this Rule by any other person or group of persons with respect to the election or removal of directors at any annual meeting of security holders.
    b. Notwithstanding the provisions of paragraph 3 of this Rule, a solicitation subject to this Rule may be made prior to furnishing security holders a written proxy statement containing the informaton specified in SEC Form 20 with respect to such solicitation, provided that:chanroblesvirtuallawlibrary
      i. No form of proxy is furnished to security holders prior to the time the written proxy statement required by paragraph 3 of this Rule is furnished to security holders. This subparagraph shall not apply where a proxy statement then meeting the requirements of SEC Form 20 has been furnished to security holders by or on behalf of the other party to the contest.
      ii. The identity of the participants in the solicitation and a description of their interest, direct or indirect, by security holdings or otherwise, are set forth in each communication published.
      iii. A written proxy statement meeting the requirements of paragraph 3(a) of this Rule is sent or given to security holders being solicited pursuant to paragraph 9(b) of this Rule at the earliest practicable date.
       
    c. Copies of any soliciting material published, sent or given to security holders prior to the furnishing of the written proxy statement required by paragraph 3 of this Rule shall be filed with the Commission no later than the date such material is published, sent or given to any security holder.
    d. The provisions of paragraphs b, c, and d of paragraph 5 of this Rule shall apply, to the extent pertinent, to soliciting material subject to paragraph 9(c) of this Rule.
10. Obligation of Registrants in Communicating with Beneficial Owners
    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:chanroblesvirtuallawlibrary
      i. 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; and
      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 annual report to security holders necessary to supply such report to beneficial owners to whom such reports are to be distributed by such record holder.
       
    b. 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 proxy, other proxy soliciting material, and/or the annual 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.

    c. Upon the request of any record holder that is supplied with proxy soliciting material and/or annual reports to security holders 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.
SRC Rule 23
Reports to be Filed by Directors, Officers and Principal Stockholders
1. Every person who is directly or indirectly the beneficial owner of more than ten per cent (10%) of any class of any equity security of a company which satisfies the requirements of Subsection 17.2 of the Code, or who is a director or an officer of the issuer of such security, shall:chanroblesvirtuallawlibrary
    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 equity securities of such issuer of which he is the beneficial owner;
    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; and
    c. notify the Commission if his direct or indirect beneficial ownership of equity 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 a Form 23-B.
2. Beneficial Owner shall have the same meaning as that term is defined in SRC Rule 3.
3. In determining, whether a person is the beneficial owner, directly or indirectly, of more than ten per cent (10%) of any class of any registered equity 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.
4. A person filing a statement pursuant to this Rule otherwise than as the direct beneficial owner of any security shall specify the nature of his beneficial ownership in such security.

5. A partner who is required under this Rule to report in respect to any security owned by the partnership may include in his statement the entire amount of such security owned by the partnership and state that he has an interest in such security by reason of his membership in the partnership, without disclosing the extent of such interest; or such partner may file a statement only as to that amount of such security which represent his proportionate interest in the partnership, indicating that the statement covers only such interests.

 
SRC Rule 24.1(b)-1
Manipulative Practices
1. It shall be unlawful for any person to make a bid or offer, or deal in securities, with the intention, or if that bid, offer or dealing, has the effect or is likely to have the effect, of 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.
2. It shall be unlawful for any Broker Dealer, associated person or salesman of a Broker Dealer (hereinafter collectively referred to as “registered person”), to make a bid or offer for, or deal in securities, on account of any other person where the registered person intends to create, or the registered person is aware that the other person intends to create, or taking into account the circumstances of the order, the registered person reasonably suspects that a person has placed the order with the intention of 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.
3. In considering whether an order violates Section 24 of the Code, a Broker Dealer shall consider:chanroblesvirtuallawlibrary
    a. Whether the order, or execution of the order, would materially alter the market for, and/or the price of, the securities;
    b. The time the order is entered or any instructions concerning the time of entry of the order;
    c. 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;
    d. Whether the order is accompanied by settlement, delivery or security arrangements which are unusual;
    e. Whether the order appears to be part of a series of orders, whether when put together with 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
    f. Whether there appears to be a legitimate commercial reason for that person 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 a transaction/s is manipulative.
4.  Obligations imposed on registered persons under this rule apply in respect of all orders, irrespective of the trading system used.
5. Set forth below are non-exclusive examples of types of prohibited conduct:chanroblesvirtuallawlibrary
    a. 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);
    b. Buying and selling securities at the close of the market in an effort to alter the closing price of the security (marking the close);
    c. 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);
    d. Engaging in buying activity at increasingly higher prices and then selling securities in the market at the higher prices (hype and dump);
    e. Engaging in transactions in which there is no genuine change in actual ownership of a security (wash sales);
    f. 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); or
    g. 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.
SRC Rule 24.1(d)-1
Advertisements and Communications with the Public

1. 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 may 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. 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.

3. Communications with the public shall not contain promises of specific results, exaggerated or unwarranted claims or unwarranted superlatives, opinions for which there is no reasonable basis, or forecasts of future events which are unwarranted, or which are not clearly labeled as forecasts.

4. 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:chanroblesvirtuallawlibrary

    a. the overall context in which the statement or statements 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;
    b. 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
    c. the overall clarity of the communication. A statement or disclosure made in an unclear manner obviously can result in a lack of understanding of the statement, or in a serious misunderstanding. A complex or overly technical explanation may be worse than too little information. Likewise material disclosure relegated to legends or footnotes realistically may not enhance the reader's understanding of the communication.
SRC Rule 24.1(d)-2
Publication of Transactions and Quotations
 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 which purports to report any transaction as a purchase or sale of any security unless such person believes that such transaction was a bona fide purchase or sale of such security; or which purports to quote the bid price or asked price for any security, unless such person believes that such quotation represents a bona fide bid for, or offer of, such security.
 
SRC Rule 24.1(d)-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 matter which is clearly distinguishable as paid advertising.
 
SRC Rule 24.2-3
Prohibition on Guarantees against Loss

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.

SRC Rule 25.1
Definition of Put, Call, Straddle and Option
1. Except as provided in paragraph 3 of this Rule, the terms Put, Call and Option have the same meanings as defined in SRC Rule 3.1-1.
 2. Except as provided in paragraph 3 of this Rule, Straddle involves the purchase of an equal number of put options and call options on the same underlying security at the same strike price and maturity date. Each option may be exercised separately, although the combination of options is usually bought and sold as a unit.
3. The terms put, call, straddle, option or privilege shall not include any  registered warrant, right or convertible security.
 
SRC Rule 26.3-1
Use of Information Obtained in Fiduciary Capacity
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 30.2-9, provide such information to any person who does not need such information to fulfill his responsibilities under the Code.


SRC Rule 26.3-2
Prohibited Representations

 It shall be unlawful for any:chanroblesvirtuallawlibrary
    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;
    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; and/or

    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.
SRC Rule 28.1-1
Registration of Brokers and Dealers
1. 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:chanroblesvirtuallawlibrary
    a. Whether he is an Exchange member or non-Exchange Member;
    b. If an Exchange member, whether he shall engage in market making transactions;
    c. If a non-Exchange member, whether he is operating a seat for or using the trading rights of an Exchange member;
    d. If a non-Exchange member, whether he shall deal only with proprietary shares.
2. “Market making transactions” shall mean transactions in a particular security/ies:chanroblesvirtuallawlibrary
    a. by a Broker Dealer which complies with Commission and Exchange rules regarding its duty as a market maker; and
    b. to ensure two way quotes, provide liquidity, and maintain a fair and orderly trading market therein.
3. An applicant for registration as a Broker Dealer shall be solely engaged in the business of a Broker Dealer.
4. Every application for registration as a Broker Dealer  shall be filed on SEC Form 28-BD and be accompanied by the following papers or documents:chanroblesvirtuallawlibrary
    a. 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, its subsidiaries or affiliates, and persons under common control with the Broker Dealer and shall be continuous with registration by the Commission;
    b.  Indicating compliance with paid up capital requirements pursuant to paragraph 5(e) of this rule in lieu of the surety bond to secure compliance with the Code: Provided, however, that Broker Dealers who do not meet the new paid up capital requirements under paragraph 5(e) of this Rule, are seeking new registration under the Code shall obtain a surety bond in compliance with SRC Rule 28.1-5;
    c. Valid work permit of foreigners connected in any capacity with the applicant;
    d. Copies of identity cards/passports of individual applicants and directors and persons who control more than ten percent (10%) of a class of voting securities of corporate applicants;
    e. Written supervision and control procedures, including procedures for establishing and maintaining a “Chinese wall” pursuant to SRC 34.1-3;
    f. A schedule of minimum commission charges as required by SRC Rule 30.2-5;
     g. Calculation of net capital requirements in accordance with paragraph 5(b) of this Rule and SRC Rule 49.1-1;
    h. Evidence of educational, professional/technical or other academic qualifications of Officers, Associated Persons and Salesmen;
    i. Latest audited financial statement;
    j. 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;
    k. Organization chart, including branch offices;
    l. If the applicant is a corporation, a certified copy of the following documents under oath, by the corporate secretary:chanroblesvirtuallawlibrary
      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;
      2. Articles of Incorporation indicating that the purpose of the applicant is to engage in the business of a Broker Dealer; and
      3. Board resolution attesting to particulars contained in the application; and
    m. 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.
5. Initial and ongoing terms and conditions for registration.
    a. Applicant shall be a member in good standing of an SRO; Provided, however that any applicant who is not a member of an SRO may only be granted registration conditioned upon future membership in an SRO;
    b. 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 49.1-1;
    c. Membership or participation in a Trust Fund accredited by the Commission under SRC Rule 36.4 (a)-1;
    d. Where the Broker Dealer is a participant in a registered clearing agency, which is not solely engaged in the business of a securities depository, fulfillment of its obligation to contribute to the guarantee fund;
    e. Unimpaired paid up capital for Broker Dealers who are seeking new registration under the Code, including those acquiring existing Broker Dealers, in the amount of 100 Million Pesos: Provided, however, that any existing Broker Dealer who is currently registered under the Revised Securities Act and plans on engaging in market making transactions shall likewise have the same paid-up capital: Provided further, that non Exchange member applicants who will deal only with proprietary shares shall have unimpaired paid-up capital of P5 Million: Provided, finally, that other existing Broker Dealer applicants currently registered under the Revised Securities Act and seeking new registration under the Code, who are not seeking authorization to engage in market making transactions, and who do not have an unimpaired paid up of 100 Million Pesos, shall file the required surety bond in lieu of new paid up capital until such time that the Exchange is demutualized and the Commission mandates a new paid-up capital requirement in view thereof;
    f. Registration of each branch office;
    g. 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 28.1-1;
    h. 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 28.1-1;
    i. A sufficient number of back office staff at the main office of the applicant;
    j. A computerized and effective recording and accounting system;
    k. Separate bank accounts for client funds;
    l. Separate bank account for firm funds;
    m. Separate office premises and facilities;
    n. Reporting, using SEC Form 28-BDA, any changes in the information provided in the application form to the Commission in writing with seven (7) days of such changes; and
    o. Timely payment of prescribed annual fees and filing of reports required under the rules and regulations.
SRC Rule 28.1.2
Registration of Successor to Broker Dealer
1. 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 as the registration of the successor if the successor, within thirty (30) days after such succession, files an application for registration on SEC Form 28-BD and the Commission, within such period, approves such registration: Provided, however, the registration of the predecessor Broker Dealer will cease to be effective forty five (45) days after the publication of registration on SEC Form 28-BD is filed by such successor.
2. The following are examples of the types of reorganizations that require the success or of a Broker Dealer to file a new application:chanroblesvirtuallawlibrary
    a. An unregistered entity purchases or assumes substantially all of the assets and liabilities of a Broker Dealer, and the unregistered entity then operate the business of the Broker Dealer;
    b. If two or more registered Broker Dealers consolidate their firms and conduct their business through a new unregistered entity which assumes substantially all of the assets and liabilities of the predecessor entities, the new entity shall file a complete application on SEC Form 28-BD, while the predecessor firms shall each be required to file for withdrawal from registration under SRC Rule 28.1-3.
3. Notwithstanding paragraph 1 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:chanroblesvirtuallawlibrary
    a. A corporate reorganization or restructuring that does not result in a change in control of the Broker Dealer; or
    b. A succession resulting from a change in the form of business, such as from a partnership to a corporation.
SRC Rule 28.1-3
Withdrawal from Registration of a Broker Dealer
1. Notice of withdrawal from registration as a Broker Dealer shall be filed on SEC Form 28-BDW in accordance with the instructions contained therein.
2. A notice to withdraw from registration filed by a Broker Dealer shall become effective on the sixtieth (60th) day after the filing thereof with the Commission or within such shorter period of time as the Commission may determine. If a notice to withdraw from 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 notice of withdrawal, the Commission institutes such proceedings or a proceeding to impose terms and conditions upon such withdrawal, the notice of withdrawal 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.
 
 SRC Rule 28.1-4
Registration of Salesmen and Associated Persons of Broker Dealers
l. 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.
2. For purposes of this Rule:chanroblesvirtuallawlibrary
     a. Salesman shall not include any employee of an issuer whose compensation is not determined directly or indirectly on sales of securities of the issuer.
    b. Associated person shall mean any person employed by the Broker Dealer whose responsibilities include 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.
3. Notice of discontinuation of employment of a salesman or associated person and the reasons therefor, 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.
4. 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:chanroblesvirtuallawlibrary
    a. Valid work permit if the applicant is a foreigner;
    b. Copies of identity cards/passports of applicant;
    c. Evidence that such person has complied with applicable examination requirements or meets other educational, professional or technical qualifications; and
    d. Evidence that a Broker Dealer has agreed to employ such person contingent upon such person’s registration as a salesman or associated person.
5. Terms and conditions for applicants for registration:chanroblesvirtuallawlibrary
    a. Applicants shall be only natural persons employed by a Broker Dealer;
    b. Applicants for salesmen shall be at least 18 years of age and applicants for associated person shall be at least 21 years of age;
    c. Applicants for registration as a salesman shall have no disciplinary history that would subject them to disqualification from registration under Section 29 of the Code;
    d. Applicants for registration as an associated person, shall not have been censured or reprimanded by a professional, trade or regulatory body 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;
    e. If the applicant is applying for registration as a salesman or associated person for the first time, he must first be certified by the SRO with whom his employer is a member or participant, as a Certified Securities Representative or Certified Associated Person; and
    f. Applicants shall have at least three (3) years experience as a registered salesman or associated person or no later than three (3) years from date of application passed applicable examination requirements; Provided, however, that all applicants shall 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.
6. 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.
7. Duties of an Associated person. An Associated person shall:chanroblesvirtuallawlibrary
    a. actively participate in the business of the Broker Dealer for whom he is employed;
    b. be responsible for supervising other employees, agents, salesmen, officers, directors, clerks and stockholders of the Broker Dealer for compliance with the Code and rules and regulations adopted thereunder;
    c.  be responsible for overseeing 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);
    d. ensuring that all salesmen of the Broker Dealer are registered and that the Commission is notified when any salesmen is no longer employed by the Broker Dealer;
    e. developing procedures and monitoring on a daily basis compliance with financial resource requirements; and
    f. ensuring that there is an audit trail which enables compliance with applicable laws, Exchange, clearing agency and other SRO rules.
8. As a condition for maintaining their status as such, registered salesmen and associated persons shall:chanroblesvirtuallawlibrary
    a. Report any changes in the information provided in the application form to the Commission in writing within seven (7) days of such changes, using SEC Form 28-AMD;
    b. 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
    c. Be able to demonstrate an on-going understanding of applicable regulatory requirements and Exchange, clearing agency, and other SRO rules.
9. Every registered salesman and associated person shall pay the Commission, no later than one year from the anniversary date of their registration date, the annual prescribed fee. If such fee is not paid, the registration of such person shall be suspended until payment has been made, but if not paid prior to the expiration of thirty (30) days after the required payment date, the registration shall be terminated.


SRC Rule 28.1-5
Broker Dealer Surety Bond

The amount of surety bonds required to be filed pursuant to SRC Rule 28.1-1 by Broker Dealers who have elected to defer compliance with 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.   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.


SRC Rule 28.2-3
Compliance with Qualification Requirements of Self Regulatory Organizations

 No Broker Dealer shall effect any transaction in, or induce the purchase or sale of, any security unless the employee of such Broker Dealer who effects or is involved in effecting such transaction is registered or approved in accordance with the standards of training, experience, competence, and other qualification standards (including, but not limited to, submitting and maintaining all required forms, paying all required fees, and passing the required examinations) established by the rules of any Exchange or other Self Regulatory Organization where such Broker Dealer is a Member of or Participant in.


SRC Rule 29
Protection of Customer Accounts Where Registration of a Broker Dealer is Suspended or Revoked

 Where the Commission has suspended or revoked the registration of a Broker Dealer under Section 29 of the Code:chanroblesvirtuallawlibrary
    1. Where such Broker Dealer is a Member of an Exchange, the Exchange shall immediately arrange for another Member to take over any outstanding contracts relating to securities, simultaneously notify the Commission in writing of such transfer and any affected customers that their accounts have been transferred, and provide such customers with the opportunity to re-transfer their account to another Broker Dealer of their choice; or

    2. Where such Broker Dealer is not a Member of an Exchange, the Commission shall notify any affected customers of such suspension or revocation and require that they transfer their account to another Broker Dealer.
SRC Rule 30.1
Monitoring of Affiliated Transactions by Broker Dealers
1. Every Broker Dealer shall request every stockholder, director, associated person, salesman and authorized clerk of the Broker Dealer (collectively referred to as “director”) to complete and submit to the Broker Dealer an executed copy of SEC Form 30.1 under oath (hereinafter referred to as the “questionnaire”) to ensure compliance with the prohibitions set forth in Section 30.1 of the Code.
2. Based on information set forth in the questionnaire, every Broker Dealer shall provide the Commission with a list of securities that the Broker Dealer is prohibited from dealing in, purchasing or selling, and shall file an amendment thereto with the Commission, within twenty four (24) hours of any change thereto.
3. Every director shall ensure that his questionnaire is accurate and complete at all times and shall update and submit to the Broker Dealer any amendments thereto within twenty four (24) hours to reflect any change thereto.
4. The failure of any director to comply with this rule shall be deemed a violation of the Code.
SRC Rule 30.2-1
Ethical Standards Rule

1. 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. 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:chanroblesvirtuallawlibrary

    a. Honesty and fairness - In conducting his business activities, a registered person should act honestly, fairly and in the best interest of his client and the integrity of the market.
    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)-1.
    b. Diligence. - In conducting his business activities, a registered person should act with due skill, care and diligence, in the best interests of his clients and the integrity of the market:chanroblesvirtuallawlibrary
      i. A registered person shall take all reasonable steps to execute promptly client orders in accordance with the instruction of clients.
      ii. A registered person when acting for or with clients shall always execute client orders on the best available terms in compliance with SRC rule 32.2(a)-2.
      iii. 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.
      iv. 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.
    c. Capabilities. - A registered person should have and employ effectively the resources and procedures which are needed for the proper performance of his business activities:chanroblesvirtuallawlibrary
      i. 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 28.1-4 and 28.2-3.
      ii. A registered person shall ensure that at all times, pursuant to SRC Rule 30.2-7 he has:chanroblesvirtuallawlibrary
        A. adequate resources to supervise diligently and does supervise diligently his employees and persons appointed by him to conduct business for or with clients or other registered persons; and
        B. 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, professional misconduct or omissions.
    d. Information about clients. -
      i. 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 52.1-6.
      ii. 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.
      iii. 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, when making a recommendation or solicitation, ensure the suitability of such recommendation or solicitation for that client is reasonable in all circumstances pursuant to SRC Rule 30.2-4.
      iv.  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.
      v. A registered person shall be satisfied on reasonable grounds 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.
      vi. 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 52.1-1.
      vii. As required in SRC Rule 30.2-4, a registered person shall not do any thing to effect a transaction unless he has first complied with the requirements of this Rule.
        a. Information for clients. - A registered person shall make adequate disclosure of material information in his dealings with his clients.
          i. A registered person shall ensure that a written agreement which complies with SRC Rule 30.2-3 is entered into with a client before any services are provided to that client.
          ii.  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.
          iii.  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 30.2-2.
          iv. A registered person shall comply with SRC Rule 52-1.8, regarding customer account statements.
          v. 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 52.1-5 (net capital) and disclose any material changes which adversely affect the registered person’s financial condition after the date of such filing.
        b. Conflicts of Interest. - A registered person should avoid conflicts of interest and when they can not be avoided, should ensure that his clients are fairly treated.
          i. 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 34.1-2.
            A.  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 34.1-2 where the Broker is a Member of an Exchange.
            B.  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.
            C.  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).
            D.  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.
          ii.  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.
          iii.  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 52.1-10. 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.
        c. 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.
          i. 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.
          ii.  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 34.1-2, shall be set out in writing and communicated to each employee.
          iii. A registered person shall ensure that complaints from clients relating to his business are adequately addressed in compliance with SRC Rule 30.2(g) and sufficient records of such complaints are made in compliance with SRC Rule 52.1-9.
          iv. Pursuant to Section 51 of the Code, 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.
          v. All registered persons, as a condition of their registration, shall undertake in writing to uphold the Code, and rules and regulations adopted thereunder.
    2. 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.
    3. Where the Commission makes an inquiry under Section 53 of the Code, the Commission will refer to requirements set forth in this Rule in considering whether any person is guilty of a violation of this Code and should remain registered.
SRC Rule 30.2-2
Confirmation of Customer Orders
1. 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. The confirmation shall be sent to the customer at the address provided on the Customer Account Information Form. An employee or salesman of a Broker Dealer shall not be authorized to accept a confirmation for or on behalf of a customer.
2. The confirmation required by paragraph 1 above hereof shall contain at least the following information:chanroblesvirtuallawlibrary
     i.  a statement as to whether the Broker Dealer is brokering 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 34.1-2;
    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; and
    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.
3. The Commission may require a Broker Dealer to submit a report of his commission or remuneration to a particular transaction as it deems necessary.


SRC Rule 30.2-3
Client Agreement

1. A Broker Dealer and employees 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.
2. The Client Agreement shall be in a language understood by the client and employees who deal directly with clients shall explain to the client the contents of the agreement.
3. A Client Agreement shall contain, among other things, the following information:chanroblesvirtuallawlibrary
    a. full name and address of the client, as verified 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;
    b. the full name and registered address of the Broker Dealer’s business;
    c. the Broker Dealer’s registration status with the Commission;
    d. 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;
    e. 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;
    f. 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;
    g. 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;
    h. if the Broker Dealer is acting as a Dealer in relation to securities and is a member of an Exchange, 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, the client faces a loss of such securities;
    i. 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
    j. risk disclosure statement as set forth in “Annex D”.
4. 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.
5. 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.


SRC Rule 30.2-4
Suitability Rule

 1. 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.
2. Except as provided in SRC Rule 52.1-6, 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 52.1-6.


SRC Rule 30.2-5
Commissions and Charges for Services Performed by a Broker Dealer

1. Charges by a Broker Dealer for services performed, including:chanroblesvirtuallawlibrary
    a. miscellaneous services such as collection of monies due for principal, dividends or interest;
    b. exchange or transfer of securities; and
    c. appraisals, safekeeping or custody of securities, and other services,  shall be reasonable.
 2. All Broker Dealers shall file a schedule of their minimum commission rates with the Commission. No discounts and/or rebates shall be permitted from such minimum rates.
 
SRC Rule 30.2-6
Supervision

 
1. 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, and which reports directly to management. 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 to enable them to effectively execute their duties and such person is registered with the Commission as an Associated Person.
2. Associated Persons shall be responsible 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, and the Broker Dealer’s own internal policies and procedures.  Final responsibility for proper supervision shall rest with the Broker Dealer firm. A firm’s supervisory system shall include at least the following:chanroblesvirtuallawlibrary
    a. the establishment and maintenance of written supervisory procedures;
    b. the 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;
    c. the 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;
    d. written documentation to prove that all Associated Persons are qualified by virtue of experience or training to carry out their assigned supervisory responsibilities;
    e. written documentation to prove that each person engaged in securities transactions, either collectively or individually, no less than annually has participated 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;
    f. 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
    g. 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.

3. Associated Persons shall promptly report to management all occurrences of material non-compliance 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 any self regulatory organization which such Broker Dealer is a member or participant in and the Commission of occurrences of material non-compliance by the firm or its staff with relevant legal and regulatory requirements.

 SRC Rule 30.2-7
Internal Training Program
1. Every Broker Dealer shall establish, implement and maintain a reasonably comprehensive system of training towards:chanroblesvirtuallawlibrary
    a. ensuring the continuous improvement in critical areas of its principal activities and operations; and
    b. 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.
 2. Such system of training shall be properly documented in a manual form which shall:chanroblesvirtuallawlibrary
    a. set out details of the training programs which the Broker Dealer proposes to implement; and
    b. be regularly updated in line with the development in the securities industry.
SRC Rule 30.2-8
Block Sale
1. Except with respect to transactions which are subject to a mandatory tender offer under Section 19 of the Code and SRC Rule 19.1 adopted thereunder, a Broker Dealer may engage in block sales on an Exchange, and an Exchange may execute block sales, provided that:chanroblesvirtuallawlibrary

    a. no order shall be executed by the Exchange at a price inferior to the best-bid-offer;

    b. all existing bids and offers are satisfied before a transaction can occur that establishes a new price;
    c. such transaction complies with Exchange rules, which have been approved by the Commission, regarding block sales; and
    d.  no later than one business day after the date such transaction has been executed, the Exchange provides the Commission with written notification that a block sale has occurred, and the price and number of shares subject to such transaction.
2. 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.


 SRC Rule 30.2-9
Submission of Names of Stockholders, Members, Participants, Clients and Related Information

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 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, either in pursuance of an investigation, as part of a surveillance procedures, and/or in compliance with other pertinent laws.

 
SRC Rule 31
Commission Role in Development of Securities Market Professionals
1. The Commission shall periodically meet with organizations and associations of securities market participants and private educational and research institutions to discuss new regulatory developments and related compliance issues.
2. In coordination with such organizations, associations and institutions, the Commission shall help facilitate the organization of, and participate in, workshops on regulatory requirements.
3. The Commission shall encourage all securities market participants to participate in the continued development of the securities market through such organizations, associations and institutions.
 
SRC Rule 32.1-1
Trading Limited to Listed Securities and Exchanges Registered under the Code
 No Broker Dealer shall effect any transaction in any security in an Exchange, unless such Exchange and the securities listed therein are registered under the Code or exempt from registration pursuant to Sections 9 and 10 thereof.


SRC Rule 32.2(a) –2
Best Execution

 In any transaction for or with a customer, a Broker Dealer shall use reasonable diligence to ascertain the best available price for the security and buy or sell at that price so that the resultant price to the customer is as favorable as possible under the prevailing market conditions.
 
SRC Rule 33.1
Registration of Exchange
1. An application for registration as an Exchange shall be filed on SEC Form 33 and be accompanied by the statements and exhibits prescribed to be filed under Section 33 of the Code: Provided, however, an Exchange may also apply for registration as a Self-Regulatory Organization under Section 40 of the Code at the same time on SEC Form 33-SRO. An application on SEC Form 33-SRO shall also be accompanied by the statements and exhibits prescribed under Section 40 of the Code.
2. An amendment to such application shall be made in duplicate on SEC Form 33-A, and each amendment shall be dated and numbered in the order of filing.
3. No later than seven (7) days after the discovery that any information in the statement, any exhibit, or any amendment was inaccurate when filed, an Exchange shall file with the Commission an amendment correcting such inaccuracy.
4. Whenever the number of changes to be reported in an amendment, or the number of amendments filed, are so great that the purpose or clarity of the disclosure will be promoted by the filing of a new complete statement and exhibits, an Exchange may, at its election, or shall, upon request of the Commission, file as an amendment a complete new statement together with all exhibits which are prescribed to be filed in connection with SEC Form 33.


SRC Rule 33.2(c)
Ownership of an Exchange

1. An Exchange organized as a stock corporation may be owned and controlled by another juridical person (“Exchange Controller”), based on the following terms and conditions, to ensure that such ownership will not negatively impact the Exchange’s ability to effectively operate in the public interest:chanroblesvirtuallawlibrary
    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 39.1-1, the enforcement responsibilities of an SRO shall be delegated to the Exchange which is being controlled by the Exchange Controller.
    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 independent directors and persons who represent the interest of issuers, investors and other market participants who are not associated with any Broker Dealer or member 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.
    c. 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.
    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.
2. For purposed of Section 33 (c) of the Code, an industry group shall include the following sectors which are based on the Philippine Standard Industrial Classification Code:chanroblesvirtuallawlibrary
    i. Agriculture, Hunting, Forestry, Fishing, Mining and Quarrying;
    ii. Manufacturing;
    iii. Electricity, Gas, Water Supply, and Construction;
    ii. Wholesale and Retail Trade, Hotels and Restaurants;
    iii. Transport, Storage and Communications;
    iv. Banking and other Financial Institutions;
    v. Brokers and Dealers;
    vi. Compulsory Social Security (Government);
    vii. Real Estate including leasing; and
    viii. Education, Health, Social Work and other community, social and personal services.
3. To insure diversification of Exchange ownership or where the Exchange is owned by an Exchange Controller, that 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 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 Commission approval of such transfer.
4. Where any ownership restrictions set forth in this rule are exceeded and/or violated, the Commission may order divestment of such excess ownership. Until such ownership is divested, a person violating this restriction shall be barred from exercising his voting rights thereunder.
 
SRC Rule 33.2(d)-1
Protection of Customer Accounts in Case of Business Failure of an Exchange Member
 Where the Commission has ordered an Exchange to take over the operations of a member firm whose financial condition has so deteriorated that it can not readily meet the demands of its customers for the delivery of securities and/or payment of sales proceeds (hereinafter Failed Member Firm), an Exchange shall:chanroblesvirtuallawlibrary
    1. 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;
    2. 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;
    3. Settle the Failed Member’s liabilities to customers through the sale of the Member’s seat or trading rights, liquidation of paid up capital and/or oversee payment of claims made against the surety bond;
    4. Where after such settlement, there are outstanding liabilities to customers of the Failed Member, inform that Member’s customers that the matter has been transferred to a Trust Fund accredited under Section 36.5 of the Code to which such Failed Member is a Member or Participant and procedures for claiming compensation for losses which have not been satisfied; and
    5. Simultaneously inform that Accredited Trust Fund of such take-over and any outstanding liabilities of the Failed Member firm remaining after liquidation.
SRC Rule 34.1-2
Segregation of Broker and Dealer Function. Affiliations and Practices
l. A Member Broker of an Exchange shall not effect any transaction on such Exchange for its own account, the account of an associated person, or an account with respect to which an associated person exercises investment discretion, unless:chanroblesvirtuallawlibrary
    a. The transaction is of a kind described in paragraphs (a) through (d) of Section 34.1 of the Code and is effected in accordance with applicable rules and regulations adopted thereunder; or
    b. The transaction is effected in compliance with the following conditions:chanroblesvirtuallawlibrary
      i. the initiating Member Broker transmits an order for the transaction to another Member Broker (executing Member Broker) for execution: Provided however that the order may only be transmitted to one executing Member Broker;
       ii. the executing Member Broker is not an affiliated person of the initiating Member Broker;
      iii. the order ticket states that the order is for the account of the initiating Member Broker, associated person, other employees, owners, officers, or directors of an Initiating Member Broker, or discretionary account on behalf thereof (collectively referred to as “Member Orders");
      iv. the initiating Member Broker retains a copy of the order ticket with the date and time of its transmittal, which shall be time stamped thereon;
      v. in compliance with SRC Rule 52.1-7, the executing Member Broker dates and time stamps the order ticket to reflect the time that he received the order from the Initiating Member Broker and the time that the order was transmitted for execution;
      vi. the executing Member Broker gives priority to the execution of non-Member orders over Member Orders at the same price;
      vii. neither the initiating Member Broker nor an associated person of the initiating Member Broker participates in the execution of the transaction at any time after the order for the transaction has been transmitted to the executing Member Broker;
      viii. in the case of a transaction effected for an account with respect to which the initiating Member Broker or an associated person of the initiating Member Broker exercises investment discretion, neither the initiating Member Broker nor any associated person thereof retains any compensation in connection with effecting the transaction unless:chanroblesvirtuallawlibrary
        A. the person or persons authorized to transact business for the account have expressly provided otherwise by written contract with the initiating Member Broker or the associated person thereof; and
        B. the initiating Member Broker or the associated person furnished at least annually to the person or persons authorized to transact business for the account, a statement setting forth the total amount of compensation retained by the initialing Member Broker or any associated person thereof in connection with effecting transactions for the account in the period covered by the statement, which amount shall be exclusive of all amount paid to others during the period for services rendered in effecting such transactions;
      ix. the initiating Member Broker and the executing Member Broker retain all order tickets in chronological order for a period of six (6) years; and
      x. the initiating Member Broker and the executing Member Broker retain in chronological order for a period of six (6) years records in hard or soft copy of all orders executed by them containing their date, time, price, and other significant details.
2. Any Exchange to which such initiating Member Broker is a member and through which any such orders are transmitted for execution:chanroblesvirtuallawlibrary
    a. undertakes in writing, under oath, that its trading system will be able to prioritize orders in accordance with this Rule; or
    b. obtains a contrary certification from its software vendor and Commission approval of an alternate means to ensure compliance.
3. For purposes of this Rule:chanroblesvirtuallawlibrary
    a.  Affiliated person of a Member Broker is any person who (i) controls, is controlled by, or is under common control with the Member Broker, (ii) has officers, directors, or associated persons who are also officers, directors, or associated persons of the Member Broker, (iii) directly or indirectly controls more than ten percent (10%) of the equity interest in the Member Broker, or (iv) has more than ten percent (10%) of its equity interest owned by the Member Broker and/or associated persons of the Member Broker.
    b. 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, (1) transmission of an order for execution, (2) execution of the order, (3) clearance and settlement of transaction, and (4) arranging for the performance of any such function.
    c. 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.
4. 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 there are no interlocking officers or directors.
5. Exchange Member Associated Persons may purchase securities only through another non-affiliated Broker Dealer or Investment House, provided that they obtain the permission of the Member Broker that they are associated with and inform such Broker that they have opened such account, and provided that the Broker or Investment House through whom they transact business agrees to send duplicate account statements to the Associated Person’s Member Broker. If the account is with a non-Member Broker or Investment House, such associated person shall receive permission from that broker or Investment House for access to that account by the Exchange.
6. Member Broker employees, other than Associated Persons, may purchase securities only through their Employer Member Broker.
7. Owners, officers and Directors of Member Brokers may purchase securities through their associated Member Broker or through another Broker or Investment House; provided, however, that where securities are purchased through another Broker or Investment House, they obtain the permission of the Member Broker whom they are associated with and inform such Member Broker that they have opened such account, and provided that the Broker or Investment House through whom they transact business agrees to send duplicate account statements to the owner, officer or director’s associated Member Broker. If the account is with a Non-Member Broker or Investment House, such owner, officer or director shall receive permission from that Broker or Investment House for access to that account by the Exchange.
8. 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.B 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.
9. No Broker Dealer shall execute for its own account, or the account of its customers, listed securities issued by an affiliated company prohibited under Section 30.1 of the Code.
10. For purposes of paragraph 9 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.


SRC Rule 34.1-3
Segregation of Functions (Chinese Walls)

1. 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:chanroblesvirtuallawlibrary
    a. the flow of information between the different parts of its organization which perform each function; and
    b. any conflict of interest which may result.
2. For purposes of this Rule, information means information:chanroblesvirtuallawlibrary
    a. of a specific nature which has not been made public;
    b. relating to one or more public companies or any securities of a public company; and
    c. which, if it were made public, would likely affect the market price of the securities.
3. A Broker Dealer shall at all times ensure that its trading functions and back-office settlement functions are properly segregated and shall establish written procedures to ensure compliance with this Rule.


SRC Rule 36-4.1
Registration of Transfer Agents

1. No person shall act as a transfer agent for an issue which is listed on an Exchange without being registered with the Commission in accordance with the provisions of this Rule.
2. To apply for registration under this Rule, a transfer agent shall:chanroblesvirtuallawlibrary
    a. be a corporation or a partnership;
    b. have paid-up capital of at least P 1,000,000.00, and
    c. have a partner or officer who is a certified public accountant.
3. 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.
4. 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.
 5. After reviewing an application for registration as a transfer agent, or an amendment thereto, the Commission shall, by order:chanroblesvirtuallawlibrary
    a. grant registration or approve the amendment; or
    b. 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:chanroblesvirtuallawlibrary
      i. that such order is in the public interest;
      ii. that the registrant does not meet applicable qualifications;
      iii. the application is incomplete, inaccurate or misleading; or
      iv. that the transfer agent has been found to:chanroblesvirtuallawlibrary
        A. be insolvent or not in sound financial condition;
        B. have violated or not have complied with the applicable provisions of the Code or the rules and regulations adopted thereunder, or any order of the Commission;
        C. have engaged in or be engaged in or about to engage in fraudulent transactions;
        D. be in any other way dishonest or not of good repute;
        E. 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;
        F. have an officer, member of the board of directors or principal shareholder who is disqualified to be such an officer, director or principal shareholder;
        G. have a backlog of share certificate transfers which indicates an inability of the registrant to fulfill its responsibilities as a transfer agent;
        H. have repeatedly or materially failed to comply with its procedures or those of a registered clearing agency; or
        I. 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.
6. A transfer agent can not be the auditor of an issuer for whom it acts as transfer agent.
7. The procedures of a transfer agent are binding on and enforceable against issuers for which they act, registered securities holders and transferees who present securities for transfer. To minimize the issuance and movement of and to facilitate other dealings with those securities eligible to the operations of a registered clearing agency, a transfer agent and registered clearing agency shall jointly formulate and abide by written procedures addressing certificated and uncertificated securities issuance, transfers, cancellations, registration, confirmation and reconciliation of positions in securities, audit, replacement of lost securities, signature guarantees, delivery processes and turnaround times.
 8. Every transfer agent registered pursuant to this Rule shall file the appropriate registration renewal form within thirty (30) days from June 1 of every year and pay to the Commission the prescribed annual renewal fee. The prescribed fee shall be collected by the Commission upon filing of the application.
If such fee is not paid or the registration renewal form is not filed as required, the registration of such transfer agent shall be suspended or terminated as the case may be.


SRC Rule 36-4.2
Reports from Transfer Agents

1. Annual Report. - Every registered transfer agent shall file with the Commission an annual report on SEC Form 36-AR in accordance with the instructions contained therein within 105 days after the end of its fiscal year. Reports filed on SEC Form 36-AR shall be deemed to satisfy Section 141 of the Corporation Code of the Philippines.
2. Exception Report to Commission. - A transfer agent shall provide to the Commission within seven (7) days of the occurrence of any of the following events, a report detailing the reasons and circumstances for:chanroblesvirtuallawlibrary
    a. any delay in the turnaround or processing of an issue, transfer or replacement of a security;
    b. any discrepancy between its records and those of the registered clearing agency, if applicable;
    c. any loss of securities reported to it; and/or
    d. the termination of its function as a transfer agent for a particular security.
4. Periodic Reporting to Issuer. - At regular intervals within each and every year and upon request by the issuer, a transfer agent shall supply the issuer, for whom it acts in that capacity, with the list of holders of its securities, as shown by the register of holders of securities, and the changes to the register of transfers, showing the name and registered address of, and the number or face value of the securities held by each such holder and supply any other statements, lists, entries, information and material concerning issues, transfers and cancellations of securities.
 
5. Complaint Log. - A record of all claims and complaints made to a transfer agent shall be kept by it at its principal office. The record shall contain:chanroblesvirtuallawlibrary
    a. the name of the security holder and a description of the security;
    b. the date of the complaint or claim and a complete description thereof; and
    c. the steps taken by the transfer agent, the manner in which the complaint or claim is resolved and any subsequent action taken or to be taken by the holder or the transfer agent.
The record shall be open for inspection during normal business hours by the Commission and by any issuer with respect to securities issued by it.


SRC Rule 36-4.3
Records Retention by Transfer Agents

1. In addition to the records required to be maintained pursuant to Section 74 of the Corporation Code of the Philippines, every transfer agent shall make and retain for a period of six (6) years the following books and records relating to its transfer agent activities:chanroblesvirtuallawlibrary
    a. its rules and procedures;
    b. exception reports filed with the Commission pursuant to SRC Rule 36-4.2.2;
    c. complaint log as required to be maintained under SRC Rule 36-4.2.5;
    d. reports to the issuers for whom the firm acts as transfer agent as required under SRC Rule 36-4.2.3; and
    e. Annual report on SEC Form 36-AR.
2. Every transfer agent shall make available any or all of its books and records upon request of an authorized representative of the Commission. Failure to do so shall result in an immediate suspension of the transfer agent's registration. Such suspension shall continue until such time as the books and records are made available to the Commission.
 
SRC Rule 36.4(a)-1
Trust Funds for Broker Dealer Customers
1. A trust fund established to compensate customers for the extraordinary losses or damage they may suffer due to the business failure or fraud or mismanagement of a Broker Dealer shall be registered as an Accredited Trust Fund under this Rule.

2. An application for registration shall be filed on SEC Form 36-TF and contain the following supporting documents:chanroblesvirtuallawlibrary

    a. data on its organization, rules of procedure and membership/participation;
    b. copies of its rule; and
    c. list of directors and officers and a list of their affiliations.
3. Business failure shall be established upon a determination by the Exchange, where the Broker Dealer is an Exchange member, or the Commission, where the Broker Dealer is not an Exchange member, that the financial condition of the Broker Dealer has so deteriorated that the Broker Dealer can not readily meet the demands of its customers for the delivery of securities and/or the payment of sales proceeds: Provided, however, that such determination shall not be dependent upon a judicial declaration of insolvency.
4. As a condition of their registration, all Broker Dealers shall be a member of or participant in an Accredited Trust Fund.
5. An Accredited Trust Fund shall establish a Customer Protection Fund (the “Fund”). All amounts received by the Accredited Trust Fund, except amounts set outside for operating expenses, shall be deposited into the Fund which shall serve as trustee in compliance with general rules of trust.
6. The Commission shall not accredit a trust fund unless the trust fund has adopted rules governing:chanroblesvirtuallawlibrary
    a. The initial and the continuing required balanced for the Fund;
    b. Assessments to be imposed on members/participants and procedures for collecting such assessment;
    c. Borrowing by the Fund;
    d. Investment of Fund assets;
    e.   Procedures for paying customers for the extraordinary losses or damage they may suffer due to business failure or fraud or mismanagement of the Broker Dealer;
    f. Role and duty of the trust fund as trustee; and
    g. The composition of the trust fund’s board of Directors.
7. All rules of the Accredited Trust Fund, including amendments thereto, shall be approved by the Commission prior to becoming effective.
8. If the Commission or any Exchange is aware of facts which lead it to believe that the financial condition of a Broker Dealer, including an Exchange Member, has so deteriorated and the Broker Dealer has difficulties meeting the demands of its customers for the delivery of securities and/or the payment of sales proceeds, it shall immediately notify the Accredited Trust Fund; provided, however, where such notification involves an Exchange member, the Exchange shall simultaneously notify the Commission.
9. Every Exchange, or other SRO responsible for monitoring the financial condition of Members and/or Participant Broker Dealer shall file with the Accredited Trust Fund copies of financial reports submitted by such Broker Dealers.


SRC Rule 38.1
Definition of “Independent Director”

1. As used in Section 38 of the Code, independent director means a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgement in carrying out his responsibilities as a director in any corporation that meets the requirements of Section 17.2 of the Code and includes, among others, any person who:chanroblesvirtuallawlibrary
    a. Is not a director or officer of the corporation or of its related companies or any of its substantial shareholders (other than as an independent director of any of the foregoing);
    b. Is not a substantial shareholder of the corporation or of its related companies or any of its substantial shareholders;
    c. Is not a relative of any director, officer or substantial shareholder of the corporation, any of its related companies or any of its substantial shareholders. For this purpose, relatives includes spouse, parent, child, brother, sister, and the spouse of such child, brother or sister;
    d. Is not acting as a nominee or representative of any director or substantial shareholder of the corporation, any of its related companies or any of its substantial shareholders;
    e. Has not been employed in any executive capacity by that public company, any of its related companies or by any of its substantial shareholders within the last five (5) years;
    f. Is not retained as professional adviser by that public company, any of its related companies or any of its substantial shareholders within the last five (5) years;
    g. Is not retained as professional adviser, by that public company, any of its related companies or by any of its substantial shareholders, either personally or through his firm; or
    h. Has not engaged and does not engage in any transaction with the corporation or with any of its related companies or with any of its substantial shareholders,   whether by himself or with other persons or through a firm of which he is a partner or a company of which he is a director or substantial shareholder, other than transactions which are conducted at arms length and are immaterial.
When used in relation to a company subject to the requirements of this Rule and Section 38 of the Code:chanroblesvirtuallawlibrary
    a. Related company  means another company which is: (a) its holding company, (b) its subsidiary, or (c) a subsidiary of its holding company; and
    b.  Substantial shareholder  means any person who is directly or indirectly the beneficial owner of more than ten percent (10%) of any class of its equity security.
SRC Rule 39.1-1
Rules Governing a Self Regulatory Organizations which is an Organized Exchange
1. Applicability. All organized Exchanges shall be subject to these procedures and requirements set forth in this Rule.
2. Definitions. For purposes of this Rule:chanroblesvirtuallawlibrary
    a. Organized Exchange or Exchange means a registered Exchange, whether or not registered as an SRO under the Code.
    b. Participant refers to any person who has been approved to use the SRO’s services and facilities but is not a member therein.
    c. Securities laws refers to the Code and rules, regulations and orders issued by the Commission.
    d. SRO means a Self Regulatory Organization which is an organized Exchange.
    e. SRO rule refers to the constitution, articles of incorporation, by-laws and rules, or instruments corresponding to the foregoing and such policies, practices and interpretations of the SRO, other than those designated by the SRO as constituting a policy, practice or interpretation of an existing rule or establishing or concerning solely matters of SRO administration under Section 4(c) of this Rule.
3. SRO Rulemaking
    a. Subject to Commission approval and pursuant to the procedures set forth herein, an SRO’s power to adopt and amend rules shall also include the power to repeal existing rules, implement such rules and provide interpretative guidance to aid in compliance.
    b. An SRO shall adopt comprehensive rules governing its organization and governance, qualifications and rights of shareholders, listing of securities, trading of securities, settlement of contracts, qualification of members and other participants, ethical conduct of members and other participants, supervision and control of members, financial and operational responsibility of members, and discipline of members and other participants.
4. Commission Review Procedures
    a. An SRO shall submit to the Commission for prior approval any proposed rule or amendment thereto (hereinafter collectively referred to as “proposal”), together with a concise statement of the reason and effect of the proposal.   If the Commission believes that such proposal is of “major significance”, at least thirty (30) days before approving such proposal, the Commission shall direct the SRO to publish the text of the proposal and a statement of the reasons and effect in a newspaper of general circulation or by some other means to guarantee the public circulation thereof, and shall afford interested persons an opportunity to submit written data, views and arguments, provided that comment period shall not exceed a period of twenty (20) days. The SRO shall file with the Commission a written summary of the comments received, along with responses thereto, no later than thirty (30) days after the end of the comment period. Where the comments cause the SRO proposal to be changed in a material manner, a new review period shall be triggered.
    b.  Except as provided in paragraph (c) below, within the later of sixty (60) days after submission of the proposal or summary of comments required to be filed with the Commission pursuant to paragraph (a) above, the Commission shall, by order, approve the proposal, or institute proceedings to determine whether the proposal should be disapproved. If the Commission does not institute proceedings to disapprove the proposal within such period, the proposal may be declared effective by the SRO. If a proceeding is instituted, the Commission shall provide notice to the SRO of the proposed grounds for disapproval, and an opportunity for hearing, at the conclusion of which the Commission shall grant or deny approval of the proposal. The Commission shall approve a proposal where it finds that the proposal is consistent with the requirements of the securities law, and shall disapprove if it does not make such findings. If the proceeding is not concluded within ninety (90) days following its commencement, the proposal shall be made effective by the SRO.
    c. Notwithstanding paragraph (b) above, a proposal may take effect within ten (10) business days after its submission to the Commission if designated by the SRO as constituting a policy, practice or interpretation of an existing rule, establishing or concerning solely matters of administration of the SRO (e.g. setting of dues, fees and charges ) or such other matters as the Commission by rule or order, may prescribe, unless the Commission, within the ten (10) day period, provides written notice to the SRO of its determination to review such proposal for prior approval pursuant to paragraphs (a) and (b) above.
    d. Notwithstanding any other provision of this section, in an emergency requiring action for the protection of investors, the maintenance of fair and orderly markets, or the safeguarding of securities and funds, the SRO may summarily put into effect a proposal; provided however that the proposal made effective shall be promptly submitted to the Commission pursuant to paragraph (a) above.
    e. Commission directions regarding rulemaking
    i. The Commission may request in writing that the SRO effect on its own behalf specified changes in its rules and practices which are necessary or appropriate for the protection of investors, to insure fair dealing in securities traded on the SRO, insure fair administration of the SRO, conform SRO rules to the requirements set forth in the securities law, or to otherwise further the purpose of the securities law on such matters as:chanroblesvirtuallawlibrary
      1.  safeguards in respect of the financial responsibility of members and adequate provision against the evasion of financial responsibility through the use of corporate forms or special partnerships;
      2. supervision of trading practices;
      3. listing or delisting any security;
      4. hours of trading;
      5. manner, method and place of soliciting business;
      6. fictitious accounts;
      7. time and method of making settlements, payments and deliveries and of closing accounts;
      8. transparency of securities transactions and prices;
      9. fixing of reasonable rates of fees, interest, listing and other charges but not rates of commission;
      10. minimum units of trading;
      11. odd-lot purchases and sales;
      12. minimum deposits on margin accounts; and
      13. supervision, auditing and disciplining of members or participants.
    ii. If after making such request in writing to the SRO, and after due notice of the reasons and effects of the proposed changes and opportunity for a hearing, the Commission determines that the SRO has not made the changes so requested, the Commission may alter, abrogate, or supplement the SRO’s rules, with such changes to be made effective immediately upon adoption by the Commission.
5. Power over listed companies
    The SRO shall be solely responsible for processing and approving or rejecting applications for new listing of shares, suspension and de-listing of listed issues and imposition of sanctions on listed companies for violation of SRO rules; provided, however, that such powers shall be exercised pursuant to SRO rules.
6. Compliance and Surveillance
    a. An SRO shall establish a separate audit, compliance and surveillance department/s, overseen by at least one “independent” member of the Board of Directors, and one other non-broker member.  Such department shall not be subordinated or otherwise controlled in its activity by the Exchange Board and shall be responsible for carrying out the SRO’s enforcement role pursuant to the securities law and the disciplining of participants, with findings to be provided simultaneously to the Commission and Exchange Board which shall notify the Commission within forty five (45) days as to the Board’s decision.
    b.  Absent reasonable justification or excuse, the SRO shall enforce compliance with provisions of the securities laws regulating brokers, dealers and trading on the SRO and SRO rules by its members.
    c.  An SRO shall enter into a Memorandum of Understanding with other SROs to clarify its oversight responsibilities over persons who are members of or participants in more than one SRO and coordinate with other SROs to ensure adequate oversight. Such plan shall be submitted to the Commission for approval under SRC Rule 39.1-6.
    d.  An SRO shall monitor market conditions and trading activity to detect violations of the securities law and SRO rules:chanroblesvirtuallawlibrary
      i. The SRO shall conduct market surveillance of all trading activity on the SRO pursuant to SRO rules setting forth surveillance procedures and guidelines.
      ii. The SRO shall monitor compliance by listed companies with continuing listing obligations; provided however, primary oversight for compliance with full disclosure regulation under the securities law shall remain the responsibility of the Commission.
    e. The Commission may, on its own initiative, monitor the market to ensure that the SRO is fulfilling its SRO functions.

 7. Periodic Examinations

     a. The SRO shall examine members to determine whether they are in compliance with the securities law and SRO rules governing, among other things, financial responsibility, dealings with members of the public, back office procedures, trading practices, and supervision and shall  submit to the Commission for review and comment its examination calendar for the year on or before the 15th of January of every year, provided that any amendment to the calendar shall be promptly provided to the Commission. This calendar shall be treated as confidential information. Periodic examination of each member firm shall be conducted without prior notice to the member firm.

    b. The SRO shall file with the Commission monthly reports of its periodic examinations started and completed during the month, within ten (10) days after the end of each month, together with a summary of findings for audits completed. Periodic examinations of each member firm shall be made by the SRO pursuant to written procedures approved by the Commission. Where deficiencies are detected, the SRO shall either send a letter to the firm within three (3) business days of the completion of such examination requesting that such deficiencies be corrected or, where such deficiencies evidence violations of the securities law, SRO rules and/or otherwise negatively reflect upon the firm’s integrity or solvency, initiate an investigation.

    c. The Commission may, on its own initiative, conduct periodic or parallel examinations of members to validate the SRO’s findings and conduct on-spot audit inspections of the relevant SRO department to check if it is fulfilling its duties and responsibilities as an SRO.
8.  Investigations
    a. An SRO shall investigate suspected violations of the securities law and SRO rules based on complaints, examination/audit findings or unusual trading activities and take disciplinary action, where appropriate, pursuant to SRO rules.
    b.  The SRO shall be primarily responsible for conducting investigations which concern suspected violation of rules governing sales practices, financial and operational requirements, trading and floor related violations, and compliance procedures/supervision of members.
    c. The SRO shall promptly notify the Commission of any investigation which involves suspected violations of the securities law involving persons not subject to the SRO’s jurisdiction, concerning the disclosure obligations of listed companies under the securities law, and/or involving fraud or manipulation. The SRO shall cooperate with the Commission which shall have primary investigative authority over such suspected violations.
9.  Discipline of SRO Members and Participants
    a.  An SRO shall discipline a member, including suspension or expulsion of a member, if such person has been found to have been engaged in a violation of SRO rules or provisions of the securities law, including, but not limited to, illegal sales practices, financial and operational requirements, trading and floor related violations, and/or violation of SRO listing rules.
    b. In any disciplinary hearing by the SRO, other than a proceeding brought pursuant to paragraph (c) below, the SRO shall bring specific charges, provide notice to the member or participant charged, afford such person charged with an opportunity to defend against the charges, and keep a written record of the proceeding. A determination to bring a disciplinary sanction shall be supported by a written statement of the offense, a summary of the evidence presented and a statement of the sanction imposed.
    c. The SRO may summarily suspend a member or person associated with a member who has been expelled or suspended from another SRO, and/or suspend a member who the SRO finds to be in such financial or operating difficulty that the member cannot be permitted to do business as a member with safety to investors, creditors, other members, or the SRO; provided, however that the SRO immediately provides written notice to the Commission of the action taken. Any person aggrieved by a summary action pursuant to this paragraph shall be promptly afforded an opportunity for a hearing by the SRO in accordance with paragraph (b) above. The Commission, by order, may stay a summary action on its own motion or upon application by any person aggrieved thereby if the Commission determines summarily or after notice and an opportunity for hearing (which may consist solely of the submission of affidavits or presentation of oral arguments) that a stay is consistent with the public interest and the protection of investors.
    d. The SRO shall promptly notify the Commission in written reports of any disciplinary sanction imposed on any member or participant. Within thirty (30) days after receipt of such notice, any aggrieved person may appeal to the Commission from, or the Commission on its own motion within such period, may institute review of, the decision of the SRO, at the conclusion of which, after due notice and opportunity for hearing which may consist solely of review of the record before the SRO, the Commission shall affirm, modify or set aside the sanction. In such proceeding, the Commission shall determine whether the aggrieved person has engaged or omitted to engage in the acts and practices as found by the SRO, whether such acts and practices constitute willful violations of the securities law or SRO rules, whether such provisions were applied in a manner consistent with the purposes of the securities law, and whether, with due regard for the public interest and the protection of investors, the sanction is excessive or oppressive.
10. SRO Discipline by the Commission
 The Commission may, if in its opinion such action is necessary or appropriate in the public interest or for the protection of investors, or otherwise in furtherance of the purposes of the securities law, after due notice and an opportunity for a hearing:chanroblesvirtuallawlibrary
    a. suspend for a period not to exceed twelve (12) months or revoke the registration of an SRO, or censure or impose limitations on the activities, functions and operations of the SRO as an SRO, if the Commission finds that the SRO has willfully violated or is unable to comply with any provision of the securities law or SRO rules, or without reasonable justification or excuse has failed to enforce compliance therewith by a member or participant;
    b. take over the activities of an SRO pursuant to SRC rule 40.5.1;
    c. suspend for a period not exceeding twelve (12) months or to expel from the SRO any member who is subject to an order of the Commission under Section 29 of the Code or is found to have willfully violated any provision of the securities law, or effected, directly or indirectly, any transaction for any person who such member had reason to believe was violating in respect of such transaction any of such provisions;
    d. remove from office or censure any officer or director of the SRO if it finds that such officer or director has violated any provision of the securities law or the rules of such SRO, abused his authority or without reasonable justification or excuse, has failed to enforce compliance with any of such provisions; and/or
    e. Take other actions as provided by the Code.
11. SRO Reporting
An SRO shall submit the following reports to the Commission:chanroblesvirtuallawlibrary
    a. Monthly reports on dockets of examinations and investigations being conducted, containing the docket number, name of SRO examiner/investigator, how audit/examination originated (investor complaint, examination, surveillance), name of the member or participant, including a listed company being audited/investigated, nature of the violations alleged, status, findings, sanctions imposed and other courses of action taken by the SRO relative thereto;
    b. Monthly reports on capital adequacy requirements by members;
    c. Quarterly reports on the result of the monitoring of trading of listed companies and investigations conducted with respect thereto;
    d. Semi- annual report on the number of newly listed issues, delisted/suspended issues and reasons therefor, and the number, type and issuer of current listed issues;
    e. Semi-annual report containing information on the number of investor complaints received, investigated, nature of claim, status and manner of disposition; and
     f. Such other information as may, from time to time, be required by the Commission from the SRO.
12. SRO Relationship with Commission.
    a. In order to enhance investor protection and more effectively utilize existing resources, the Commission and SRO shall work towards a more harmonious and cooperative relationship among their officers and personnel. Commission staff working in the area of Broker Dealer and market regulation and corporate disclosure shall meet with their SRO counterparts at least once a month to discuss issues and concerns relating to the operation of the SRO as an SRO. Minutes of such meetings shall be prepared and circulated to SRO management and Commissioners of the Commission. This monthly meeting may, at the discretion of the Commission and SRO, involve officials of the Commission and/or SRO, directors of the Commission and their SRO counterparts, or technical working groups from both sides.
    b. The Commission and SRO shall work closely and try to coordinate their media campaigns on the securities industry to generate positive public opinion and increase investor confidence.
SRC Rule 39.1-2
Registration of Associations of Brokers and Dealers and Other Self Regulatory Organizations
1.  An application for registration as an Association of Securities Brokers and Dealers shall be filed on SEC Form 39-BD accompanied by copies of the statements and exhibits required to be filed thereunder under Section 40 of the Code and SEC Form 39-BD.
2.  Any other application for registration as a Self Regulatory Organization shall be filed on SEC Form 39 accompanied by the statements and exhibits required to be filed thereunder under Section 40 and SEC Form 39; provided, however, that an application for registration as an Exchange and SRO shall file Form 33-SRO and an applicant for registration as a Clearing Agency and SRO shall file SEC Form 42-SRO.
3. Every Association of Securities Brokers and Dealers and other Self Regulatory Organizations (collectively referred to hereinafter as “SROs”) shall promptly, after the discovery of any inaccuracy in the registration statement or in any amendment or supplement thereto, file with the Commission an amendment on SEC Form 39-A correcting such inaccuracy.
4.  Promptly after the close of each fiscal year, every registered SRO shall file with the Commission an annual return on SEC Form 39-AR including a copy of its balance sheet as of the close of its fiscal year and its income and expense statement for such year. The annual return shall be signed and attested, in the same manner as required in the case of the original registration statement.
5. Amendments to the registration statement shall be filed, at least one of which shall be signed and attested, in the same manner as required in the case of an original registration statement. All amendments shall be dated and numbered in the order of filing. One amendment may include a number of changes.
6. In addition to the formal filing of amendments and the annual return, every registered SRO shall send to the Commission copies of any notices, reports, circulars, loose leaf instructions, riders, new additions, lists, or other records of changes covered by amendments or supplements when, as, and if such records are made available to members and/or participants of the SRO.


 SRC Rule 39.1.6-
Allocation of Regulatory Responsibilities Among Self Regulatory Organizations

1.  Any two or more Self Regulatory Organizations (SROs) may file with the Commission a plan for allocating among SROs the responsibility to receive regulatory reports from persons who are members of or participants in more than one SRO, to examine such persons for compliance, or to enforce compliance by such persons, with the Code and rules and regulations adopted thereunder, and the rules of such SRO, and to carry out other specified regulatory functions with respect to such persons.
2.  Any plan filed hereunder may contain provisions for the allocation among the parties of expenses reasonably incurred by the SRO having regulatory responsibility under the plan.
3.  After appropriate notice and opportunity for comment, the Commission may, by written notice, declare such a plan, or any part thereof, effective if it finds the plan, or any part thereof, necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among SROs.
4. Upon the effectiveness of such a plan, or part thereof, any SRO which is a party to the plan shall be relieved of responsibility as to any person for whom such responsibility is allocated under the plan to another SRO to the extent of such allocation.
5. After the Commission has declared a plan or part thereof effective pursuant to paragraph 3 of this rule, or acted pursuant to paragraph 6 of this rule, an SRO relieved of responsibility may notify customers of, and persons doing business with, such member or participant of the limited nature of its responsibility for such member’s or participant’s acts, practices and course of business.

6. In the event that a plan declared effective pursuant to paragraph 3 does not provide for all members or participants or does not allocate regulatory responsibilities, the Commission may, after notice and opportunity for hearing, designate one or more SROs responsible for specified regulatory responsibilities with respect to such members or participants.

 
SRC Rule  40.5.1
Commission Powers over Exchanges, Clearing Agencies and Self Regulatory Organizations
1. Subject to paragraphs 2 through 6 of this rule, the Commission may, where it is satisfied that it is in the interest of the investing public, or appropriate to do so for the protection of investors, after due notice and a hearing:chanroblesvirtuallawlibrary
    a. suspend registration of an Exchange, clearing agency and/or self regulatory organization (hereinafter collectively “Exchange”) upon findings that such Exchange has willfully violated or is unable to comply with any provision of this Code, or the rules and regulations hereunder, or its own rules, or has failed to enforce compliance therewith by a member of, person associated therewith, or a participant in such Exchange; or
    b. suspend any or all officers of said Exchange and appoint an independent administrator knowledgeable in capital market operations to take over the management of the Exchange, and/or suspend any and all member/s of the board of directors and appoint new director/s to serve during the suspension period, upon findings that such officer/s and/or director/s have willfully violated any provision of this Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of such Exchange, or abused his authority, or without reasonable justification or excuse has failed to enforce compliance with any of such provisions.
2. Upon discovery of any of the above-mentioned violation or failures, the Commission shall notify the Exchange, officer/s and/or director/s thereof and set a period of time in which such violation or failure shall be rectified, which period shall be no less than ten (10) days nor more than ninety (90) days.
3. In the event that an Exchange fails to rectify such violation or failure within the stated period, which the Commission may extend only once based on its finding that such extension is in the public interest or for the protection of investors, the Commission, after due notice and a hearing, may exercise its powers hereunder.
4. For as long as an order suspending any officer/s and/or director/s is in effect under this rule, none of the functions to which the order relates shall be performed, where applicable, by the officer or director to which it relates.
5. Where an independent administrator is appointed under this rule, such administrator shall immediately prepare a workplan which shall be submitted to the Commission for approval and/or amendment, to address the underlying reason for the suspension. Such workplan shall include a timetable for compliance with this Code which shall not be later than the period of suspension.
6. At the end of suspension period, or upon expiration of the period set forth in the workplan approved by the Commission, the Commission may (a) lift the suspension order and reinstate the Exchange’s registration, (b) revoke such registration pursuant to this Code; (c) reinstate the Exchange’s officer/s and/or board member/s, and/or (d) issue an order prohibiting officers and/or members of the board who have been suspended from serving in such capacity for a stated period.
7. Immediately after the issuance of a decision to revoke registration, no new transactions shall be effected, except as necessary to protect investors.


SRC Rule 42-1
Registration of Clearing Agencies

1. An application for registration as a clearing agency or any amendment thereto shall be filed with the Commission on SEC Form 42-CA in accordance with  the instructions contained therein along with the prescribed registration fee; provided, however, that an applicant for registration as clearing agency may also, at the same time, apply for registration as an SRO pursuant to SRC Rule 39.1-3 on SEC Form 42-SRO.
 2. In addition to the prescribed registration fee prescribed above and for the privilege of doing business for the preceding calendar year or any part thereof, every Clearing Agency shall pay to the Commission, on or before the 30th day of the fourth month after the end of the fiscal year, a prescribed annual fee.
3. After reviewing  an application for registration as a clearing agency, or an amendment thereto, the Commission shall:chanroblesvirtuallawlibrary
    a. grant registration or approve the amendment;
    b. require a change in the Articles of Incorporation, By-laws, contracts, rules or procedures (hereinafter “rules”) to ensure their fair administration or to make them conform to the requirements of the Code and rules and regulations adopted thereunder;
    c. deny registration or the amendment if:chanroblesvirtuallawlibrary
      (i) the clearing agency does not have the capacity and resources to enforce compliance with its rules as proposed or amended;
      (ii) the rules or any amendment thereto would be inconsistent with provisions of the Code, or rules and regulations adopted thereunder or with the development and operation of a prompt and accurate clearance and settlement system and the safeguarding of money and securities in its custody, within its control or for which it is responsible; or
      (iii) the application for registration or an amendment thereto is incomplete, inaccurate or misleading; or
    d. exempt from  registration due to the limited volume of transactions and based on findings that it is not practicable and necessary or appropriate in the public interest or for the protection of investors to require such registration.
4. If any of the information reported on SEC Form 42-CA becomes inaccurate, misleading or incomplete or requires updating for any reason, including changes to rules and the list of directors and officers, the registrant shall correct the information by filing an amendment within seven (7) days after the date on which the information contained in the application became inaccurate, misleading or incomplete. Amendments to SEC Form 42-CA which update the registrant’s list of directors, officers, partners or shareholders shall be deemed to satisfy Section 26 of the Corporation Code of the Philippines.
6.   On an annual basis, a registered clearing agency shall file with the Commission its audited balance sheet and statement of income and expenses, and all notes or schedules thereto within 105 days from the end of its fiscal year.  Financial statements filed pursuant to this subsection shall be deemed to satisfy Section 141 of the Corporation Code of the Philippines.
 
SRC Rule 42-2
Reports from Clearing Agencies
If a registered clearing agency at any time becomes aware of any development relating to a participant that leads such clearing agency to believe that (1) such participant has breached, is in breach, or is about to breach the clearing agency’s rules, or (2) the participant has experienced, is experiencing, or is about to experience material operational or financial difficulties, which breach or difficulties may adversely affect such participant, such registered clearing agency shall immediately notify the Commission and provide any documentation or evidence leading the clearing agency to such determination.


SRC Rule 48.1-1
Margin

1. A Broker Dealer shall not extend credit to a customer in an amount that exceeds fifty percent (50%) of the current market value of the security at the time of the transaction. In no event shall new or additional credit be extended in an account in which the equity is less than P50,000.00.
2. The margin maintained in a margin account of a customer shall be no less than twenty five percent (25%) of the current market value of all securities "long" in the account and thirty percent (30%) of the current market value of securities "short" in the account.
3. When there is an insufficiency of margin, a call for additional margin shall be issued promptly by the Broker Dealer to the customer. A call for initial margin shall be satisfied within five (5) business days from the date the insufficiency is created. A call for maintenance margin shall be satisfied within 24 hours after the call is issued.
4. If a margin call is not met within the time prescribed in paragraph (3) above, the Broker Dealer shall liquidate securities sufficient to meet the margin call or eliminate the margin deficiency existing on the day such liquidation is required, whichever is less. The Broker Dealer shall liquidate the securities through the Exchange on which it is traded or in the best available public market. If the margin deficiency in the account in less than P10,000, no action need be taken by the Broker Dealer.

5. The required payment date for a call for initial margin may be extended by seven (7) days upon written application delivered by hand or facsimile transmission by the Broker Dealer to an Exchange, in the case of members of that Exchange, or to the Commission, in the case of non exchange members. In granting such an extension, the Exchange or Commission will take into consideration whether the Broker Dealer and the customer are acting in good faith and whether exceptional circumstances warrant such extension. Application for the extension must be received and acted upon before the expiration of the original payment period or the expiration of any previous extension.

 
SRC Rule 49.1-1
Net Capital Rule
1. (a) Every Broker Dealer at all times shall have and maintain net capital no less than the greater of P5 Million Pesos or five percent (5%) of his aggregate indebtedness.
(b) Every Broker Dealer shall make a computation of net capital on a daily basis. Such computations, upon request by an Exchange if such Broker Dealer is a member, and/or the Commission shall immediately be provided in written form.
(c) Every Broker Dealer shall immediately cease doing business as a Broker Dealer, and notify an Exchange if it is a member of that Exchange, and the Commission if it determines that its net capital falls below the minimum amounts required pursuant to this  Rule.
(d) The Commission or an Exchange, in the case of a member of an Exchange, may require Broker Dealers from time to time to submit reports which reflect their financial and operational condition, including net capital.
2.  No Broker Dealer shall permit its aggregate indebtedness to all other persons to exceed 2,000 percent of its net capital.
3. The term aggregate indebtedness shall mean the total money liabilities of a Broker Dealer arising in connection with any transaction whatsoever, and includes, among other things, money borrowed, money payable against securities loaned and securities failed to receive, the market value of securities borrowed to the extent to which no equivalent value is paid or credited (other than the market value of margin securities borrowed from customers and margin securities borrowed from non-customers), customers' and non-customers' free credit balances, and credit balances in customers' and non-customers' accounts having short positions in securities, but excluding:chanroblesvirtuallawlibrary
    (a) Indebtedness adequately collateralized by securities which are carried long by the Broker Dealer and which have not been sold or by securities which collateralize a secured demand note in conformity with SRC Rule 49.1-2;
     (b) Amounts payable against securities loaned, which securities are carried long by the Broker Dealer and which have not been sold or which securities collateralize a secured demand note in conformity with SRC Rule 49.1-2;
     (c) Amounts payable against securities failed to receive which securities are carried long by the Broker Dealer and which have not been sold or which securities collateralize a secured demand note in conformity with SRC Rule 49.1-2;  or amounts payable against securities failed to receive for which the Broker Dealer also has a receivable related to securities of the same issue and quantity thereof which are either fails to deliver or securities borrowed by the Broker Dealer;
    (d) Fixed liabilities adequately secured by assets acquired for use in the ordinary course of the trade or business of a Broker Dealer but not other fixed liabilities Secured by assets of the Broker Dealer shall be so excluded unless the sole recourse of the creditor for nonpayment of such liability is to such asset;
    (e) Indebtedness subordinated to the claims of creditors pursuant to a satisfactory subordination agreement in conformity with SRC Rule 49.1-2;
    (f) Liabilities which are effectively subordinated to the claims of creditors (but which are not subject to a satisfactory subordination agreement in conformity with SRC Rule 49.1-2;  by non-customers of the Broker Dealer prior to such subordination, except such subordinations by customers as have been approved by an Exchange in the case of a member of that Exchange and the Commission in the case of a firm that is not a member of an Exchange;
    (g) Credit balances in accounts of general partners;
    (h) Deferred tax liabilities; and
    (i) Eighty percent (80%) of amounts payable against securities loaned for which the Broker Dealer has receivables related to securities of the same class and issue and quantity that are securities borrowed by the Broker Dealer.
4. The term  net capital  shall be deemed to mean the net worth of a Broker Dealer, adjusted by the following, provided, however, that in determining net worth, all long and all short securities positions shall be marked to their market value:chanroblesvirtuallawlibrary
    (a) Adding unrealized profits (or deducting unrealized losses) in the accounts of the Broker Dealer;
    (b) Excluding liabilities of the Broker Dealer which are subordinated to the claims of creditors pursuant to a satisfactory subordination agreement in conformity with SRC Rule 49.1-2;
    (c) Deducting, in the case of a Broker Dealer who is a sole proprietor, the excess of liabilities which have not been incurred in the course of business as a Broker Dealer over assets not used in the business;
    (d) Deducting Deposit for Futures Stock Subscription for which no application for increase in capital stock or request for exemption for registration has been filed with the Commission. For net capital purposes, the same shall be considered part of aggregate indebtedness unless there is evidence that such amount is a deposit but an irrevocable subscription or a subordinated loan agreement has been entered into with the subscriber;
    (e) Deducting fixed assets and assets which can not be readily converted into cash (less any indebtedness excluded in accordance with paragraph 3 (d) of this Rule) including, among other things:chanroblesvirtuallawlibrary
      (i) Real estate; furniture and fixtures; Exchange memberships/trading rights; prepaid rent, insurance and other expenses; goodwill, organization expenses;
      (ii) All unsecured advances and loans; deficits in customers' and non-customers' unsecured and partly secured notes; deficits in special omnibus accounts or similar accounts carried on behalf of another Broker Dealer, after application of calls for margin, marks to the market or other required deposits that are outstanding four (4) business days or less; deficits in customers’ and non-customers’ unsecured and partly secured accounts after application of calls for margin, marks to the market or other required deposits that are outstanding four (4) business days or less, except deficits in cash accounts for which not more than one extension respecting a specified securities transaction has been requested and granted; the market value of stock loaned in excess of the value of any collateral received therefor; and any collateral deficiencies in secured demand notes in conformity with SRC Rule 49.1-2;
      For the purpose of the above, a loan or any other form of receivables shall be considered “unsecured” unless the following conditions exist:chanroblesvirtuallawlibrary
        (A) the receivable is secured by collateral which is otherwise unencumbered provided, however, that such receivable will be considered secured only to the extent of the market value of such collateral after application of such percentage deductions as may be prescribed by the Commission;
        (B) the collateral is in the possession or control of the Trading Member; and
        (C) the Trading Member has a legally enforceable written security agreement executed by the debtor in its favor under which the Trading Member shall have the power to readily sell or otherwise convert the collateral into cash.
      (iii) Interest receivable, floor brokerage receivable, commissions receivable from other Broker Dealers, and management fees receivable from registered investment companies, all of which receivables are outstanding longer than thirty (30) days from the date they arose; dividends receivable outstanding longer than thirty (30) days from the payable date;
       (iv)  Insurance claims which, after fifteen (15) business days from the date the loss giving rise to the claim is discovered, are not covered by an opinion of outside counsel that the claim is valid and is covered by insurance policies presently in effect; insurance claims which after thirty (30) business days from the date the loss giving rise to the claim is discovered and which are accompanied by an opinion of outside counsel described above, have not been acknowledged in writing by the insurance carrier as due and payable; and insurance claims acknowledged in writing by the carrier as due and payable outstanding longer than twenty (20) business days from the date they are so acknowledged by the carrier;
      (v) All other unsecured receivables; all assets doubtful of collection less any reserves established therefor; the amount by which the market value of securities failed to receive outstanding longer than thirty (30) days exceeds the contract value of such fails to receive;
      (vi) One percent (1%) of the market value of securities borrowed collateralized by an irrevocable letter of credit; and
      (vii) Any receivable from an affiliate of the Broker Dealer (not otherwise deducted from net worth) and the market value of any collateral given to an affiliate (not otherwise deducted from net worth) to secure a liability over the amount of the liability of the Broker Dealer unless the books and records of the affiliate are made available for examination when requested by the Commission or an Exchange, where a Broker Dealer is a member of that Exchange, for the Broker Dealer in order to demonstrate the validity of the receivable or payable. The provisions of this subsection shall not apply where the affiliate is a Broker Dealer;
(f)  (i) Deducting the market value of all short securities differences (which shall include securities positions reflected on the securities record which are not susceptible to either count or confirmation) unresolved after discovery in accordance with the following schedule:chanroblesvirtuallawlibrary
 Percentage of Market         Number of
 Value of Short                    Business Days
 Securities Differences                  After Discovery
         25%                 7
         50%                 14
         75%                 21
      100%                 28
(ii) Deducting the market value of any long securities differences, where such securities have been sold by the Broker Dealer before they are adequately resolved, less any reserves established therefor;
(iii) For an Exchange member, that Exchange, and in the case of a Broker Dealer that is not a member of an Exchange, the Commission may extend the periods in paragraph (i) above for up to ten (10) business days if it finds that exceptional circumstances warrant an extension.
(g) (i) Deducting for all securities or evidences of indebtedness (other than those described in subparagraphs (ii) and (iii) below) in the proprietary or other accounts of the Broker Dealer, fifteen percent (15%) of the market value of the greater of the long or short positions and to the extent the market value of the lesser of the long or short positions exceeds twenty five (25%) of the market value of the greater of the long or short positions, the percentage deduction on such excess shall be fifteen percent (15%) percent of the market value of such excess. No deduction need be made in the case of:chanroblesvirtuallawlibrary
     A. Securities that are convertible into or exchangeable for other securities within a period of ninety (90) days, subject to no conditions other than the payment of money, and the other securities into which such security is convertible or for which it is exchangeable, are short in the accounts of such Broker Dealer; or
    B. A security that has been called for redemption and that is redeemable within ninety (90) days.
(ii) Deducting, in the case of securities in the proprietary or other accounts of the Broker Dealer, which are not listed or traded on an Exchange, the following amounts:chanroblesvirtuallawlibrary
    A. In the case where there are regular quotations for the securities by three (3) or more independent dealers (exclusive of the computing Broker Dealer) and where each such quotation represents a bona fide offer to Brokers or dealers to both buy and sell in reasonable quantities at stated prices, the deduction shall be determined in accordance with subparagraph (i) above;
    B. In the case where there are regular quotations for the securities by only one or two independent dealers (exclusive of the computing Broker Dealer) and where each such quotation represents a bona fide offer to Brokers Dealers both to buy and sell in reasonable quantities, at stated prices, the deduction on both the long and short position shall be forty percent (40%); and
    C. W here a Broker Dealer demonstrates that there is sufficient liquidity for any securities long or short in the proprietary or other accounts of the Broker Dealer which are subject to a deduction required by subparagraph ii (b) above, such deduction, upon a proper showing to an Exchange in the case of a member of that Exchange and to the Commission in the case of a firm that is not a member of an Exchange may be appropriately decreased, but in no case shall such deduction be less than that prescribed in subparagraph (i) above.
(iii) Deducting for securities issued by the Republic of the Philippines or investment grade non convertible corporate debt securities having a fixed interest rate and fixed maturity date in the proprietary or other accounts of the Broker Dealer, the applicable percentage of the market value of the greater of the long or short positions in each of the categories specified below:chanroblesvirtuallawlibrary
     less than 1 year to maturity - 2%
     1 year but less than 2 years to maturity – 3%
    2 years but less than 3 years to maturity – 5%
     3 years but less than 5 years to maturity – 6%
     5 years but less than ten years to maturity – 7%
(iv)  Deducting in the case of unit trusts and other investment in the proprietary or other accounts of the Broker Dealer forty percent (40%) of the market value of such investments.
(v) In the case of securities of a single class or series of an issuer (other than securities issued by the Republic of the Philippines) which are long or short in the proprietary or other accounts of a Broker Dealer, including securities that are collateral to secured demand notes in conformity with SRC Rule 49.1-2 and that have a market value of more than ten percent (10%) of the net capital of a Broker Dealer before the application of haircuts required by this rule, there shall be an additional deduction from net worth and/or the collateral value for securities collateralizing a secured demand note in conformity with SRC Rule 49.1-2 equal to fifty percent (50%) of the percentage deduction otherwise provided by haircut provisions of this rule on that portion of the securities position in excess of ten percent (10%) of the net capital of the Broker Dealer before the application of the haircuts.
(h) Deduction of one hundred percent (100%) of the carrying value in the case of securities or evidence of indebtedness, in the proprietary or other account of the Broker Dealer, for which there is no ready market, as defined in paragraph 7 of this Rule, and securities, in the proprietary or other accounts of the Broker Dealer, which cannot be publicly offered or sold because of statutory, regulatory or contractual arrangements or other restrictions;
5. Adequately secured indebtedness shall be deemed to exist when the excess of the market value of the collateral over the amount of the indebtedness is sufficient to make the loan acceptable as a fully secured loan to banks regularly making secured loans to Broker Dealers.
6. Customer  shall mean any person from whom, or on whose behalf, a Broker Dealer received, acquired or holds funds or securities for the account of such person, but shall not include a general, special or limited partner or director or officer of the Broker Dealer, or any person to the extent that such person has a claim for property or funds which by contract, agreement or understanding, or by operation of law, is part of the capital of the Broker Dealer or is subordinated to the claims of creditors of the Broker Dealer. However, the term “customer” of a Broker Dealer shall include another Broker Dealer (the initiating Broker as defined in Section 34.1-2 hereof) wherein the latter maintains separately a Dealer account and a special omnibus account in behalf of his customer with the former.
7. (a)  Ready Market  shall include a recognized established securities market in which exists independent bona fide offers to buy and sell so that a price reasonably related to the last sales price or current bona fide competitive bid and offer quotations can be determined for a particular security almost instantaneously and where payment will be received in settlement of a sale at such price within a relatively short time.
 (b) Ready market shall also be deemed to exist where securities have been accepted as collateral for a loan by a bank and where the Broker Dealer demonstrates to an Exchange in the case of a member of that Exchange or the Commission in the case of a firm that is not a member of an Exchange that such securities adequately secure such loans.
 
LIMITATIONS ON WITHDRAWAL OF EQUITY CAPITAL
8. (a) No equity capital of a Broker Dealer may be withdrawn by action of a stockholder or a partner or by redemption or repurchase of shares of stock or through the payment of dividends or any similar distribution, nor may any unsecured advance or loan be made to a stockholder, partner, sole proprietor, employee or affiliate, if after giving effect thereto and to any other such withdrawals, advances or loans and any payments under satisfactory subordination agreements in conformity with SRC Rule 49.1-2 which are scheduled to occur within one hundred and eighty (180) days following such withdrawal, advance or loan if:chanroblesvirtuallawlibrary
     (i) The Broker Dealer’s net capital would be less than 120 percent of the minimum amount required by paragraph 1of this Rule; or
    (ii) The aggregate indebtedness of the Broker Dealer exceeds 1500 percent of its net capital.
(b) For purposes of paragraph (a) above, the term  equity capital  includes capital contributions by partners, par or stated value of capital stock, paid-in capital in excess of par, retained earnings or other capital accounts.
(c) Paragraph (a) above shall not preclude a Broker Dealer from making required tax payments or preclude the payment to partners of reasonable compensation, and such payments shall not be included in the calculation of withdrawals, advances, or loans for purposes of paragraph (a) above.
(d) For the purpose of paragraph (a) above, any transaction between a Broker Dealer and a stockholder, partner, sole proprietor, employee or affiliate that results in a diminution of the Broker Dealer’s net capital shall be deemed to be an advance or loan of net capital.
9. Every Broker Dealer shall notify the Commission within twenty four (24) hours after the occurrence of any of the following events:chanroblesvirtuallawlibrary
    (a) The Broker Dealer’s computation shows that its Aggregate Indebtedness is in excess of 1,700 percent of its adjusted net capital; and/or
    (b) The Broker Dealer’s computation shows that its total adjusted net capital is less than one hundred twenty percent (120%) of the required minimum net capital.
SRC Rule 49.1-2
Satisfactory Subordination Agreements
 1. a. This Rule sets forth minimum and non-exclusive requirements for satisfactory subordination agreements (hereinafter “subordination agreement”). An Exchange, in the case of a member of that Exchange or the Commission may require or the Broker Dealer may include such other provisions as deemed necessary or appropriate to the extent such provisions do not cause the subordination agreement to fail to meet the minimum requirements of this Rule.
b. For purposes of SRC Rule 49.1-1 and this Rule:chanroblesvirtuallawlibrary
    i. A  subordination agreement  may be either a subordinated loan agreement or a secured demand note agreement.
    ii. Subordinated loan agreement shall mean the agreement or agreements evidencing or governing a subordinated borrowing of cash.
    iii. Collateral Value of any securities pledged to secure a secured demand note shall mean the market value of such securities after reducing the market value of the securities by 30 percent, except for securities issued by the Republic of the Philippines. In lieu of the 30 percent deduction, the Broker Dealer shall reduce the market value of securities issued by the Republic of the Philippines pledged to secure the secured demand note by the percentage deductions set forth in paragraph (4)(g)(iii) of SRC Rule 49.1-1.
    iv. Payment Obligation shall mean the obligation of a Broker Dealer in respect of any subordination agreement (i) to repay cash loaned to the Broker Dealer pursuant to a subordinated loan agreement or (ii) to return a secured demand note contributed to the Broker Dealer or reduce the unpaid principal amount thereof and to return cash or securities pledged as collateral to secure the secured demand note. Payment shall mean the performance by a Broker Dealer of a Payment Obligation.
    v. (A) Secured demand note agreement shall mean an agreement (including the related secured demand note) evidencing or governing the contribution of a secured demand note to a Broker Dealer and the pledge of securities and/or cash with the Broker Dealer as collateral to secure payment of such secured demand note. The secured demand note agreement may provide that neither the lender, his heirs, executors, administrators or assigns shall be personally liable on such note and that in the event of default the Broker Dealer shall look for payment of such note solely to the collateral then pledged to secure the same.
      (B) The secured demand note shall be a promissory note executed by the lender and shall be payable on the demand of the Broker Dealer to which it is contributed; provided, however, that the making of such demand may be conditioned upon the occurrence of any of certain events which are acceptable to the Commission and to an Exchange in the case of a Broker Dealer which is a member of that Exchange.
      (C) If such note is not paid upon presentment and demand as provided for therein, the Broker Dealer shall have the right to liquidate all or any part of the securities then pledged as collateral to secure payment of the same and to apply the net proceeds of such liquidation, together with any cash then included in the collateral, in payment of such note. Subject to the prior rights of the Broker Dealer as pledgee, the lender, as defined herein, may retain ownership of the collateral and have the benefit of any increases and bear the risks of any decreases in the value of the collateral and may retain the right to vote securities contained within the collateral and any right to income therefrom or distributions thereon, except the Broker Dealer shall have the right to receive and hold as pledgee all dividends payable in securities and all partial and complete liquidating dividends.
      (D) Subject to the prior rights of the Broker Dealer as pledgee, the lender may have the right to direct the sale of any securities included in the collateral, to direct the purchase of securities with any cash included therein, to withdraw excess collateral or to substitute cash so other securities as collateral, provided that the net proceeds of any such sale and the cash so substituted and the securities so purchased or substituted are held by the Broker Dealer, as pledgee, and are included within the collateral to secure payment of the secured demand note, and provided further that no such transaction shall be permitted if, after: giving effect thereto, the sum of the amount of any cash, plus the Collateral Value of the securities, then pledged as collateral to secure the secured demand note would be less than the unpaid principal amount of the secured demand note.
      (E) Upon payment by the lender, as distinguished from a reduction by the lender which is provided for in “Annex E”   paragraph (6)(c) or reduction by the Broker Dealer as provided for in “Annex E” paragraph (7) of this rule, of all or any part of the unpaid principal amount of the secured demand note, a Broker Dealer shall issue to the lender a subordinated loan agreement in the amount of such payment (or in the case of a Broker Dealer that is a partnership credit a capital account of the lender) or issue preferred or common stock of the Broker Dealer in the amount of such payment, or any combination of the foregoing, as provided for in the secured demand note agreement.
       
     vi. Lender  shall mean the person who lends cash to a Broker Dealer pursuant to a subordinated loan agreement and the person who contributes a secured demand note to a Broker Dealer pursuant to a secured demand note agreement.
2.  The Minimum requirements for Subordination Agreements and Miscellaneous Provisions are set forth in “Annex E”.

 
SRC Rule 49.2-1
Customer Protection Reserves and Custody of Securities
1. Physical Possession or Control of Securities
    (a) A Broker Dealer on a daily basis shall obtain and shall thereafter maintain the physical possession or control of all fully paid securities and excess margin securities carried by a Broker Dealer for the account of customers
    (b) A Broker Dealer shall not be deemed to be in violation of the provisions of paragraph 1(a) regarding physical possession or control of customers' securities if, solely as the result of normal business operations, temporary lags occur between the time when a security is required to be in the possession or control of the Broker Dealer and the time that it is placed in the firm's physical possession or under the firm's control; provided, the Broker Dealer takes timely steps in good faith to establish prompt physical possession or control. The burden of proof shall be on the Broker Dealer to establish that the failure to obtain physical possession or control of securities carried for the account of customers is merely temporary and solely the result of normal business operations including same day receipt and redelivery (turnaround), and to establish that the Broker Dealer has taken timely steps in good faith to place them in the Broker Dealer’s physical possession or control.
    (c) A Broker Dealer shall not be deemed to be in violation of the provisions of paragraph 1(a) of this rule regarding physical possession or control of fully-paid or excess margin securities borrowed from any person, provided, that the Broker Dealer and the lender, at or before the time of the loan, enter into a written agreement that, at a minimum:chanroblesvirtuallawlibrary
      (i) Sets forth in a separate schedule or schedules the basis of compensation for any loan and generally the rights and liabilities of the parties as to the borrowed securities;
      (ii) Provides that the lender will be given a schedule of the securities actually borrowed at the time of the borrowing of the securities; and
      (iii) Specifies that the Broker Dealer shall:chanroblesvirtuallawlibrary
        (A) provide to the lender, upon the execution of the agreement or by the close of the business day of the loan if the loan occurs subsequent to the execution of the agreement, collateral consisting exclusively of cash or Republic of the Philippines Treasury bills and Treasury notes or an irrevocable letter of credit issued by a bank which fully secures the loan of securities; and
        (B) must mark the loan to the market not less than daily and, in the event the market value of all the outstanding securities loaned at the close of trading at the end of the business day exceeds 100 percent of the collateral then held by the lender, the borrowing Broker Dealer must provide additional collateral of the type described in subparagraph (A) above to the lender by the close of the next business day as necessary to equal, together with the collateral then held by the lender, not less than one hundred percent (100%) of the market value of the securities loaned.
2. Control of Securities. - Securities under the control of a Broker Dealer shall be deemed to be securities which:chanroblesvirtuallawlibrary
    (a) Are represented by one or more certificates in the custody or control of a clearing agency registered with the Commission in accordance with Section 42 of the Code the delivery of which certificates to the Broker Dealer does not require the payment of money or value, and if the books or records of the Broker Dealer identify the customers entitled to receive specified number or units of the securities so held for such customers collectively;
    (b) Are carried for the account of any customer by a Broker Dealer and are carried in a special omnibus account in the name of such Broker Dealer with another Broker Dealer, such securities being deemed to be under the control of such Broker Dealer to the extent that it has instructed such carrying Broker Dealer to maintain physical possession or control of them free of any charge, lien or claim of any kind in favor of such carrying Broker Dealer or any person claiming through such carrying Broker Dealer ;
    (c) Are the subject of bona fide items of transfer; provided that securities shall be deemed not to be the subject of bona fide items of transfer if, within forty (40) days after they have been transmitted for transfer by the Broker Dealer to the issuer or its transfer agent, new certificates conforming to the instructions of the Broker Dealer have not been received by him, he has not received a written statement by the issuer or its transfer agent acknowledging the transfer instructions and the possession of the securities or he has not obtained a revalidation of a window ticket from a transfer agent with respect to the certificate delivered for transfer;
    (d) Are in the custody of a foreign depository, foreign clearing agency or foreign custodian bank which the Commission upon application from a Broker Dealer, an Exchange or upon its own motion, shall designate as a satisfactory control location for securities;
    (e)   Are in the custody or control of a bank the delivery of which securities to the Broker Dealer does not require the payment of money or value and the bank having acknowledged in writing that the securities in its custody or control are not subject to any right, charge, security interest, lien or claim of any kind in favor of a bank or any person claiming through the bank;
    (f) (i)  Are held in or are in transit between offices of the Broker Dealer; or
       (ii) Are held by a corporate subsidiary if the Broker Dealer owns and exercises a majority of the voting rights of all of the voting securities of such subsidiary, assumes or guarantees all of the subsidiary's obligations and liabilities, operates the subsidiary as a branch office of the Broker Dealer, and assumes full responsibility for compliance by the subsidiary and all of its salesmen and other personnel with the provisions of the Code and rules and regulations adopted thereunder as well as for all of the other acts of the subsidiary and such persons;
    (g) Are in transit to or from Broker Dealers, banks, custodians, registered transfer agents and registered clearing agencies which are otherwise good control locations pursuant to the term of this Rule, Provided, such items shall have been in transit from or to the Broker Dealer for a period of not more than five (5) business days from the day they are first put in transit, and provided further, the books and records of the Broker Dealer clearly account for such items. An "in transit" account may be used for this purpose; or
    (h) Are held in such other locations as the Commission shall upon application from a Broker Dealer or an Exchange to which a Broker Dealer is a member find and designate to be adequate for the protection of customer securities.
3. Requirement to Reduce Securities to Possession or Control.
    (a) Not later than the next business day, a Broker Dealer, as of the close of the preceding business day, shall determine from the Broker Dealer’s books or records the quantity of fully paid securities and excess margin securities in its possession or control and the quantity of fully paid securities and excess margin securities not in its possession or control. In making this daily determination inactive margin accounts (accounts having no activity by reason of purchase or sale of securities, receipt or delivery of cash or securities or similar type events) may be computed not less than once weekly. If such books or records indicate, as of the close of the business day, that the Broker Dealer has not obtained physical possession or control of all fully paid and excess margin securities as required by this paragraph and there are securities of the same issue and class in any of the following non-control locations:chanroblesvirtuallawlibrary
      (i) Securities subject to a lien securing monies borrowed by the Broker Dealer or securities loaned to another Broker Dealer, then the Broker Dealer shall, not later than the business day following the day on which such determination is made, issue instructions for the release of such securities from the lien or return such loaned securities and obtain physical possession or control of such securities within two (2) business days following the date of issuance of the instructions in the case of securities subject to lien securing borrowed monies and within five (5) business days following the date of issuance of instructions in the case of securities loaned;
      (ii) Securities included on his books or records as failed to receive more than thirty (30) days, then the Broker Dealer shall, not later than the business day following the day on which such determination is made, take prompt steps to obtain physical possession or control of securities so failed to receive through a buy-in procedure or otherwise; or
      (iii) Securities receivable by the Broker Dealer as a stock dividend receivable, stock split, or similar distribution for more than forty five (45) days, then the Broker Dealer shall, not later than the business day following the day on which such determination is made, take prompt steps to obtain physical possession or control of securities so receivable through a buy-in procedure or otherwise.
    (b) A Broker Dealer which is subject to the requirements of this rule with respect to physical possession or control of fully paid and excess margin securities shall prepare and maintain a current and detailed written description of the procedures which it utilizes to comply with the possession or control requirements set forth in this Rule.
    (c) A Broker Dealer which is subject to this rule shall record information relating to physical possession and control of fully paid and excess margin securities on a quarterly basis and submit such record to an Exchange, in the case of a member of that Exchange or to the Commission, in the case of a non-member, in accordance with the format set forth in “Annex F”.
4. Special Reserve Bank Account for the Exclusive Benefit of Customers.
    (a) Every Broker Dealer shall maintain with a bank/s at all times when deposits are required or hereinafter specified a "Special Reserve Bank Account for the Exclusive Benefit of Customers" (hereinafter referred to as the "Reserve Bank Account"), and it shall be separate from any other bank account of the Broker Dealer. Such Broker Dealer shall at all times maintain in the Reserve Bank Account, through deposits made therein, cash and/or qualified securities in amounts computed in accordance with the formula attached hereto as “Annex G”.
    (b) It shall be unlawful for any Broker Dealer to accept or use any of the amounts under items comprising Total Credits under the formula referred to in paragraph 4(a) above except for the specified purposes indicated under items comprising Total Debits under the formula, and, to the extent Total Credits exceed Total Debits, the net amount thereof shall be maintained in the Reserve Bank Account required by paragraph 4(a) above.
    (c) (i)  Computations necessary to determine the amount required to be deposited pursuant to paragraph 4(a) above shall be made weekly, as of the close of the last business day of the week and the deposit so computed shall be made no later than 1 hour after the opening of banking business on the second following business day; Provided, however, a Broker Dealer  which  has aggregate indebtedness not exceeding 800 percent of net capital as defined in SRC Rule 49.1-1 and which carries aggregate customer funds as defined in paragraph 13(i) of this rule as computed at the last required computation pursuant to this rule, not exceeding P 25 million, may in the alternative make the computation monthly, as of the close of the last business day of the month, and in such event, shall deposit not less than 105 percent of the amount so computed no later than 1 hour after the opening of banking business on the second following business day.
      (ii) If a Broker Dealer, computing on a monthly basis, has, at the time of any required computation, aggregate indebtedness in excess of 800 percent of net capital, such Broker Dealer shall thereafter compute weekly as aforesaid until four successive weekly computations are made, none of which were made at a time when his aggregate indebtedness exceeded 800 percent of his net capital.
      (iii) Computations in addition to the computations required in this paragraph (c)(i) above, may be made as of the close of any other business day, and the deposits so computed shall be made no later than 1 hour after the opening of banking business on the second following business day.
      (iv) The Broker Dealer shall make and maintain a record of each such computation made pursuant to paragraph (c)(i) above and submit such computation quarterly to an Exchange, in the case of a member of that Exchange, or to the Commission in the case of a non-member.
5. Notifications of Banks.
    A Broker Dealer required to maintain the Reserve Bank Account prescribed by paragraph (4) of this Rule shall obtain and preserve in accordance with SRC Rule 52.1-2 a written notification from each bank in which the firm has its Reserve Bank Account that the bank was informed that all cash and/or qualified securities deposited therein are being held by the bank for the exclusive benefit of customers of the Broker Dealer in accordance with the rules and regulations of the Commission, and are being kept separate from any other accounts maintained by the Broker Dealer with the bank, and the Broker Dealer shall have a written contract with the bank which provides that the cash and/or qualified securities shall at no time be used directly or indirectly as security for a loan to the Broker Dealer by the bank and shall be subject to no right, charge, security interest, lien or claim of any kind in favor of the bank or any person claiming through the bank.
6. Withdrawals from the Reserve Bank Account.
A Broker Dealer may make withdrawals from the firm's Reserve Bank Account if and to the extent that at the time of the withdrawal the amount remaining in the Reserve Bank Account is not less than the amount then required by paragraph (4) of this rule. A bank may presume that any request for withdrawal from a Reserve Bank Account is in conformity and compliance with this paragraph. On any business day on which a withdrawal is made, the Broker Dealer shall make a record of the computation on the basis of which the firm makes such withdrawal, and the Broker Dealer shall preserve such computation in accordance with SRC Rule 52.1-2.
7. Buy-In of Short Security Differences.
A Broker Dealer shall within forty five (45) days after the date of the examination, count, verification and comparison of securities pursuant to SRC Rule 52.1-10, preparation of the annual report of financial condition in accordance with SRC Rule 52.1-5, or for any other purpose, buy-in all short security differences which are not resolved during the forty five (45) day period.
8. Notification in the Event of Failure to Make a Required Deposit.
If a Broker Dealer shall fail to make in its Reserve Bank Account a deposit, as required by this rule, the Broker Dealer shall by fax, telegram or other similar means, immediately notify the Commission and an Exchange, if it is a member of that Exchange, and shall promptly thereafter confirm such notification in writing, including the reasons for such failure.
9. Exemptions.
    (a) The provisions of this Rule shall not be applicable to a Broker Dealer who carries no margin accounts, promptly transmits all customer funds and delivers all securities received in connection with its activities as a Broker Dealer   and does not otherwise hold funds or securities for, or owe money or securities to, customers.
    (b) Upon written application by a Broker Dealer, the Commission or an Exchange, if the Broker Dealer is a member of that Exchange, may exempt such Broker Dealer from the provisions of this rule, either unconditionally or on specified terms and conditions, if the Commission or the Exchange finds that the Broker Dealer has established safeguards for the protection of funds and securities of customers comparable with those provided for by this rule and that it is not necessary in the public interest or for the protection of investors to subject the particular Broker Dealer to the provisions of this rule.
10. Delivery of Securities.
Nothing stated in this Rule shall be construed as affecting the absolute right of a customer of a Broker Dealer to receive in the course of normal business operations following demand made on the Broker Dealer, the physical delivery of certificates for:chanroblesvirtuallawlibrary
    (a) Fully paid securities to which he is entitled; and
    (b) Margin securities upon full payment by such customer to the Broker Dealer of his indebtedness to the Broker Dealer and, subject to the right of the Broker Dealer to retain collateral for the firm's own protection beyond the requirements of SRC Rule 48.1-1, excess margin securities not reasonably required to collateralize such customer's indebtedness to the Broker Dealer.
11. Completion of Sell Orders on Behalf of Customers.
If a Broker Dealer executes a sell order of a customer (other than an order to execute a sale of securities which the seller does not own) and if for any reason whatever the Broker Dealer has not obtained possession of the securities from the customer within ten (10) business days after the settlement date, the Broker Dealer shall immediately thereafter close the transaction with the customer by purchasing securities of like kind and quantity.
12. Extensions of Time.
If an appropriate committee of the Exchange is satisfied that a Broker Dealer which is a member of that Exchange is acting in good faith in making the application and that exceptional circumstances warrant such action, such committee, on application of the Broker Dealer, may extend any period specified in paragraphs (3)(a)(ii) and (iii), paragraph (7) and paragraph (11) of this rule, relating to the requirement that such Broker Dealer take action within a designated period of time to buy-in in a security, for one or more limited periods commensurate with the circumstances. Each such committee shall make and preserve for a period of not less than three (3) years a record of each such extension granted which shall contain a summary of the justification for the granting of the extension.
13. Definitions.
For the purpose of this rule:chanroblesvirtuallawlibrary
    (a) Customer shall mean any person from whom or on whose behalf a Broker Dealer has received or acquired or holds funds or securities for the account of that person. The term shall not include a Broker Dealer nor shall it include general partners or directors or principal officers of the Broker Dealer or any other person to the extent that the person has a claim for property or funds which by contract, agreement or understanding, or by operation of law, is part of the capital of the Broker Dealer or is subordinated to the claims of creditors of the Broker Dealer. The term “customer”, however, shall  include another Broker Dealer (the initiating Broker as defined in Section 34.1-2 hereof) wherein the latter maintains separately a Dealer account and a special omnibus account in behalf of his customer with the former.
    (b) Securities carried for the account of the customer (also customer securities shall mean:chanroblesvirtuallawlibrary
      (i) Securities received by or on behalf of a Broker Dealer for the account of any customer and securities carried long by a Broker Dealer for the account of any customer; and
      (ii) Securities sold to, or brought for, a customer by a Broker Dealer.
    (c) Fully paid securities  shall include all securities carried for the account of a customer in a cash account or a margin account if they have been fully paid for; provided, however, that the term  fully paid securities  shall not apply to any securities which are purchased in transactions for which the customer has not made full payment.
    (d) Margin securities  shall mean those securities which have been purchased by a customer on the basis of credit extended by a Broker Dealer pursuant to the provisions of Section 48 of the Code and SRC Rule 48.1-1.
    (e) Excess margin securities shall mean margin securities having a market value in excess of 140 percent of the total of the debit balances in the customer's account/s encompassed by paragraph (d) above which the Broker Dealer identifies as not constituting margin securities.
    (f) Qualified security  shall mean a security issued by the Republic of the Philippines or a security in respect of which the principal and interest are guaranteed by the Government of the Philippines
    (g) Free credit balances shall mean liabilities of a Broker Dealer to customers which are subject to immediate cash payment to customers on demand, whether resulting from sales of securities, dividends, interest, deposits, or otherwise.
    (h) Other credit balances  shall mean cash liabilities of a Broker Dealer to customers other than free credit balances.
    (i) Funds carried for the account of any customer  (also  customer funds ) shall mean all free credit and other credit balances carried for the account of the customer.
    (j) Principal officer  shall mean the president, executive vice president, treasurer, secretary or any other person performing a similar function with the Broker Dealer.
    (k) Household members and other persons related to principals includes husbands or wives, children, sons-in-law or daughters-in-law and any household relative to whose support a principal contributes directly or indirectly. For purpose of this paragraph, a principal shall be deemed to be a director, general partner or principal officer of the Broker Dealer.
    (l) Affiliated person includes any person who directly or indirectly controls a Broker Dealer or any person who is directly or indirectly controlled by or under common control with the Broker Dealer. Ownership of ten percent (10%) or more of the common stock of the relevant entity will be deemed prima facie control of that entity for purposes of this paragraph.
    (m) Omnibus account shall mean an account in which a Broker Dealer effects transactions for its customer through another Broker Dealer.
14. Information relating to Possession and Control Requirements and the Formula for Determination of Reserve Requirements of Broker Dealers under SRC Rule 49.2-1 are set forth as Annexes “F” and “G” respectively.


SRC Rule 49.3-1
Lending and Voting Customers Securities

A Broker Dealer which extends credit to a customer shall not without the written consent of the customer, lend the latter’s securities to itself or to anyone else, or vote them as if they were its own.

 
SRC Rule 50-1
Purchases and Sales in Cash Account
1. Purchases by a customer in a cash account shall be paid in full within three (3) business days after the trade date.
2. If full payment is not received within the required time period, the Broker Dealer shall cancel or otherwise liquidate the transaction, or the unsettled portion thereof, starting on the next business day but not beyond ten (10) business days following the last day for the customer to pay, unless such sale cannot be effected within said period for justifiable reasons.
3. If a transaction is cancelled or otherwise liquidated as a result of non-payment by the customer, prior to any subsequent purchase during the next ninety (90) days, the customer shall be required to deposit sufficient funds in the account to cover each purchase transaction prior to execution.
4.  If the amount of money due from a customer in a cash account is less than P10,000, the Broker Dealer may choose not to take the action required by paragraph (2).
5. Exceptions to paragraphs (1), (2), and (3) include when the security purchased is unissued or where the purchase is made by the customer with the understanding that payment is to be made upon delivery.
6. Written application for an extension of the period of time required for payment under paragraph (1) may be made by the Broker Dealer to the Exchange in the case of a member of that Exchange or to the Commission, in the case of a non-member of the Exchange. Applications for the extension must be based upon exceptional circumstances and must be filed and acted upon before the expiration of the original payment period or the expiration of any subsequent extension.
7. If a Broker Dealer executes a sell order of a customer (other than an order to execute a sale of securities which the seller does not own) and if for any reason whatever the Broker Dealer has not obtained possession of the securities from the customer within ten (10) business days after the settlement date, the Broker Dealer shall immediately thereafter close the transaction with the customer by purchasing securities of like kind and quantity.

8.  If the Broker Dealer is required to take the action required by paragraph (7), prior to any subsequent sale during the next ninety (90) days, the customer will be required to place the securities on deposit in the account prior to execution of the transaction.
SRC Rule 52.1-1
Books and Records Rule
1. Every Broker Dealer shall make and keep current the following books and records relating to its business and they shall be maintained in the principal office of the Broker Dealer:chanroblesvirtuallawlibrary
    (a) Blotters (or other records of original entry) containing an itemized daily record of all purchases and sales of securities, all receipts and deliveries of securities (including certificate numbers), all receipts and disbursements of cash and all other debits and credits. Such records shall show the account for which each such transaction was effected, the name and amount of securities, the unit and aggregate purchase or sale price (if any), the trade date, settlement date, and the name or other designation of the person from whom purchased or received or to whom sold or delivered.
    (b) Ledgers reflecting all assets and liabilities, income and expense and capital accounts.
    (c) Ledger accounts (or other records) itemizing separately as to each cash and margin account of every customer, Broker Dealer and partners thereof, all purchases, sales, receipts and deliveries of securities for such account and all other debits and credits to such account.
    (d)  Ledgers (or other records) reflecting the following:chanroblesvirtuallawlibrary
      (i) Securities in transfer;
      (ii) Dividends and interest received and paid, including receivable and payable balances by security;
      (iii) Securities borrowed and securities loaned-shares and monies;
      (iv) Monies borrowed and monies loaned (together with a record of the collateral therefor and any substitutions in such collateral);
      (v) Securities and monies failed to receive and failed to deliver;
      (vi) All long and all short securities record differences arising from the examination, count, verification and comparison (by date of examination, count, verification and comparison showing for each security the number of long or short count differences); and
      (vii) Repurchase and reverse repurchase agreements.
    (e) A securities record or ledger reflecting separately for each security as of the clearance dates all "long" or "short" positions (including securities in safekeeping and securities that are the subject of repurchase or reverse repurchase agreements) carried by such Broker Dealer for his account of for the account of his customers or partners or others and showing the location of all securities long and the offsetting position to all securities short, including long security count differences and short security count differences classified by the date of the physical count and verification in which they were discovered, and in all cases the name or designation of the account in which each position is carried.
    (f) A memorandum of each brokerage order, and of any other instruction, given or received for the purchase or sale of securities, whether executed or unexecuted. Such memorandum shall show the terms and conditions of the order or instructions and of any modification or cancellation thereof, the account for which entered, the time of receipt and entry, the price at which executed and, to the extent feasible, the time of execution or cancellation. Orders entered pursuant to the exercise of discretionary power by such Broker Dealer, or any employee thereof, shall be so designated. The term "instruction" shall be deemed to include instructions between associated persons and employees of a Broker Dealer. The term "time of entry" shall be deemed to mean the time when such Broker Dealer transmits the order or instruction for execution so transmitted.
    (g) A memorandum of each purchase and sale for the account of such Broker Dealer showing the price and, to the extent feasible, the time of execution; and in addition, where such purchase or sale is with a customer other than a Broker Dealer, a memorandum of each order received, showing the time of receipt, the terms and conditions of the order, and the account in which it was entered:  Provided, however, with respect to purchases and sales on behalf of a Member Broker Dealer, its officers, directors, employees, including associated persons, and owner’s thereof, including discretionary accounts on behalf thereof, the memorandum shall reflect requirements set forth in SRC Rule 34.1-2.
     (h) Copies of confirmations of all purchases and sales of securities, including all repurchase and reverse repurchase agreements, and copies of notices of all other debits and credits for securities, cash and other items for the account of customers and partners of such Broker Dealer.
    (i) A record in respect of each cash or margin account with such Broker Dealer indicating (A) the name and address of the beneficial owner of such account, and (B) in the case of a margin account, the signature of such owner, provided, that, in the case of a joint account or an account of a corporation, such records are required only in respect of the person or persons authorized to transact business for such account.
    (j) A record of all puts, calls, spreads, straddles and other options in which such Broker Dealer has any direct or indirect interest or which such Broker Dealer has granted, purchased or guaranteed, containing, at least, an identification of the security and the number of units involved.
    (k) A record of the proof of money balances of all ledger accounts in the form of trial balances, and a record of the computation of aggregate indebtedness and net capital, as of the trial balance date. Such trial balances and computations shall be computed daily, provided in writing upon the request of the Commission or any Exchange to which a Broker Dealer is a member, and prepared at least once a month.
    (l) A questionnaire or application for employment executed by each associated person and salesman of such Broker Dealer, which questionnaire or application shall be approved in writing by an authorized representative of such Broker Dealer and shall contain at least the following information with respect to such person:chanroblesvirtuallawlibrary
      (i) His name, address, and the starting date of his employment or other association with the Broker Dealer;
      (ii) His date of birth;
      (iii)  A complete, consecutive statement of all his business connections for at least the preceding ten (10) years, including whether the employment was part-time or full-time;
      (iv) A record of any denial of registration, or termination for cause, and of any disciplinary action taken, or sanction imposed, upon him by any agency, or by any exchange or other SRO including any finding that he was a cause of any disciplinary action or had violated any law;
      (v) A record of any denial, suspension, expulsion or revocation of any registration of a Broker Dealer with which he was associated in any capacity when such action was taken;
      (vi) A record of any permanent or temporary injunction entered against him or any Broker Dealer with which he was associated in any capacity at the time such injunction was entered;
      (vii) A record of any arrest or indictment for any felony, or any misdemeanor pertaining to securities, commodities, banking, insurance or real estate (including, but not limited to acting as or being associated with a Broker-Dealer, investment company, investment house, finance company, bank, or quasi-bank, fraud, false statements or omissions, wrongful taking of property or bribery, forgery, counterfeiting or extortion, and the disposition of the foregoing; and
      (viii)  A record of any other name or names by which he has been known or which he has used: Provided, however, that if such salesman or associated person has been registered with the Commission, retention of a full, correct, and complete copy of any and all applications for such registration or approval shall be deemed to satisfy the requirements of this subparagraph.
2. Every Broker Dealer shall immediately make available any or all of its books and records upon request of the Commission, an Exchange or any other self regulatory organization of which it is a member of participant in.  Failure to do so shall result in immediate suspension of the Broker Dealer’s registration. Such suspension shall continue until such time as the books and records are made available to the requesting organization and the organization has satisfied itself that the books and records have not been modified or otherwise changed or altered during the period of suspension.
3. The explanation for the Books and Records Rule is  set forth in “Annex H”.
 
SRC Rule 52.1-2
Records Retention Rule
1. Every Broker Dealer shall preserve for a period of not less than six (6) years, the first two years in an easily accessible place, all records required to be made pursuant to Paragraphs 1 (a), (b), (c) and (e) of SRC Rule   52.1-1, the Books and Records Rule.
2. Every Broker Dealer shall preserve for a period of not less than three (3) years, the first two years in an accessible place:chanroblesvirtuallawlibrary
    (a) All records required to be made pursuant to paragraphs 1 (d), (f), (g), (h), (i), (j) and (k) of the Books and Records Rule;
    (b) All check books, bank statements, cancelled checks and cash reconciliations;
    (c) All bills receivable or payable (or copies thereof), paid or unpaid, relating to the business of such Broker Dealer as such;
    (d) Originals of all communications received and copies of all communications sent by such Broker Dealer (including inter-office memoranda, e-mails and other communications) relating to his business as such;
     (e) All trial balances, computations of aggregate indebtedness and net capital (and working papers in connection therewith), financial statements, branch office reconciliations and internal audit working papers, relating to the business of such Broker Dealer;
    (f) All guaranteed accounts and all powers of attorney and other evidence of the granting of any discretionary authority given in respect of any account, and copies of resolutions empowering an agent to act on behalf of a corporation;
    (g) All written agreements (or copies thereof) entered into by such Broker Dealer relating to his business as such, including client agreements;
    (h) Records which contain the following information in support of amounts included in the report prepared as of the audit date in annual audited financial statements required by SRC Rule 52.1-5:chanroblesvirtuallawlibrary
      (i) Money balance position, long or short, including description, quantity, price and valuation of each security, including contractual commitments in customer's accounts, in cash and fully secured accounts, partly secured accounts, unsecured accounts and in securities accounts payable to customers;
      (ii) Money balance and position, long or short, including description, quantity, price and valuation of each security, including contractual commitments in non-customers' accounts, in cash and fully secured accounts, partly secured and unsecured accounts and in securities accounts payable to non-customers;
      (iii)   Position, long or short, including description, quantity, price and valuation of each security, including contractual commitments included in the Computation of Net Capital as commitments, securities owned, securities owned not readily marketable, and other investments owned not readily marketable;
      (iv) Amount of secured demand note, description of collateral securing such secured demand note including quantity, price and valuation of each security and cash balance securing such secured demand note;
      (v) Number of shares, description of security, exercise price, cost and market value of put and call options including short out of the money having no market or exercise value, showing listed and unlisted put and call options separately;
      (vi) Quantity, price, and valuation of each security underlying the haircut for undue concentration made in the Computation for Net Capital;
      (vii) Description, quantity, price, and valuation of each security or contractual commitment, long or short, in each joint account in which the Broker Dealer has an interest, including each participant's interest and margin deposit;
       (viii)   Description, settlement date, contract amount, market price, and valuation for each aged failed to deliver requiring a charge in the Computation of Net Capital;
      (ix) Detail of all items, not otherwise substantiated which are charged or credited in the Computation of Net Capital pursuant to the Net Capital Rule, such as cash margin deficiencies, deductions related to securities values and undue concentration, aged securities differences and insurance claims receivable; and
      (x) Details relating to information for possession or control requirements and computations for determination of reserve requirements under the Rule on Customer Protection-Reserves and Custody of Securities.
       
    (i) A detailed description of the procedures which the Broker Dealer utilizes to comply with requirements set forth in  “Annex E”.
3. Every Broker Dealer shall preserve for a period of not less than six (6) years after the closing of any customer's account , the client agreement, account statement and any other records which relate to the terms and conditions with respect to the opening and maintenance of such account.
4. Every Broker Dealer shall preserve during the life of the enterprise and of any successor enterprise all partnership articles or, in the case of a corporation, all articles of incorporation or charter, minute books and stock certificate books.
5. Every Broker Dealer shall maintain and preserve in an easily accessible place all records required under paragraph (1)(l) of the Books and Records Rule until at least three (3) years after the associated person or salesman has terminated his employment and any other connection with the Broker Dealer.
6. The records required to be maintained and preserved pursuant to this Rule may be immediately produced or reproduced on microfilm and be maintained and preserved for the required time in that form. If such microfilm substitution for hard copy is made by a Broker Dealer, it shall (a) at all times have available for Commission or any Exchange of which it is a member examination of its records, facilities for immediate, easily readable projection of the microfilm and for producing easily readable facsimile enlargements, (b) arrange the records and index and file the films in such a manner as to permit the immediate location of any particular record, (c) be ready at all times to provide and immediately provide, any facsimile enlargement which the Commission or that Exchange by their examiners or other representatives may request, and (d) store separately from the original one other copy of the microfilm for the time required.
7. If a person who has been subject to this rule ceases to transact a business in securities such person shall, for the remainder of the periods of time specified in this rule, continue to preserve the records which he theretofore preserved pursuant to this Rule.
8. If the records required to be maintained and preserved pursuant to the Books and Records Rule and Records Retention Rule are prepared or maintained by an outside service bureau, depository, bank or other recordkeeping service on behalf of the Broker Dealer required to maintain and preserve such records, such outside entity shall file with the Commission a written undertaking in a form acceptable to the Commission, signed by a duly authorized person, to the effect that such records are the property of the Broker Dealer required to maintain and preserve such records and will be surrendered promptly on request of the Broker Dealer and including the following provision:chanroblesvirtuallawlibrary
     "With respect to any books and records maintained or preserved on behalf of [name of Broker Dealer], the undersigned hereby undertakes to permit examination of such books and records at any time or from time to time during business hours by representatives or designees of the Securities and Exchange Commission, and/or any Exchange to which the Broker Dealer is a member and to promptly furnish to the Commission and that Exchange or their designee true, correct, complete and current hard copy of any or all or any part of such books and records."
 Agreement with an outside entity shall not relieve such Broker Dealer from the responsibility to prepare and maintain records as specified in this rule or in the Books and Records Rule.
9. Every Broker Dealer subject to this Rule shall furnish promptly to a representative of the Commission and any Exchange to which the Broker Dealer is a member legible, true and complete copies of those records of the Broker Dealer which are required to be preserved under this Rule which are requested by the Commission or that Exchange.
 
SRC Rule 52.1-3
Keeping of Exchange Records
An Exchange shall keep complete and accurate records of all its proceedings, transactions and decisions and such records shall be made available for inspection by the Commission.


SRC Rule 52.1-4
Reports of Exchange Members, and Brokers or Dealers Trading Through Members

Every member of an Exchange and every Broker Dealer who transacts a business in securities through the medium of any such member shall, in the manner and form to be prescribed by the Commission, make such periodic, special or other reports as the Commission may by order require from time to time.
 
SRC Rule 52.1-5
Annual Audited Financial Reports of Broker Dealers
1. Every Broker Dealer shall file annually with the Commission and any Exchange to which it is a member at the close of its fiscal year an audited financial report by an independent certified public accountant and a statement of management responsibility of said Broker Dealer.
2. Unless the Broker Dealer notifies the Commission otherwise and receives written approval to change the date, December 31st of each year shall be considered the closing of the fiscal year, and the Annual Audited Financial Report is due within 110 days after the close of such fiscal year.
3. The Annual Audited Financial Report shall contain a Statement of Financial Condition in the format outlined in SEC Form 37-AR, a Statement of Income, a Statement of Changes in Financial Condition, a Statement of Changes in Stockholders’ or Partners’ or Sole Proprietor's Equity, a Statement of Changes in Liabilities Subordinated to Claims of General Creditors, a Computation of Net Capital under SRC Rule 49.1-1, Statement of Management’s Responsibility; Information relating to the Possession or Control Requirements under “Annex F” and a Computation for Determination of Reserve Requirements under “Annex G”; Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit; Results of Quarterly Securities Count Conducted pursuant to SRC Rule 52.1-10 as of the date of the balance sheet statement in the Annual Audited Financial Report.
4. All supporting papers pertaining to such report or statement shall be kept in the possession of the Broker Dealer for at least three (3) years and shall be made available for examination by the Commission and an Exchange, if the Broker Dealer is a member of that Exchange.
5. For the purposes of this Rule, the term market value shall be understood to mean the last sale price of the security on the date of the report or statement; if no sale of the corresponding security is made on that date, it shall be understood to mean the bid price and, in the absence of any buyer, it shall be taken to mean the last sale price which is below the offer price on the date of the report or statement. For purposes of determining “market value” for a short position, where no sale of the corresponding security is made on that date, it shall be understood to mean the offer price and, in the absence of any seller, it shall be taken to mean the last sale price which is above the bid price on the date of the report or statement.
6. For the purposes of this Rule, the term material inadequacy encompasses either a material weakness in internal control or a material inadequacy in the practices and procedures for safeguarding securities.
A material inadequacy that is expected to be reported includes any condition that has either contributed substantially to or, if appropriate corrective action is not taken, could reasonably be expected to cause any of the following:chanroblesvirtuallawlibrary
    a. Inhibit a Broker Dealer from completing securities transactions or promptly discharging its responsibilities to customers or to other Broker Dealers or creditors;
    b.  Result in material financial loss;
    c. Result in material misstatements of the Broker Dealer’s financial statements; or
    d. Result in violations of the Commission’s recordkeeping or financial responsibility rules to an extent that could reasonably be expected to result in the conditions described above.
If conditions believed to be material weaknesses are found to exist or have existed during the year, the report should disclose the nature of the weaknesses and the corrective action taken or proposed to be taken by the Broker Dealer. If management has implemented control procedures to correct the weaknesses, the auditor should not refer to this corrective action in his or her report unless the auditor is satisfied that the procedures are suitably designed to correct the weakness and are being applied as prescribed.


 SRC Rule 52.1-6
Customer Account Information Rule

Every Broker Dealer shall maintain customer accounts as follows:chanroblesvirtuallawlibrary
    1. For each account, the following information:chanroblesvirtuallawlibrary
      (a) Customer's name, residence address and residence telephone;
      (b) Whether customer is of legal age;
      (a)  Whether customer is an institutional customer;
      (d) Nationality;
      (e) Signature of the salesman introducing the account and signature of the partner, officer or manager who accepts the account; and
      (f) The names of any person authorized to transact business on behalf of the entity if the customer is a corporation, partnership or other legal entity.
       
    2. For each account other than an institutional account  the Broker Dealer shall obtain, prior to the settlement of the initial transaction in the account, the following information to the extent it is applicable to the account:chanroblesvirtuallawlibrary
      (a) Customer's tax identification number;
      (b) Occupation of customer and name and address and telephone number of employer;
      (c) Whether the customer is employed by or otherwise associated with another Broker Dealer (e.g. officer, director, salesman, shareholder);
      (d) Whether the customer is an officer or director of a company listed on an exchange;
      (e) The customer's investment objective and other related information concerning the customer's financial situation and needs; and
      (f) If duplicate confirmations are required to be sent to another person, the identity of that person and his relationship to the customer.
       
    3. For discretionary accounts, the Broker Dealer shall also:chanroblesvirtuallawlibrary
      (a) Obtain the signature of each person authorized to exercise discretion in the account; and
      (b) Record the date such discretion is granted.
    4. For purposes of this Rule, institutional account shall mean the account of:chanroblesvirtuallawlibrary
      (a) A bank, insurance company, or registered investment company;
      (b) Any other entity set forth in section 10.1(1) of the Code as a qualified buyer; or
      (c) Any other entity (whether a natural person, corporation, partnership, trust or otherwise) with total assets of at least  1,200,000,000: Provided, however, that the Broker Dealer shall obtain from such entity a declaration, under oath, confirming ownership of such assets.
     5. If more than one party is named on the account, new account information shall be obtained for each party on the account.
     6. If the account is a trust account, a copy of the trust agreement shall be obtained. The agreement shall specify the types of transactions that the trustee is allowed to perform. These accounts can not be margin accounts unless specifically authorized by the trust agreement.
    7. A Broker Dealer is allowed to maintain a numbered account for a client who wishes to keep his or her name confidential. If numbered accounts are used, the firm is obliged to keep on file the name of the customer and a written statement signed by the customer showing that the customer owns the account.
     
    8. The format for a customer account information form is  set forth in  “Annex I”.
SRC Rule 52.1-7
Order Ticket Rule
1. Every order received by a Broker Dealer or any other associated person or salesman of a Broker Dealer to buy or sell securities for customers shall be entered on an order form, which shall contain at the minimum, all the information required by this Rule. Each buying or selling order form shall be time stamped by the Broker Dealer or any other associated person or salesman of a Broker Dealer or any person acting on his behalf upon receipt of the customer’s order and upon transmission to the trading floor, if necessary. Time recording of subsequent action on an order, whether for amendment, cancellation or actual matching thereof, shall be captured by the computerized trading system of the Exchange or by time stamping, for over-the-counter transaction. Any such information captured by the computerized trading system of the Exchange shall be printed and made available for legal and/or audit purposes.
2. All the necessary time recordings shall be disclosed in the confirmation to the customer upon his request.
3. All Broker Dealers, who deal for their own account either directly or where a Member Broker Dealer, through another Member Broker, or trade for a discretionary account, as well as their partners, floor traders, officials and employees, shall   record all purchase and sale orders on the same order form used by such brokers for their customers, and such order forms shall also be time-stamped as required by paragraph (1) hereof, and comply with SRC Rule 34.1-2.
4. Every Broker Dealer, associated person and  salesman of a Broker Dealer, executing an order for a transaction in securities shall enter on the order ticket whether the transaction will be matched through the Exchange trading system or transacted as a block sale in accordance with SRC Rule 30.2-8, whether the firm is acting as agent or principal in connection with the transaction; provided, however, Member Brokers are required to comply with SRC Rule 34.1-2 when placing orders for their own account.
5.  In addition to the information required in paragraphs 1, 2 and 3 of this Rule, the order ticket shall reflect the terms and conditions of the order or instructions, including a notation if the order is a short sale, and any subsequent modification or cancellation, the name of the customer for which the order was entered, the name of the salesman   who took the order, the price at which executed, and whether the order was solicited or unsolicited.
    (a) For purposes of this rule, an order is solicited or unsolicited depending on who first mentioned the name of the security. If mentioned first by the customer, the order should be marked unsolicited (regardless of who initiated the phone call or other communication). If mentioned first by the salesman, the order should be marked solicited.
    (b)  The designation should be entered on real time on the order ticket and indicated on the confirmation.
6. An order is solicited or unsolicited depending on who recommends the security. If the order is recommended by the salesman, the order ticket should be marked solicited. Otherwise, it should be marked unsolicited. The designation should be entered on real time on the order ticket and indicated on the confirmation.
7. All purchase and sale orders for the same security and under the same terms and conditions, including those placed by the Broker Dealer for its own account or for discretionary accounts and those placed by partners, floor traders, officials and employees, shall be executed by the Broker Dealer in the order in which they were received:  Provided, however, Member Brokers shall comply with SRC Rule 34.1-2 regarding priority of customer orders.
 8. All time stamping machines that are being used by Broker Dealers for the purposes of this Rule should be synchronized at all times in accordance with the official time of the Exchange.
9. A Broker Dealer may seek exemption from the paper format requirements of this Rule and instead apply for an electronic format.  Such application has to be approved by the Commission.


SRC Rule 52-1.8
Customer Account Statements

1. A Broker Dealer shall, with a frequency of not less than monthly, send a statement of account containing a description of any securities positions, money balances, or account activity to each customer whose account had a security position, money balance, or account activity during the period since the last such statement was sent to the customer.
2. Such statement shall disclose that free credit balances are not segregated and may be used in the operation of the Broker Dealer and that such funds are payable on demand of the customer.
3. For purposes of this Rule, the term account activity shall include, but not be limited to, purchases, sales, interest credits or debits, charges or credits, dividend payments, transfer activity, securities receipts or deliveries, and/or journal entries relating to securities or funds in the possession or control of the Broker Dealer.


SRC Rule 52.1-9

Customer Complaint Rule
1. Every Broker Dealer shall keep and preserve in each of its offices either a separate file of all written complaints of customers received by that office and the action taken by the Broker Dealer or a separate record of such complaints and a clear reference to the files containing the correspondence connected with such complaint and maintained in such office.
2. Every Broker Dealer shall keep in its main office either a duplicate copy of all written complaints of customers received by all offices of the Broker Dealer and the action taken in respect thereto or a separate record of such complaints and a clear reference to the files containing the correspondence connected with such complaint.
3. Complaint shall mean any written statement of a customer or any person acting on behalf of a customer alleging a grievance involving the activities of those persons under the control of the Broker Dealer in connection with the solicitation or execution of any transaction, the disposition of securities or funds of that customer or any other aspect of the Broker Dealer's business.


SRC Rule 52.1-10

Quarterly Securities Counts by Brokers Dealers
1. This Rule shall apply to all Broker Dealers except those Broker Dealers who promptly transmits all funds and delivers all securities received in connection with its activities as a Broker Dealer, and who do not otherwise hold securities for itself or hold funds or securities for, or owe money or securities to, customers.
2. Any Broker Dealer who is subject to the provisions of this Rule shall at least once in each calendar quarter:chanroblesvirtuallawlibrary
    (a) Physically examine and count all securities held;
    (b) Account for all securities in transit, in transfer, pledged, loaned, borrowed, deposited, failed to receive, failed to deliver, subject to repurchase and reverse repurchase agreements, or otherwise subject to its control or direction but not in its physical possession by examination and comparison of the supporting detail records with the appropriate ledger control accounts;
    (c)   Verify all securities in transfer, in transit, pledged, loaned, borrowed, deposited, failed to receive, failed to deliver, subject to repurchase and reverse repurchase agreements, or otherwise subject to its control or direction but not in its physical possession, where such securities have been in that status for longer than thirty (30) days;
    (d) Compare the results of the count and verification with its records; and
    (e) Record on its books and records all unresolved differences setting forth the security involved and date of comparison in a security count difference account no later than seven (7) business days after the date of each required quarterly security examination, count and verification in accordance with the requirements of paragraph (3) of this rule: Provided, however, that no examination, count, verification and comparison for the purpose of this rule shall be within two (2) months of or more than four (4) months following a prior examination, count, verification and comparison made hereunder.
3. The examination, count, verification and comparison may be made either as of a date certain or on a cyclical basis covering the entire list of securities. In either case the recording shall be effected within seven (7) business days subsequent to the examination, count, verification and comparison of a particular security. In the event that an examination, count, verification and comparison is made on a cyclical basis, it shall not extend over more than one calendar quarter, and no security shall be examined, counted, verified or compared for the purpose of this rule less than two (2) months or more than four (4) months after prior examination, count, verification and comparison.
4. The examination, count, verification and comparison shall be made or supervised by persons whose regular duties do not require them to have direct responsibility for the proper care and protection of the securities or the making or preservation of the relevant records.
5. The Commission and/or Exchange, if the Broker Dealer is a member of that Exchange, may, upon written request, exempt from the provisions of this rule, either unconditionally or on specified terms and conditions, any Broker Dealer who satisfies the Commission or that Exchange that it is not necessary in the public interest and for the protection of investors to subject that particular Broker Dealer to certain or all of the provisions of this rule because of the special nature of the Broker Dealer's business, the safeguards it has established for the protection of customers' funds and securities, or such other reasons as may be deemed appropriate.
 
SRC Rule 55.1
Settlement Offers
1. Any person who is notified that an investigation or proceeding has or will be instituted against him, or any party to a proceeding already instituted, may, at any time propose in writing to the Director of the Department of Compliance and Enforcement (CED) an offer of settlement (proposer).
An offer of settlement shall state that it is being made pursuant to Section 55 of the Code and Rule 55.1 adopted thereunder, shall recite or incorporate as part of the offer the provisions of paragraphs 3 (d) and (e) of this Rule, shall be signed by the person making the offer, not by counsel, and shall be submitted to the Director of CED.
2. Consideration of Settlement Offers:chanroblesvirtuallawlibrary
    (a) Offers of settlement shall be considered when time, the nature of the investigation or proceeding, and the public interest permit.
    (b) The Director of CED shall consult with the person he has assigned to the matter (enforcement officer) and request his view regarding the appropriateness of the offer of settlement. Such request for such enforcement officer’s view on a settlement offer or other participation in a settlement conference constitutes a waiver by the proposer of any right to claim bias or prejudgement by such enforcement officer based on the views expressed.
    (c) The Director of CED shall present the offer of settlement to the Commission with its recommendations: Provided, however, if the Department’s recommendation is unfavorable, the offer shall not be presented to the Commission unless the proposer so requests in writing.
    (d) By submitting an offer of settlement, the proposer waives, subject to the acceptance of the offer:chanroblesvirtuallawlibrary
      i. all hearings pursuant to the statutory provisions under which the investigation or proceeding is to be or has been instituted;
      ii. the filing of proposed findings of fact and conclusions of law;
      iii. proceedings before, and an initial decision by, a the appropriate office or division of the Commission so delegated;
      iv. all post-hearing procedures; and
      v. judicial review by any court.
       
    (e) By submitting an offer of settlement, the proposer further waives:chanroblesvirtuallawlibrary
      i. Such provisions of law as may be construed to prevent any member of the Commission’s staff from participating in the preparation of, or advising the Commission as to, any order, opinion, finding of fact, or conclusion of law to be entered pursuant to the order;
      ii. Any right to claim bias or prejudgement by the Commission based on the consideration of discussions concerning settlement or all or any part of the proceeding.
    (f) If the Commission rejects the offer of settlement, the proposer shall be notified of the Commission’s action and the offer of settlement shall be deemed withdrawn. The rejected offer shall not constitute part of the record in any proceeding against the proposer: Provided, however, that rejection of an offer of settlement does not affect the continued validity of waivers pursuant to paragraph 3(e) of this rule with respect to any discussions concerning the rejected offer of settlement.

    (g) Final acceptance by the Commission of any offer of settlement will occur only upon the issuance of a summary of findings, and an order of the Commission and shall become effective only upon public disclosure thereof on the Commission’s web page and/or in such other manner. Such disclosure may be made without a determination of guilt on the part of the proposer and shall include the name of the proposer, sections of the Code and rules and regulations adopted thereunder involved, and applicable conditions.
SRC Rule 66.3
Confidential Treatment of Information Filed with the Commission
1. Any person required to file any application, report or document (hereinafter collectively referred to as the “report”) with the Commission under Section 8 or 17 of the Code may remove any confidential information from such required report, provided that he files with the Commission such confidential information in a supplemental report prominently labeled “CONFIDENTIAL”, together with a request for confidential treatment of the report and the specific grounds for the grant thereof and complies with this Rule: Provided, however, that the Commission may require disclosure of such confidential information.
2. For purposes of this Rule, confidential information shall include, but is not limited to, such matters as trade secrets, commercial or financial information that has been prepared by analysts within or outside a company for strategic purposes and similar information which raises concerns for business confidentiality.
3. The Commission shall maintain the confidentiality of the information contained in the supplemental report, pending a determination by the Corporation Finance Department in consultation with the Office of the General Counsel as to the validity of the request for confidential treatment.
4. Within seven (7) days from receipt of the special report, the Corporation Finance Department shall make a determination regarding the confidentiality of the information contained in the supplemental report.
5. If it is determined by the Corporation Finance Department that confidential treatment is not warranted with respect to all or part of the information in question, the person requesting confidential treatment of the information will be notified of this decision by telephone, followed up by written notification sent by mail. Such notice will also advise such person that he has the right, which shall be exercised no later than within ten (10) days of receipt of notification by telephone, to request that the Commission en Banc reconsider such determination.
6. A request for reconsideration shall be in writing and include additional factors for the Commission En Banc to consider.
7. The Commission En Banc may reconsider such determination only once and its administrative decision shall not be subject to judicial review.
8. If the Commission En Banc makes a determination that any or all of the information in the supplemental report is not entitled to confidential treatment, the person who submitted the request shall promptly make an amended filing with the Commission containing such information.
 
SRC Rule 68
Special Accounting Rules

 
1. Application and Definition of Terms
    a. Application of this Rule
      i. This Rule (together with subsequent official pronouncements, interpretations and rulings on accounting and reporting matters, which may be issued by the Commission from time to time) states the requirements applicable to the form and content of financial statements required to be filed with the Commission by corporations which are filing a securities registration statement under Section 12 of the Code or which meet the following criteria with respect to the requirements to file reports:chanroblesvirtuallawlibrary
        A. issuers which have sold a class of their securities pursuant to a registration under Section 8 of the Code: Provided, however, the obligation of such issuers to file reports shall be suspended for any fiscal year after the year such registration became effective if such issuer, as of the first day of any such fiscal year, has less than 100 holders of such class of securities or such other number as the Commission shall prescribe and it notifies the Commission of such;
        B. issuers with a class of securities listed for trading on an Exchange; and
        C. issuers with assets of at least P50,000,000 or such other amount as the Commission shall prescribe and having 200 or more holders each holding at least 100 shares of a class of its equity securities as of the first day of any fiscal year:   Provided, however, that the obligation of such issuers to file reports shall be terminated ninety (90) days after notification to the Commission by the issuer that the number of its holders holding at least 100 shares is reduced to less than 100.
      ii.  Unless otherwise specified, the term financial statements when used in this Rule, shall include a balance sheet, a statement of income and retained earnings, and a statement of cash flows, together with all notes to the statements and related schedules.
    b.  Definition of Terms Used in this Rule
     Unless the context otherwise requires, the following terms shall have the respective meanings when used in this Rule.
      i. An affiliate of, or a person affiliated with, a specified person is a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.
      ii. Audit (or examination), when used in regard to financial statements, means an examination of the statements by an independent certified public accountant in accordance with generally accepted auditing standards for the purpose of expressing an opinion thereon.
      iii. Auditor or independent auditor means an independent certified public accountant who performs an examination of financial statements for the purpose of expressing an opinion on them.
      iv. Auditor's report when used in regard to financial statements, means a document in which an independent certified public accountant indicates the scope of the audit (or examination) which he has made and sets forth his opinion regarding the financial statements taken as a whole, or an assertion to the effect that an overall opinion cannot be expressed. When an overall opinion cannot be expressed, the reason therefore shall be stated.
      v. Accounting principles includes not only accounting principles and practices but also the method of applying them. Generally accepted accounting principles means accounting principles based on pronouncements of recognized bodies involved in setting accounting principles. Greatest weight shall be given to their pronouncements in the order listed below:chanroblesvirtuallawlibrary
        A. Philippine Securities and Exchange Commission.
        B. Accounting Standards Council.
        C. Standards issued by the International Accounting Standards Committee.
        D. Accounting principles and practices for which there is a long history of acceptance and usage.
        If there appears to be a conflict between any of the bodies listed above, the pronouncements of the first listed body shall be utilized.
         
      vi. Majority-owned subsidiary means a subsidiary more than fifty percent (50%) of whose outstanding securities representing the right, other than as affected by events of default, to vote for the election of directors, is owned by the subsidiary's parent and/or one or more of the parent's other majority-owned subsidiaries.
      vii. Parent of a specified person is an affiliate controlling such person directly, or indirectly, through one or more intermediaries.
       viii. Person means an individual, a corporation, a partnership, an association, a joint-stock company, a business trust, or unincorporated organization.
      ix. Registrant means an issuer of securities with respect to which a securities registration statement or required issuer report has been or is to be filed.
      x. Related parties means affiliates of the enterprise, entities for which investments are accounted for by the equity method by the enterprise; trusts for the benefit of employees, such as pension and profit sharing trusts that are managed by or under the trusteeship of the management; principal owners of the enterprise; its management; members of the immediate families of principal owners of the enterprise and its management; and other parties with which the enterprise may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. Another party also is a related party if it can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
      xii. Significant subsidiary means a subsidiary, including its subsidiaries, which meets any of the following conditions:chanroblesvirtuallawlibrary

       
        A. The registrant’s and its other subsidiaries’ investments in and advances to the subsidiary exceed ten percent (10%) of the total assets of the registrant and its subsidiaries consolidated as of the end of the most recently completed fiscal year (for a proposed business combination to be accounted for as a pooling of interests, this condition is also met when the number of common shares exchanged or to be exchanged by the registrant exceeds ten percent (10%) of its total common shares outstanding at the date the combination is initiated); or
        B. The registrant’s and its other subsidiaries' proportionate share of the total assets (after inter company eliminations) of the subsidiary exceeds ten percent (10%) of the total assets of the registrant and its subsidiaries consolidated as of the end of the most recently completed fiscal year; or
        C. The registrant’s and its other subsidiaries’ equity in the income from continuing operations before income taxes, extraordinary items and cumulative effect of a change in accounting principle of the subsidiary exceeds ten percent (10%) of such income of the registrant and its subsidiaries consolidated for the most recently completed fiscal year.
          COMPUTATIONAL NOTE:  For purposes of making the prescribed income test the following guidance should be applied:chanroblesvirtuallawlibrary
           1. When a loss has been incurred by either the parent and its subsidiaries consolidated or the tested subsidiary, but not both, the equity in the income or loss of the tested subsidiary should be excluded from the income of the registrant and its subsidiaries consolidated for the purposes of the computation.
          2. If income of the registrant and its subsidiaries consolidated for the most recent fiscal year is at least 10 percent lower than the average of the income for the last five (5) fiscal years, such average income should be substituted for purposes of the computation. Any loss years should be omitted for purposes of computing average income.
          3.  Where the test involves combined entities, as in the case of determining whether summarized financial data should be presented, entities reporting losses shall not be aggregated with entities reporting income.
      xii. Subsidiary of a specified person is an affiliate controlled by such person directly, or indirectly through one or more intermediaries.
      xiii. Summarized financial information referred to in this Rule shall mean the presentation of summarized financial information as to the assets, liabilities and results of operations of the entity for which the information is required.   Summarized financial information shall include the following disclosures:chanroblesvirtuallawlibrary
        A. Current assets, noncurrent assets, current liabilities, noncurrent liabilities, and when applicable, redeemable preferred stocks [See Items (29)(D) and (E) of ANNEX L] and minority interests (for specialized industries in which classified balance sheets are normally not presented, information shall be provided as to the nature and amount of the major components of assets and liabilities);
        B. Net sales or gross revenues, gross profit (or, alternatively, costs and expenses applicable to net sales or gross revenues), income or loss from continuing operations before extraordinary items and cumulative effect of a change in accounting principle, and net income or loss (for specialized industries, other information may be substituted for sales and related costs and expenses if necessary for a more meaningful presentation).
      xiv. Voting shares means the sum of all rights, other than as affected by events of default, to vote for election of directors.
2.  General Guides to Financial Statements Preparation
    a. Responsibility for Financial Statements
      The financial statements filed with the Commission are primarily the responsibility of the issuer and accordingly, the fairness of the representations made therein is an implicit and integral part of the issuer's responsibility.
      To carry out the intent and attain the wisdom of this concept, management of all corporations covered by this Rule are required to acknowledge their responsibility over their financial statements. For this purpose, the financial statements filed with the Commission shall be accompanied by a statement of management's responsibility as follows:chanroblesvirtuallawlibrary


      STATEMENT OF MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL STATEMENTS

      The management of (name of registrant) is responsible for all information and representations contained in the financial statements for the year (s) ended (date).   The financial statements have been prepared in conformity with generally accepted accounting principles and reflect amounts that are based on the best estimates and informed judgment of management with an appropriate consideration to materiality.
      In this regard, management maintains a system of accounting and reporting which provides for the necessary internal controls to ensure that transactions are properly authorized and recorded, assets are safeguarded against unauthorized use or disposition and liabilities are recognized.
      The Board of Directors reviews the financial statements before such statements are approved and submitted to the stockholders of the company.
      (name of auditing firm), the independent auditors appointed by the stockholders, have examined the financial statements of the company in accordance with generally accepted auditing standards and have expressed their opinion on the fairness of presentation upon completion of such examination, in their report to stockholders.
       Signature ___________________________________________
       Name of Chief Executive Officer _________________________
       Signature ___________________________________________
       Name of Chief Financial Officer __________________________

       The independent certified public accountant's responsibility for the financial statements required to be filed with the Commission is confined to the expression of his opinion on such statements which he has examined.

       
    b. Consolidated balance sheets
      i. There shall be filed for the registrant and its subsidiaries consolidated audited balance sheets (except for filings on Form 17-Q, to which Part VI is applicable), in a comparative format, as of the end of each of the two most recent fiscal years. If the registrant has been in existence for less than one fiscal year, there shall be filed an audited balance sheet as of a date within 135 days of the date of filing the registration statement.
      ii. If a filing on SEC Form 12 -1 is made within one hundred five (105) days after the end of the most recently ended fiscal year, the filing shall include audited consolidated balance sheets as of the end of each of the two (2) years prior to the most recently ended fiscal year and also an interim balance sheet as of the end of the most recently ended fiscal year.
      iii. If a filing on SEC Form 12 -1 is made more than one hundred five (105) days but not more than one hundred thirty five (135) days after the end of the most recently ended fiscal year, the filing shall include  audited consolidated balance sheets  as of the end of each of the two most recently ended fiscal years.
      iv. If a filing on SEC Form 12 -1 is made more than one hundred thirty five (135) days but not more than two hundred twenty five (225) days after the end of the most recently ended fiscal year, the filing shall include  audited consolidated balance sheets  as of the end of each of the two most recently ended fiscal years and also an interim balance sheet as of the end of the first fiscal quarter subsequent to the most recent fiscal year end.
      v. If a filing on SEC Form 12 -1 is made more than two hundred twenty five (225) days but not more than three hundred fifteen (315) days  after the end of the most recently ended fiscal year, the filing shall include  audited consolidated balance sheets  as of the end of each of the two most recently ended fiscal years and also an interim balance sheet as of the end of the second fiscal quarter subsequent to the most recent fiscal year end.
      vi. If a filing on Form 12 -1 is made more than three hundred fifteen (315) days after the end of the most recently ended fiscal year,  the filing shall include  audited consolidated balance sheets  as of the end of each of the two most recently ended fiscal years and also an interim balance sheet as of the end of the third fiscal quarter subsequent to the most recent fiscal year end.
      vii. Any interim balance sheet provided in compliance with this subsection may be unaudited and need not be presented in greater detail than is required by Section 6 of this Rule.
    c. Consolidated statements of income and cash flows
      i. There shall be filed for the registrant and its subsidiaries consolidated and its predecessors, audited statements of income and of cash flows for each of the three fiscal years preceding the date of the most recent audited balance sheet being filed or such shorter period as the registrant (including predecessors) has been in existence.
      ii. In addition, statements of income and of cash flows shall be provided for any interim period between the latest audited balance sheet and the date of the most recent interim balance sheet being filed, and for the corresponding period of the preceding year. Such interim financial statements may be unaudited and need not be presented in greater detail than is required by Section 6 of this Rule.
    d. Financial statements of businesses acquired or to be acquired
      i. Financial statements required:chanroblesvirtuallawlibrary
        A. Financial statements prepared and audited in accordance with this Rule should be furnished for the periods specified in paragraph (ii) below if any of the following conditions exist:chanroblesvirtuallawlibrary
          I. Consummation of a business combination accounted for as a purchase has occurred or is probable (for purposes of this rule, the term “purchase” encompasses the purchase of an interest in a business accounted for by the equity method); or
          II. Consummation of a business combination to be accounted for as a pooling of interests is probable.
        B. For purposes of determining whether the provisions of this rule apply, the determination of whether a “business” has been acquired should be made in accordance with the guidance set forth in Section 7 of this Rule.
        C. If consummation of more than one transaction has occurred or is probable, the required financial statements may be presented on a combined basis, if appropriate.
        D. This subsection shall not apply to a business  which is totally owned by the registrant prior to consummation of the transaction.
         
       ii. Periods to be presented.

        A. If securities are being registered to be sold for cash, the audited financial statements specified in Section 2(b) and 2(c) of this Rule shall be furnished for the business to be acquired (See also Pro-Forma Financial Information requirements in Section 7). In all other cases, the financial statements specified in Sections 2(b) and 2(c) shall be furnished on an audited basis to the extent practicable for the business to be acquired. The periods for which such financial statements are to be filed shall be determined using the conditions specified in the definition of “significant subsidiary” in Section 1(b)(xi).

        I. If none of the conditions exceeds ten percent (10%), financial statements are not required. However, if the aggregate impact of the individually insignificant businesses acquired since the date of the most recent audited balance sheet filed for the registrant exceeds twenty percent (20%), financial statements covering at least the substantial majority of the businesses acquired, combined if appropriate, shall be furnished.  Such financial statements shall be for at least the most recent fiscal year and any interim periods specified in Sections 2(b) and 2(c) of this Rule.
        II. If any of the conditions exceeds ten percent (10%), but none exceed twenty percent (20%), financial statements shall be furnished for at least the most recent fiscal year and any interim periods specified in Sections 2(b) and 2(c) of this Rule.
        III. If any of the conditions exceeds twenty percent (20%) but none exceed forty percent (40%), financial statements shall be furnished for at least the two most recent fiscal years and interim periods specified in Sections 2(b) and 2(c) of this Rule.
        IV. If any of the conditions exceeds forty percent (40%), the full financial information specified in Sections 2(b) and 2(c ) of this Rule shall be furnished.
        V. The determinations under subparagraphs (I),(II), (III), and (IV) shall be made by comparing the most recent annual financial statements of each such business to the registrant’s most recent annual consolidated financial statements filed at or prior to the date of acquisition. However, if the registrant made a significant acquisition subsequent to the latest fiscal year-end and filed a report on Form 17-C which included audited financial statements of such acquired business for the periods required by this subsection and the pro forma financial information required by Section 7, such determination may be made by using the pro forma amounts for the latest fiscal year in the report on Form 17-C rather than by using the historical amounts for the latest fiscal year of the registrant. The tests may not be made by “annualizing” data.
        VI. Notwithstanding the requirements in subsection (d)(ii)(A) above, separate financial statements of the acquired business need not be presented once the operating results of the acquired business have been reflected in the audited consolidated financial statements of the registrant for a complete fiscal year unless such financial statements have not been previously filed or unless the acquired business is of such significance to the registrant that omission of such financial statements would materially impair an investor’s ability to understand the historical financial results of the registrant. For example, if, at the date of acquisition, the acquired business met at least one of the conditions in the definition of “significant subsidiary” in Section 1(b)(xi) at the 60 percent (60%) level the income statements of the acquired business should normally continue to be furnished for such periods prior to the purchase as may be necessary when added to the time for which audited income statements after the purchase are filed to cover the equivalent of the period specified in Section 2(c)(i).
        VII. A separate audited balance sheet of the acquired business is not required when the registrant’s most recent audited balance sheet required by Section 2(b) is for a date after the date the acquisition was consummated.
    e. Separate financial statements of subsidiaries not consolidated and fifty percent (50%) or less owned persons
      i. If any of the conditions set forth in the definition of “significant subsidiary” in Section I(b)(xi), substituting twenty percent (20%) for ten percent (10%) in the tests used therein to determine a significant subsidiary are met for a majority-owned subsidiary not consolidated by the registrant or by a subsidiary of the registrant, separate financial statements of such subsidiary shall be filed. Similarly, if any of the conditions set forth therein, substituting twenty percent (20%) for ten percent (10%), are met by a fifty percent (50%) or less owned person accounted for by the equity method either by the registrant or a subsidiary of the registrant, separate financial statements of such fifty percent (50%) or less owned person shall be filed.
      ii. Insofar as practicable, the separate financial statements required by this Part shall be as of the same dates and for the same periods as the audited consolidated financial statements required by Sections 2(b) and 2(c). However, these separate financial statements are required to be audited only for those fiscal years in which any of the conditions described in the definition of “significant subsidiary” in Section I(b)(xi), substituting 20 percent (20%) for 10 percent (10%), are met.
      iii. Notwithstanding the requirements for separate financial statements in paragraph (e)(i) above, where financial statements of two or more majority-owned subsidiaries not consolidated are required, combined or consolidated statements of such subsidiaries may be filed subject to principles of inclusion and exclusion which clearly exhibit the financial position, cash flows and results of operations of the combined or consolidated group. Similarly, where financial statements of two or more 50 percent or less owned persons are required, combined or consolidated statements of such persons may be filed subject to the same principles of inclusion or exclusion referred to above.
     f. Age of financial statements at effective date of a registration statement on SEC Form 12-1
      At the time a registration statement on SEC Form 12-1 is to become effective, the financial information therein must be as of a date within 135 days of the effective date. Interim financial statements required to be included in a registration statement which are necessary to keep the registration statement current need not be audited and need not be in greater detail than required by Section 6 of this Rule.
    g. Comparative Statements
      i. The financial statements to be filed with the Commission shall be presented in comparative form. However, the presentation of comparative figures need not be applied to related schedules to be filed under this Rule.
      ii. An explanation through a note or otherwise shall be made explaining the reasons for filing a single-period statement, e.g. it is the first period of a new company.
      iii. When financial statements are presented on a comparative basis for more than the periods required, the auditor's report need not extend to prior period's for which the financial statements are not required to be audited:chanroblesvirtuallawlibrary
        A. If the financial statements of the prior year were not audited, such statements should be marked prominently as "UNAUDITED." In addition, the auditor should disclose this fact in his report by a statement to that effect in a separate paragraph after the opinion paragraph.
        B. If the financial statements of a prior-period have been examined by another independent certified public accountant whose report is not presented, the statements should be marked to disclose prominently that they are not being reported upon herein by the previous auditor. If the auditor of the financial statements for such periods did not give a “clean” opinion on such statements, the auditor for the current year should indicate in the scope paragraph of his report (I) that the financial statements of the prior-period were examined by other auditors, (II) the date of their report (III) the type of opinion expressed by the predecessor auditor and (IV) the substantive reasons it was qualified.
    h. Form, Order and Terminology
      i. Financial statements should be filed in such form and order, and should use such generally accepted terminology as will best indicate their significance and character in the light of the provisions applicable thereto. The information required with respect to any statement shall be furnished as a minimum requirement to which shall be added such further material information as is necessary to make the required statements, in the light of the circumstances under which they are made, not misleading.
      Financial statements filed with the Commission should be prepared in accordance with generally accepted accounting principles [See definition in Section 1(b)(v)]. This Part and other parts of this Rule provide clarification of certain disclosures which must be included in financial statements filed with the Commission.
      ii. All money amounts required to be shown in financial statements may be expressed in whole pesos or multiples thereof, as appropriate: provided, that when stated in other than whole pesos, an indication to that effect is inserted immediately beneath the caption of the statement or schedule, at the top of the money columns, or at an appropriate point in narrative material.
      iii. Negative amounts shall be shown in a manner which clearly distinguishes the negative attribute. When determining methods of display, consideration should be given to the limitations of reproduction and microfilming processes.
      iv. The chronological ordering of data may be with the most recent date to the right or to the left. However, the ordering used must be consistent in all financial statements, tabular data and footnote data in the document.
    i. Items Not Material
      If the amount which would otherwise be required to be shown with respect to any item is not material, it need not be separately set forth. The combination of insignificant amounts is permitted.
    j. Inapplicable Captions and Omission of Unrequired or Inapplicable Financial Statements
      i. No caption should be shown in any financial statement as to which the items and conditions are not present.
      ii. Financial statements not required or inapplicable because the required matter is not present need not be filed.
      iii. The reasons for the omission of any required financial statements shall be indicated.
    k. Current Assets and Current Liabilities
      Assets classed with current assets shall be reasonably expected to be realized in cash or sold or consumed during the normal operating cycle of the business or within one year if the operating cycle is shorter than one year.
      Current liabilities are obligations that are reasonably expected to be liquidated through the use of existing current assets or the creation of other current liabilities within the normal operating cycle of the business or one year, whichever is longer.
      Where a particular business has no clearly defined operating cycle, the one year rule should govern. However, if a company's normal operating cycle is longer than one year, generally recognized trade practices should be followed with respect to the inclusion or exclusion of items in current assets or current liabilities. An appropriate explanation of the circumstances should be made and, if practicable, an estimate should be given of the amount not realizable or payable within one year. The amounts maturing in each year (if practicable) along with the interest rates or range shall also be disclosed.
      The captions current assets and current liabilities are not required for companies in some industries which, because of the nature of their business, do not normally distinguish current assets and current liabilities from non-current.
    l. Requirements of Rule 68 Not Applicable to Annual Reports to Shareholders
      The schedules required by Section 4(e) and set forth in “Annex N” of SRC Rule 68 and the separate financial statements of subsidiaries not consolidated and 50 percent or less owned persons required by Section 2(e) are not required in annual reports to shareholders. However, if the financial statements required by Section 2(e) are included in annual reports to shareholders, the requirements of Section 5(f)(ii) as to footnote disclosures about such investments need not be provided. (Footnotes in the annual report to shareholders should be the same as the footnotes included in the report on Form 17-A.) Also, if the principal accountant relied on the work of other accountants, the report of the other accountants which is required by Section 3(d) is not required in annual reports to shareholders.
    m. General Notes to Financial Statements
       Furnish the information set forth in “Annex J”.
 3. Qualifications and Reports of Independent Auditors
    a. Examination of Financial Statements by Independent Auditors
      The Commission will not accept financial statements required to be audited unless such financial statements are accompanied by an auditor's report issued by an independent auditor.
    b. Qualifications of Independent Auditors
      i. The Commission will not recognize any person as an independent auditor who is not in good standing and entitled to practice as such under the laws governing the practice of public accounting in the Philippines.
      ii.  The term independent auditor as used in the foregoing paragraph is an auditor who possesses the independence as defined in Part II Section 14 of the Code of Professional Ethics for Certified Public Accountants as promulgated by the Board of Accountancy and approved by the Professional Regulation Commission.
      Independence will be considered to be impaired if:chanroblesvirtuallawlibrary
        A. During the period of his professional engagement, or at the time of expressing his opinion, he:chanroblesvirtuallawlibrary
          I. Had or was committed to acquire any direct or material indirect financial interest in the enterprise; or
          II. Had any joint closely-held business investment with the enterprise or any officer, director or principal stockholder thereof; or
          III. Had any loan to or from the enterprise or any officer, director or principal stockholder thereof.
           
        B. During the period covered by the financial statements and during the period of the professional engagement or at the time of expressing an opinion, he:chanroblesvirtuallawlibrary
          I. Was connected with the enterprise as a promoter, underwriter or voting trustee, a director or officer or in any capacity equivalent to that of a member of management or of an employee, or
          II. Was a trustee of any trust or executor or administrator of any estate if such trust or estate had a direct or material indirect financial interest in the enterprise; or was a trustee for any pension or profit-sharing trust of the enterprise.
           
          The above examples are not intended to be all-inclusive.
          Independence may be impaired by the financial interests and business relationships of the CPA's spouse, dependent children or any relative living in a common household with or supported by the CPA. The financial interests or business relationships of such family, dependents or relatives in a CPA's client are ascribed to the CPA; in such circumstances the independence of the CPA or his firm would be impaired.
      iii. In determining whether an auditor may in fact be not independent with respect to a particular issuer, the Commission will give appropriate consideration to all relevant circumstances, including evidence bearing on all relationships between the auditor and that issuer or any affiliate thereof.
    c. Reports of Independent Auditors
      i. Technical Requirements - The auditor's report shall: (A) be dated; (B) be manually signed; (C) identify the financial statements covered by the report; (D) state the certifying accountant's PTR number; (E) state the complete mailing address of the client and the auditor; and (F) clearly indicate the name of the certifying partner, where the certification is made under a firm name.
      ii. Representations as to the Audit - The auditor's report shall state whether the examination was made in accordance with generally accepted auditing standards and shall designate any auditing procedures deemed necessary by the auditor under the circumstances of the particular case, which have been omitted, and the reasons for their omission. This rule, however, shall not be construed to imply authority for the omission of any procedure which independent auditors would ordinarily employ in the course of an audit made for the purpose of expressing the opinion required by paragraph (iii) below.
      iii. Opinion to be Expressed - The auditor's report shall state clearly: (A) the opinion of the independent auditor in respect of the financial statements covered by the report and the accounting principles and practices reflected therein; (B) the opinion of the independent auditors as to the consistency of the application of such accounting principles, or as to any changes in such principles which have a material effect on the financial statements.
      iv. Exceptions - Any matters to which the independent certified public accountant takes exception shall be clearly identified, the exception thereto specifically and clearly stated and to the extent practicable, the effect of each such exception on the related financial statements given. In cases when financial statements filed with the Commission pursuant to its rules and regulations are prepared in accordance with accounting principles for which there is no substantial authoritative support, such financial statements will be presumed to be misleading or inaccurate despite disclosures contained in the report of the accountant or in footnotes to the financial statements provided the matters involved are material.
      In cases where there is a difference of opinion between the Commission and the registrant as to the proper principles of accounting to be followed, disclosure will be accepted in lieu of correction of the financial statements themselves only if the points involved are such that there is substantial authoritative support for the practices followed by the registrant and the position of the Commission has not previously been expressed in rules, regulations or other official pronouncements of the Commission.
      v. Special report at time of first filing by accountant -
      All financial statements to be submitted by a corporation to the Securities and Exchange Commission which are required to be certified by an independent Certified Public Accountant, shall in addition to the report of the certifying CPA, be accompanied by the statement that follows. The statement of representation shall be required to be filed only once with the Commission and shall be considered as forming part of all financial statements presented to the Commission, bearing the signature of the CPA practitioner.
        “TO THE SECURITIES AND EXCHANGE COMMISSION:chanroblesvirtuallawlibrary

      In connection with my examination of the financial statements of client corporations, which are to be submitted to the Commission, I hereby represent the following:chanroblesvirtuallawlibrary

       
        1. That said financial statements are presented in conformity with generally accepted accounting principles in all cases where I shall express an unqualified opinion; Except that in case of any departure from such principles, I shall indicate the nature of the departure, the effects thereof, and the reasons why compliance with the principles would result in a misleading statement, if such is a fact;
        2. That I shall fully meet the requirements of independence as provided in Section 14 of the Code of Professional Ethics for CPAs;
        3. That in the conduct of the audit, I shall comply with the generally accepted auditing standards promulgated by the Board of Accountancy; in case of any departure from such standards or any limitation in the scope of my examination, I shall indicate the nature of the departure and the extent of the limitation, the reasons therefore and the effects thereof on the expression of my opinion or which may necessitate the negation of the expression of an opinion; and
        4. That relative to the expression of my opinion on the said financial statements, I shall not commit any acts discreditable to the profession as provided in Section 23 of the Code of Professional Ethics for CPAs.
         
       As a CPA engaged in public practice, I make these representations in my individual capacity and as a partner in the accounting firm of
Signature
 Printed Name
 CPA Cert. No.
 TAN
 Date:chanroblesvirtuallawlibrary
    d. Examination of Financial Statements by More Than One Accountant
      If, with respect to the examination of the financial statements, part of the examination is made by an independent Certified Public Accountant other than the principal accountant and the principal accountant elects to place reliance on the work of the other accountant and makes reference to that effect in his report, the separate report of the other accountant shall be filed. However, notwithstanding the provisions of this Section, reports of other accountants which may otherwise be required in filings need not be presented in annual reports to security holders.
  4. Commercial and Industrial Companies
    a. This Section shall be applicable to financial statements filed for all issuers of securities engaged in commercial and industrial activities, except banks, insurance companies and public utilities, as to which copies of their financial statements, as submitted to the appropriate government offices, shall be furnished to the Commission.
    b. Balance Sheet - Form of Statement
    Except as otherwise permitted by the Commission, the various line items and certain additional disclosures set forth in “Annex K” if applicable, should appear on the face of the balance sheets or related notes filed by the persons to whom this Section pertains.
    c. Statement(s) of Income and Retained Earnings - Form of Statement
    The statement of income and retained earnings may be combined to form one statement. When the number of changes in retained earnings during the period or periods covered so warrant, a separate statement of retained earnings should be prepared.
    Except as otherwise permitted by the Commission, the various line items and certain additional disclosures set forth in “Annex L”, if applicable, should appear on the face of the income statements or related notes filed by the persons to whom this Section pertains.

    d. Statement of Cash Flows - Form of Statement

    When statements purporting to present both financial position and results of operations are issued, a statement of cash flows should be presented as a basic financial statement for the period for which an income statement is presented.

    The statement of cash flows filed by issuers of securities to whom this Section is applicable shall comply with the presentation and disclosure requirements under generally accepted accounting principles.

    e.    Schedules to be Filed

    i. Except as expressly provided otherwise, the schedules specified below shall be filed for each period for which statements of income are required. (For the form and contents of the schedules, refer to “Annex M”.

    ii. Any of the schedules required may be omitted if the information required by the schedule (including the notes thereto) is shown in the related financial statements or in a note thereto.

    iii. The independent auditor's report shall cover the schedules accompanying the financial  statements filed.

    iv. In a registration statement filed on SEC Form 12-1, the Schedules need not be included in Part I - Information Required in Prospectus, but may be included in Part II - Information Not Required in Prospectus.

    Schedule A. Marketable Securities - (Current Marketable Equity Securities and Other Short-Term Cash Investments) This schedule shall be filed:chanroblesvirtuallawlibrary
      1. In support of the caption Current Marketable Equity Securities in the balance sheet, if the greater of the aggregate cost or the aggregate market value of current marketable equity securities as of the balance sheet date constitute 10 per cent or more of total assets.
      2. In support of the caption Other Short Term Cash Investments, if the amount at which other short-term cash investments shown in the balance sheet constitutes 10 per cent or more of total assets, and
      3. In support of the caption Current Marketable Equity Securities and Other Short Term Cash Investments in the balance sheet, if the greater of the aggregate cost or the aggregate market value of current marketable equity securities plus the amount at which other short term cash investments is shown in the balance sheet as of the balance sheet date.
       
    Schedule B. Amounts Receivable from Directors, Officers, Employees, Related Parties, and Principal Stockholders (Other than Affiliates).
    This schedule shall be filed with respect to each person among the directors, officers, employees, and principal stockholders (other than affiliates) from whom an aggregate indebtedness of more than P100,000 or one per cent of total assets, whichever is less, is owed. For the purposes of this schedule, exclude in the determination of the amount of indebtedness all amounts receivable from such persons for purchases subject to usual terms, for ordinary travel and expense advances and for other such items arising in the ordinary course of business.
     Schedule C. Non-Current Marketable Equity Securities, Other Long-Term Investments in Stocks, and Other Investments - This schedule shall be filed in support of the respective captions on long-term investments in the balance sheet. This schedule may be omitted if:chanroblesvirtuallawlibrary
      1. The sum of the captions Non-Current Marketable Equity Securities, Other Long-Term Investments, and Other Investments in the related balance sheet does not exceed five per cent of total assets as shown in the related balance sheet at either the beginning or end of the period; or
      2. There have been no material changes in the information required to be filed from that last previously reported.
       
    Schedule D. Indebtedness of Unconsolidated Subsidiaries and Affiliates - The Schedule shall be filed in support of the caption Indebtedness of Unconsolidated Subsidiaries and Affiliates in the balance sheet. This schedule may be omitted if:chanroblesvirtuallawlibrary
      1. The amount of all indebtedness of Affiliates to the registrant in such balance sheet does not exceed five per cent of total assets as shown in the related balance sheet at either the beginning or end of the period or
      2. There have been no material changes in the information required to be filed from that last previously reported.
       
    Schedule E. Property, Plant and Equipment - This Schedule shall be filed in support of the caption Property, Plant and Equipment in the balance sheet, provided that this schedule may be omitted if:chanroblesvirtuallawlibrary
      1. The total shown under this caption does not exceed twenty-five per cent  of total assets as shown by the related balance sheet at both the beginning and end of the period; and
      2.  Neither the additions nor the deductions during the period exceeded five per cent of total assets as shown by the related balance sheet at either the beginning or end of the period.
       
    Schedule F. Accumulated depreciation - This schedule shall be filed in support of the caption accumulated depreciation in the balance sheet. This schedule may be omitted if Schedule E is not required.
    Schedule G.  Intangible Assets and Other Assets - Part A of this Schedule shall be filed in support of the caption intangible assets and Part B shall be filed in support of the caption Other Assets in the balance sheet provided that either part may be omitted if:chanroblesvirtuallawlibrary
      1. the total shown by the related balance sheet caption does not exceed five per cent of total assets as shown in the related balance sheet at both the beginning and end of the period; and
      2. neither the additions nor the deductions during the period exceeded five per cent of total assets as shown by the related balance sheet at either the beginning or end of the period
       
    Schedule H. Long-Term Debt - This schedule shall be filed in support of the caption Long-Term Debt in the balance sheet.
    Schedule I. Indebtedness to Affiliates and Related Parties -   This schedule shall be filed to list the total of all non current Indebtedness to Affiliates and Related Parties included in the balance sheet. This schedule may be omitted if:chanroblesvirtuallawlibrary
      1. The total Indebtedness to Affiliates  and Related Parties included in  such balance sheet does not exceed five per cent of total assets as shown in the related balance sheet at either the beginning or end of the period; or
      2. There have been no changes in the information required to be filed  from that last previously reported.
       
     Schedule J. Guarantees  of Securities of Other Issuers - This schedule shall be filed with respect to any guarantees of securities of other issuing entities by the issuer for which the statement is filed.
    Schedule K. Capital Stock - This schedule shall be filed in support of caption Capital Stock in the balance sheet.
 5. Consolidated Financial Statements
    a. As a general rule, consolidated financial statements should include the statements of the parent company and all its subsidiaries, except those described in paragraph (d) below.
    b. Even if the parent and its subsidiaries are engaged in dissimilar activities (i.e., some entities in the group are engaged in Manufacturing, Merchandising or other non financial activities, while the other entities are engaged in financial activities, such as banking, insurance, financing), consolidated financial statements shall be presented for the group.
    c. Consolidation of Non-Subsidiaries:chanroblesvirtuallawlibrary
      A company in which a group does not have control, but in which a group:chanroblesvirtuallawlibrary
        i. Owns more than half the equity capital, but less than half the voting power; and
        ii. Has the power to control, by statute or agreement, the financial and operating policies of the company, with or without more than one-half of the equity, shall be treated as a subsidiary and included in the consolidated financial statements.
    d. Exclusion from Consolidation:-
      A subsidiary should be excluded from consolidation if:chanroblesvirtuallawlibrary
        i. Control is likely to be temporary as, for example, when a subsidiary must be disposed of under court order or will be abandoned if certain likely adverse contingencies materialize.
        ii. Control does not rest with the majority owners as, for instance, when the subsidiary is in legal reorganization or in bankruptcy, or operates under foreign exchange restrictions, controls, or other governmentally imposed uncertainties so severe that they cast significant doubt on the parent's ability to control the subsidiary.
         
    e. Consolidation of Subsidiaries with Different Fiscal Periods -
      A difference in fiscal periods of a parent and subsidiary does not itself justify the exclusion of the subsidiary from consolidation. It ordinarily is feasible for the subsidiary to prepare, for consolidation purposes, statements for a period that corresponds with or closely approaches the fiscal period of the parent. However, if the difference is not more than three months, it usually is acceptable to use, for consolidation purposes, the subsidiary's statements for its fiscal period; when this is done recognition shall be given by disclosure or otherwise to the effect of intervening events that materially affect the financial position or results of operations. In addition, the consistency principle dictates that the length of the reporting periods and any difference in the balance sheet dates should be considered from period to period.
    f. Disclosure of Principles of Consolidation
      i. General Disclosures
        The following disclosures should be made in consolidated statements or the accompanying notes:chanroblesvirtuallawlibrary
          A. The consolidation policy being followed, including a description of the bases on which subsidiaries and associated companies have been dealt with.
          B. General identification (e.g., "all subsidiaries" or "all unconsolidated subsidiaries") of the entities included, if not stated in the financial statement captions. Desirably, an appropriate listing and description of significant subsidiaries included in consolidation should be provided.
          C. The name of subsidiaries not consolidated and the reasons for not consolidating such subsidiaries unless otherwise evident.
          D. Changes in the entities included and the reasons and effects on income thereof.
          E. If differences in fiscal periods exist and the effect could be significant, the fiscal periods of the entities' statements and any changes in such periods. In addition, the effects of intervening material events and transactions should be disclosed.
          F. The nature of the relationship between the parent company and a company that is not a subsidiary but is treated as a subsidiary in consolidation, [Section 5(c) above] and the reasons for consolidating such company.

          G.  The amounts of any material intercompany balances or transactions not eliminated and the reasons hereof

          H. If the exercise of outstanding conversion privileges or stock options and warrants of a subsidiary could have a significant effect on consolidated income, the existence of such stock rights and the effects if exercised.   However, when a subsidiary is experiencing losses and it is not likely that the stock rights will be exercised, disclosure of the effects should be made.

          I. The policy followed with respect to providing taxes on undistributed earnings of subsidiaries and the cumulative amount of undistributed earnings, if any, of such subsidiaries included in the consolidated retained earnings, for which taxes have not been provided.

          J. Restrictions on consolidated retained earnings (statutory or contractual), including those relating to legal reserves and capitalized earnings of and restrictions imposed on subsidiaries.

          K. When the consolidated entities follow different accounting policies, desirably the proportion of the assets, liabilities, revenue or expenses, as appropriate, to which the different policies apply.

          L. Desirably, what portions of long-term debt are those of the parent and what portions are those of the subsidiaries.

      ii. Disclosure about Subsidiaries Not Consolidated and 50 Percent or Less Owned Persons
        A. In addition to the separate financial statements required by Section 2(e) separate summarized financial information (see definitions in Section I(b)(xiii) shall be furnished in the footnotes for each significant subsidiary not consolidated and for each 50 percent or less owned person. Notwithstanding the requirement for separate summarized financial information for each significant subsidiary, where summarized financial information of two or more majority-owned subsidiaries not consolidated are required, combined or consolidated summarized financial information of such subsidiaries may be filed subject to principles of inclusion and exclusion which clearly exhibit the financial position, cash flows and results of operations of the combined or consolidated group.
        Similarly, where summarized financial information of two or more 50 percent or less owned persons are required, combined or consolidated summarized financial information of such persons may be filed subject to the same principles of inclusion or exclusion referred to above.
        B. Summarized financial information shall be furnished in the aggregate for (A) subsidiaries not consolidated and (B) 50 percent or less owned persons, not reported upon pursuant to (A) hereof. If in the aggregate, either subsidiaries not consolidated or 50 percent or less owned persons would not constitute a significant subsidiary, it may be stated that such groupings would not constitute a significant subsidiary and summarized financial information is not required.
     g. Disclosure of Summarized Financial Information For Dissimilar Activities of Consolidated Subsidiaries:chanroblesvirtuallawlibrary
       i. If the issuer and its subsidiaries are engaged in dissimilar activities, consolidated financial statements as required. However, disclosure of summarized financial information (See Section 1(b)(xiii), definitions) for certain subsidiaries or group of subsidiaries in the consolidated financial statements is generally considered to be desirable for an understanding of the operations of the group. Hence, when these subsidiaries are material in relation to consolidated financial position or results of operations, separate summarized financial information shall be presented for:chanroblesvirtuallawlibrary
        A. Subsidiaries whose activities are dissimilar from those of the other companies in the group.
        B. Foreign subsidiaries.
        C. Each significant financial subsidiary or group of financial subsidiaries, if the issuer and its subsidiaries are engaged in one or more types of financial activities (e.g. banking, insurance and finance).
        D. Subsidiaries related to whichever activity group is more significant, if the issuer and its subsidiaries are engaged in both non-financial and financial activities.
         
    h. Elimination of Intercompany Items and Transactions
      The following are eliminated in consolidation:chanroblesvirtuallawlibrary
        i. Intercompany open account balances such as intercompany receivables and payables.
        ii. Intercompany transactions, including intercompany sales and purchases, intercompany charges (such as rents, interests) and intercompany dividends. In eliminating dividends, the portion not paid to the parent or other subsidiaries should be charged to the minority interests.
        iii. The cost or carrying value to the parent company of its investment in each subsidiary and the portion applicable to the parent company of the equity accounts (such as capital stock, additional paid-in capital, treasury shares, retained earnings appropriations) of each subsidiary.
        iv. Unrealized intercompany profits and losses (i.e., any intercompany profit or loss on assets such as inventories and property, plant and equipment, remaining within the group).
        Parent Company Statements
        In some cases parent company statements may be needed, in addition to consolidated statements, to indicate adequately the position of bondholders and other creditors or preferred stockholders of the parent company.   Consolidated statements, in which one column is used for the parent company and other columns for particular subsidiaries or groups of subsidiaries, often are an effective means of presenting the pertinent information.
6. Interim Financial Statements
    a. Interim financial statements
      i. Condensed statements. - Interim financial statements shall follow the general form and content of presentation prescribed by the other items of SRC Rule 68 with the following exceptions:chanroblesvirtuallawlibrary
        A. Interim financial statements required by this Section need only be provided as to the registrant and its subsidiaries consolidated and may be unaudited. (Separate statements of other entities which may otherwise be required by SRC Rule 68 may be omitted.)
        B. Interim balance sheets shall include only major captions (i.e. numbered captions) prescribed by the applicable subsections herein with the exception of inventories. Data as to raw materials, work in process and finished goods inventories shall be included either on the face of the balance sheet or in the notes to the financial statements, if applicable. Where any major balance sheet caption is less than 10% of total assets, and the amount in the caption has not increased or decreased by more than 25% since the end of the preceding fiscal year, the caption may be combined with others.
        C. Interim statements of income shall also include major captions prescribed by the applicable subsections herein. When any major income statement caption is less than 15% of average net income for the most recent three fiscal years and the amount in the caption has not increased or decreased by more than 20% as compared to the corresponding interim period of the preceding fiscal year, the caption may be combined with others. In calculating average net income, loss years should be excluded. If losses were incurred in each of the most recent three years, the average loss shall be used for the purpose of this test. Notwithstanding these tests, Section 2(i) applies and minimal amounts therefore need not be shown separately.
        D. The statement of changes in cash flows may be abbreviated, starting with a single figure of funds provided by operations and showing other changes individually only when they exceed 10% of the average of funds provided by operations for the most recent three years. Notwithstanding this test, Section 2(i) applies and minimal amounts therefore need not be shown separately.
        E. The interim financial information shall include disclosures either on the face of the financial statements or in accompanying footnotes sufficient so as to make the interim information presented not misleading. Registrants may presume that users of the interim financial information have read or have access to the audited financial statements for the preceding fiscal year and that the adequacy of additional disclosure needed for a fair presentation, except in regard to material contingencies, may be determined in that context. Accordingly, footnote disclosure which would substantially duplicate the disclosure contained in the most recent annual report to security holders or latest audited financial statements, such as a statement of significant accounting policies and practices, details of accounts which have not changed significantly in amount or composition since the end of the most recently completed fiscal year, and detailed disclosures prescribed by Section 2(m) of this Rule, may be omitted. However, disclosure shall be provided where events subsequent to the end of the most recent fiscal year have occurred which have a material impact on the registrant. Disclosures should encompass for example, significant changes since the end of the most recently completed fiscal year in such items as: accounting principles and practices; estimates inherent in the preparation of financial statements; status of long-term contracts; capitalization including significant new borrowings or modification of existing financing arrangements; and the reporting entity resulting from business combinations or dispositions. Notwithstanding the above, where material contingencies exist, disclosure of such matters shall be provided even though a significant change since year end may not have occurred.
        F. Detailed schedules otherwise required by this Rule may be omitted for purposes of preparing interim financial statements.
         
      ii. Other instructions as to content. - The following additional instructions shall be applicable for purposes of preparing interim financial statements:chanroblesvirtuallawlibrary
        A. Summarized income statement information (See definition of "Summarized Financial Information", Section I(b)(xiii) shall be given separately as to each subsidiary not consolidated or 50 percent owned person or as to each group of such subsidiaries or 50 percent or less owned persons for which separate individual or group statements would otherwise be required for annual periods.
        B. If appropriate, the income statement shall show earnings per share and dividends declared per share applicable to common stock. The basis of the earnings per share computation shall be stated together with the number of shares used in the computation.
        C. If, during the most recent interim period presented, the registrant or any of its consolidated subsidiaries entered into a business combination treated for accounting purposes as a pooling of interests, the interim financial statements for both the current year and the preceding year shall reflect the combined results of the pooled businesses. Supplemental disclosure of the separate results of the combined entities for the periods prior to the combination shall be given, with appropriate explanations.
        D. Where a material business combination accounted for as a purchase has occurred during the current fiscal year, pro forma disclosure shall be made of the results of operations for the current year up to the date of the most recent interim balance sheet provided (and for the corresponding period in the preceding year) as though the companies had combined at the beginning of the period being reported on. This pro forma information should as a minimum show revenues, income before extraordinary items and the cumulative effect of accounting changes, including such income on a per share basis, and net income and net income per share.
         E. Where the registrant has disposed of any significant segment of its business revenues and net income--total and per share--for all periods shall be disclosed.
        F. In addition to meeting the reporting requirements specified by existing standards for accounting changes, the registrant shall state the date of any material accounting change and the reasons for making it. In addition, for filings on Form 17-Q, a letter from the independent accountant shall be filed as an exhibit in the first Form 17-Q filed subsequent to the date of an accounting change indicating whether or not the change is to an alternative principle which in his judgment is preferable under the circumstances; except that no letter from the accountant need be filed when the change is made in response to a standard adopted by the Philippine ASC which requires such change.

        G. Any material retroactive prior period adjustment made during any period covered by the interim financial statements shall be disclosed, together with the effect thereof upon net income--total and per share--of any prior period included and upon the balance of retained earnings. If results of operations for any period presented have been adjusted retroactively by such an item subsequent to the initial reporting of such period, similar disclosure of the effect of the change shall be made.

        H. Any unaudited interim financial statements furnished shall reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. A statement to that effect shall be included. Such adjustments shall include, for example, appropriate estimated provisions for bonus and profit sharing arrangements normally determined or settled at year-end. If all such adjustments are of a normal recurring nature, a statement to that effect shall be made; otherwise, there shall be furnished information describing in appropriate detail the nature and amount of any adjustments other than normal recurring adjustments entering into the determination of the results shown.

         
      iii. Periods to be covered. - The periods for which interim financial statements are to be provided in registration forms are stated in Section 2(b). For filings on Form 17-Q, financial statements shall be provided as set forth below:chanroblesvirtuallawlibrary
        A. An interim balance sheet as of the end of the most recent fiscal quarter and a balance sheet as of the end of the preceding year. The balance sheet as of the end of the preceding fiscal year may be condensed to the same degree as the interim balance sheet provided.  An interim balance sheet as of the end of the corresponding fiscal quarter of the preceding fiscal year need not be provided unless necessary for an understanding of the impact of seasonal fluctuations on the registrant's financial condition.
        B. Interim statements of income shall be provided for the most recent fiscal quarter, for the period between the end of the preceding fiscal year and the end of the most recent fiscal quarter, and for the corresponding periods of the preceding fiscal year. Such statements may also be presented for the cumulative twelve month period ended during the most recent quarterly period and for the corresponding preceding period.
        C. Interim statements of cash flows shall be provided for the period between the end of the preceding fiscal year and the end of the most recent fiscal quarter, and for the corresponding period of the preceding fiscal year. Such statements may also be presented for the cumulative twelve- month period ended during the most recent fiscal quarter and for the corresponding preceding period.
        D. Registrants engaged in seasonal production and sale of a single-crop agricultural commodity may provide interim statements of income and of cash flows for the twelve month period ended during the most recent quarterly period and for the corresponding preceding period in lieu of the year-to-date statements specified in (B) and (C) above.
         
      iv. Filing of other interim financial information in certain cases. - The Commission may, upon the informal written request of the registrant, and where consistent with the protection of investors, permit the omission of any of the interim financial information herein required or the filing in substitution therefor of appropriate information of comparable character. The Commission may also by informal written notice require the filing of other information in addition to, or in substitution for, the interim information herein required in any case where such information is necessary or appropriate for an adequate presentation of the financial condition of any person for which interim financial information is required, or whose financial information is otherwise necessary for the protection of investors.
7. Pro Forma Financial Information
    a. Presentation requirements
      i. Pro forma financial information shall be furnished when any of the following conditions exist:chanroblesvirtuallawlibrary
        A. During the most recent fiscal year or subsequent interim period for which a balance sheet is required by Section 2(b), a significant business combination accounted for as a purchase has occurred (for purposes of this Rule, the term "purchase" encompasses the purchase of an interest in a business accounted for by the equity method);
        B. After the date of the most recent balance sheet filed pursuant to Section 2(b), consummation of a significant business combination to be accounted for by either the purchase method or pooling-of-interests method of accounting has occurred or is probable;
        C. Securities being registered by the registrant are to be offered to the security holders of a significant business to be acquired or the proceeds from the offered securities will be applied directly or indirectly to the purchase of a specific significant business;
        D. The disposition of a significant portion of a business either by sale, abandonment or distribution to shareholders by means of a spin-off, split-up or split-off has occurred or is probable and such disposition is not fully reflected in the financial statements of the registrant included in the filing;
        E. During the most recent fiscal year or subsequent interim period for which a balance sheet is required by Section 2(b), the registrant has acquired one or more real estate operations or properties which in the aggregate are significant, or since the date of the most recent balance sheet filed pursuant to that Part the registrant has acquired or proposes to acquire one or more operations or properties which in the aggregate are significant.
        F. The registrant previously was a part of another entity and such presentation is necessary to reflect operations and financial position of the registrant as an autonomous entity; or

        G. Consummation of other events or transactions has occurred or is probable for which disclosure of pro forma financial information would be material to investors.

         
      ii. A business combination or disposition of a business shall be considered significant if:chanroblesvirtuallawlibrary
        A. A comparison of the most recent annual financial statements of the business acquired or to be acquired and the registrant's most recent annual consolidated financial statements filed at or prior to the date of acquisition indicates that the business would be a significant subsidiary pursuant to the definition specified in Section I(b)(xi), or
        B. The business to be disposed of meets the definition of a significant subsidiary in Section I(b)(xi).
         
      iii. When consummation of more than one transaction has occurred or is probable during a fiscal year, the tests of significance in (ii) above shall be applied to the cumulative effect of those transactions.. If the cumulative effect of the transactions is significant, pro forma financial information shall be presented.
      iv. For purposes of this Rule, the term business should be evaluated in light of the facts and circumstances involved and whether there is sufficient continuity of the acquired entity's operations prior to and after the transactions so that disclosure of prior financial information is material to an understanding of future operations. A presumption exists that a separate entity, a subsidiary, or a division is a business. However, a lesser component of an entity may also constitute a business. Among the facts and circumstances which should be considered in evaluating whether an acquisition of a lesser component of an entity constitutes a business are the following:chanroblesvirtuallawlibrary
        A. Whether the nature of the revenue-producing activity of the component will remain generally the same as before the transaction; or
        B. Whether any of the following attributes remain with the component after the transaction:chanroblesvirtuallawlibrary
          I. Physical facilities.
          II. Employee base.
          III. Market distribution system.
          IV. Sales force.
          V. Customer base.
          VI. Operating rights.

          VII. Production techniques, or

          VIII. Trade names.

      v. This Rule does not apply to transactions between a parent company and its wholly owned subsidiary.
    b. Preparation requirements
      i. Objective - Pro forma financial information should provide investors with information about the continuing impact of a particular transaction by showing how it might have affected historical financial statements if the transaction had been consummated at an earlier time. Such statements should assist investors in analyzing the future prospects of the registrant because they illustrate the possible scope of the change in the registrant's historical financial position and results of operations caused by the transaction.
      ii. Form and content:chanroblesvirtuallawlibrary
        A. Pro forma financial information shall consist of a pro forma condensed balance sheet, pro forma condensed statements of income, and accompanying explanatory notes. In certain circumstance (i.e., where a limited number of pro forma adjustments are required and those adjustments are easily understood), a narrative description of the pro forma effects of the transactions may be furnished in lieu of the statements described herein.
        B. The pro forma financial information shall be accompanied by an introductory paragraph which briefly sets forth a description of (I) the transaction, (II) the entities involved, and (III) the periods for which the pro forma information is presented. In addition, an explanation of what the pro forma presentation shows shall be set forth.
        C. The pro forma condensed financial information need only include major captions (i.e., the numbered captions) prescribed by the applicable Parts of this Regulation. Where any major balance sheet caption is less than 10 percent of total assets, the caption may be combined with others. When any major income statement caption is less than 15 percent of average net income of the registrant for the most recent three fiscal years, the caption may be combined with others. In calculating average net income, a loss year should be excluded unless losses were incurred in each of the most recent three years, in which case the average loss shall be used for purposes of this test. Notwithstanding these tests, "minimal" amounts need not be shown separately.
        D. Pro forma statements shall ordinarily be in columnar form showing condensed historical statements, pro forma adjustments, and the pro forma results.
        E. The pro forma condensed income statement shall disclose income (loss) from continuing operations before nonrecurring charges or credits directly attributable to the transaction. Material nonrecurring charges or credits and related tax effects which result directly from the transaction and which will be included in the income of the registrant within the 12 months succeeding the transaction shall be disclosed separately. It should be clearly indicated that such charges or credits were not considered in the pro forma condensed income statement.   If the transaction for which pro forma financial information is presented relates to the disposition of a business, the pro forma results should give effect to the disposition and be presented under an appropriate caption.
        F. Pro forma adjustments related to the pro forma condensed income statement shall be computed assuming the transaction was consummated at the beginning of the fiscal year presented and shall include adjustments which give effect to events that are (I) directly attributable to the transaction, (II) expected to have a continuing impact on the registrant, and (III) factually supportable. Pro forma adjustments to the pro forma condensed balance sheet shall be computed assuming the transaction was consummated at the end of the most recent period for which a balance sheet is required by Section 2(b) and shall include adjustments which give effect to events that are directly attributable to the transaction and factually supportable regardless of whether they have a continuing impact or are nonrecurring. All adjustments should be referenced to notes which clearly explain the assumptions involved.

        G. Historical primary and fully diluted per share data based on continuing operations (or net income if the registrant does not report either discontinued operations, extraordinary items, or the cumulative effect of accounting changes) for the registrant, and primary and fully diluted pro forma per share data based on continuing operations before nonrecurring charges or credits directly attributable to the transaction shall be presented on the face of the pro forma condensed income statement together with the number of shares used to compute the per share data. For transactions involving the issuance of securities, the number of shares used in the calculation of the pro forma per share data should be based on the weighted average number of shares outstanding during the period adjusted to give effect to shares subsequently issued or assumed to be issued had the particular transaction or event taken place at the beginning of the period presented. If a convertible security is being issued in the transaction, consideration should be given to the possible dilution of the pro forma per share data.

        H. If the transaction is structured in such a manner that significantly different results may occur, additional pro forma presentations shall be made which give effect to the range of possible results.

          INSTRUCTIONS

           1. The historical statements of income used in the pro forma financial information shall not report operations of a segment that has been discontinued, extraordinary items, or the cumulative effects of accounting changes.   If the historical statement of income includes such items, only the portion of the income statement through "income from continuing operations" (or the appropriate modification thereof) should be used in preparing pro forma results.
          2. For a purchase transaction, pro forma adjustments for the income statement shall include amortization of goodwill, depreciation and other adjustments based on the allocated purchase price of net assets acquired.   In some transactions, such as in financial institution acquisitions, the purchase adjustments may include significant discounts of the historical cost of the acquired assets to their fair value at the acquisition date. When such adjustments will result in a significant effect on earnings (losses) in periods immediately subsequent to the acquisition which will be progressively eliminated over a relatively short period, the effect of the purchase adjustments on reported results of operations for each of the next five years should be disclosed in a note.
           3. For a disposition transaction, the pro forma financial information shall begin with the historical financial statements of the existing entity and show the deletion of the business to be divested along with the pro forma adjustments necessary to arrive at the remainder of the existing entity. For example, pro forma adjustments would include adjustments of interest expense arising from revised debt structures and expenses which will be or have been incurred on behalf of the business to be divested such as advertising costs, executive salaries and other costs.
          4. For entities which were previously a component of another entity, pro forma adjustments should include adjustments similar in nature to those referred to in Instruction 3 above. Adjustments may also be necessary when charges for corporate overhead, interest, or income taxes have been allocated to the entity on a basis other than one deemed reasonable by management.
          5. Adjustments to reflect the acquisition of real estate operations or properties for the pro forma income statement shall include a depreciation charge based on the new accounting basis for the assets, interest financing on any additional or refinanced debt, and other appropriate adjustments that can be factually supported. See also Instruction 4 above.
          6. When consummation of more than one transaction has occurred or is probable during a fiscal year, the pro forma financial information may be presented on a combined basis; however, in some circumstances (e.g. depending upon the combination of probable and consummated transactions, and the nature of the filing) it may be more useful to present the pro forma financial information on a disaggregated basis even though some or all of the transactions would not meet the tests of significance individually.  For combination presentations, a note should explain the various transactions and disclose the maximum variances in the pro forma financial information which would occur for any of the possible combinations. If the pro forma financial information is presented in a proxy or information statement for purposes of obtaining shareholder approval of one of the transactions, the effects of that transaction must be clearly set forth.

          7. Tax effect, if any, of pro forma adjustments normally should be calculated at the statutory rate in effect during the periods for which pro forma condensed income statements are presented and should be reflected as a separate pro forma adjustment.

           
      iii. Periods to be presented
        A. A pro forma condensed balance sheet as of the end of the most recent period for which a consolidated balance sheet of the registrant is required by Section 2(b) shall be filed unless the transaction is already reflected in such balance sheet.
        B. Pro forma condensed statements of income shall be filed for only the most recent fiscal year and for the period from the most recent fiscal year end to the most recent interim date for which a balance sheet is required.   A pro forma condensed statement of income may be filed for the corresponding interim period of the preceding fiscal year. A pro forma condensed statement of income shall not be filed when the historical income statement reflects the transaction for the entire period.
        C. For a business combination accounted for as a pooling of interests, the pro forma income statements (which are in effect a restatement of the historical income statements as if the combination had been consummated) shall be filed for all periods for which historical income statements of the registrant are required.
        D. Pro forma condensed statements of income shall be presented using the registrant's fiscal year end. If the most recent fiscal year end of any other entity involved in the transaction differs from the registrant's most recent fiscal year end by more than 93 days, the other entity's income statement shall be brought up to within 93 days of the registrant's most recent fiscal year end, if practicable. This updating could be accomplished by adding subsequent interim period results to the most recent fiscal year-end information and deducting the comparable preceding year interim period results. Disclosure shall be made of the periods combined and of the sales and revenues and income for any periods which were excluded from or included more than once in the condensed pro forma income statements (e.g., and interim period that is included both as a part of the fiscal year and the subsequent interim period.)

        E. Whenever unusual events enter into the determination of the results shown for the most recently completed fiscal year, the effect of such unusual events should be disclosed and consideration should be given to presenting a pro forma condensed income statement for the most recent twelve-month period in addition to those required in paragraph (iii)(B) above if the most recent twelve-month period is more representative of normal operations.
8. Penalties, Repealing Clause and Effectivity
    a. Penalties
      i. All Financial Statements submitted to this Commission must adhere strictly to the provisions of these Rules; any financial statements filed which are not in accordance with these Rules shall be considered as if NOT FILED at all.
      ii. Violations of any provisions of this Rule are subject to penalties as provided in the Securities Regulation Code.
      iii. Whenever appropriate, the Certified Public Accountant who certified to the Financial Statements shall be suspended or barred from practicing before this Commission for such period of time as it may deem adequate.
       
    b. Repealing Clause
      All rules and regulations, circulars, or memoranda or any part thereof, in conflict with or contrary to these Rules or any portion hereof, are hereby repealed or modified accordingly.
    c. Effectivity
      The implementation of this Rule shall be required for financial statements for the year ended on December 31, 2000 and thereafter.
SRC Rule 72.1
General Rules and Regulations for Filing of SEC Forms with the Securities and Exchange Commission

1. Applicable Rules and Forms. - The form and content of filings with the Commission pursuant to the Code, and rules adopted thereunder, shall conform to the applicable rules and forms as in effect on the initial filing date thereof and to the provisions hereof.

2. Number of Copies; Binding; Signatures. -

    a. Except as provided in a particular form, five (5) copies of the complete filing, including exhibits and all other papers and documents filed as a part thereof, shall be filed with the Commission. Each copy shall be bound, in one or more parts, without stiff covers. The binding shall be on the left side in such a manner as to leave the reading matter legible. At least one copy of the filing shall be manually signed by the persons specified in the appropriate rule and/or related form. Unsigned copies shall be conformed. All five (5) copies (original and four conformed) are for Commission use only, including one copy for the public reference room.
    b. Each conformed copy shall be identical in content, page order, and pagination to the original filing including the main document, its table of contents, and any sections, exhibits, attachments, or other materials appurtenant thereto.
    c. Duplicated or facsimile versions of manual signatures of persons required to sign any document filed or submitted to the Commission under the Code shall be considered manual signatures for purposes of the Code and rules and regulations thereunder, provided that, the original manually signed document is retained by the filer for a period of five (5) years and upon request the filer furnishes to the Commission or the staff the original manually signed document.
3. Requirements as to Paper, Printing, Language and Pagination. -
    a. All filings shall be filed using black ink on good quality, unglazed, white letter sized paper 81/2 x 11 inches in size, or on A-4 sized paper, insofar as practicable. To the extent that the reduction of larger documents would render them illegible, such documents may be filed on paper larger than 81/2 x 11 inches in size. All original and conformed pages shall be utilized on one side only, with the exception of a prospectus which may be two-sided.
    b. All filings, and, insofar as practicable, all papers and documents filed as a part thereof shall be printed, lithographed, mimeographed or typewritten. However, the statement or any portion thereof may be prepared by any similar process which, in the opinion of the Commission, produces copies suitable for a permanent record. Irrespective of the process used, all copies of any such material shall be clear, easily readable and suitable for repeated photocopying; shall be submitted on paper not less in quality, legibility, and durability to that produced by a standard copying machine in good working order; and shall not be submitted on carbon paper or on light-weight onion skin paper. Debits in credit categories and credits in debit categories shall be designated so as to be clearly distinguishable as such on photocopies.
    c. All filings shall be in the English language. If any exhibit or other paper or document filed as part of the registration statement is in a foreign language, it shall be accompanied by a summary, version or translation in the English language. All documents executed outside the Philippines must be authenticated by the Embassy, Consulate or Legation of the Philippines in the country where the document originated.
    d. The manually signed original (or in the case of duplicate originals, one duplicate original) of all filings, and all conformed copies, including registration statements, applications, statements, reports or other documents shall be numbered sequentially (in addition to any internal numbering which otherwise may be present) by handwritten, typed, printed or other legible form of notation from the first page of the document through the last page of that document and any exhibits or attachments thereto. Further, the total number of pages contained in a numbered original and in each numbered and conformed copy shall be set forth on the first page of the document.
    e. The body of all printed statements and reports and all notes to financial statements and other tabular data included therein shall be in prominent type at least as large and as legible as 10-point type. However, to the extent necessary for convenient presentation, financial statements and other tabular data, including tabular data in notes, may be in at least as large and as legible as 8-point type. All such type shall be leaded at least 2 points.
    f. All original and conformed copies shall be submitted under cover of a standard cover page which shall identify the specific filing form type or form amendment or response to a show cause letter, the period ended date for any report or general information sheet or financial statement or other period based filing, the complete company name and principal business address and main telephone number, the fiscal year end date of the company, the SEC identification number, the SEC File Number if the filing is an amended, revised, supplementary or post-effective prospectus or an amendment to any type of registration or transaction filing, each type of Commission registration currently effective for the filing entity, and such other information as may be required by the Commission from time to time on cover pages for all SEC filings or for any specific type of filing. From time to time the Commission will publish a list showing the SEC filing form types currently in effect so applicants and registrants can comply with the requirement to indicate the specific form type on the standard cover page.
4. Information Unknown or Not Reasonably Available. -
Other than financial statements, information required need be given only insofar as it is known or reasonably available to the registrant. If any required information is unknown and not reasonably available to the registrant, either because obtaining such would involve unreasonable effort or expense, or because it rests peculiarly within the knowledge of another person not affiliated with the registrant, the information may be omitted, subject to the following conditions:chanroblesvirtuallawlibrary
    a. The registrant shall give such information on the subject as it possesses or can acquire without unreasonable effort or expense, together with the sources thereof.
    b. The registrant shall include a statement either showing that unreasonable effort or expense would be involved or indicating the absence of any affiliation with the person within whose knowledge the information rests and stating the result of a request made to such person for the information.
5. Supplemental Information. -
The Commission or its staff may, where it is deemed appropriate, request supplemental information concerning the filing or any of the content thereof.  This information shall not be required to be filed with or deemed part of the registration statement or report. The information shall be returned to the registrant upon request, provided that:chanroblesvirtuallawlibrary
    a. Such request is made at the time such information is furnished to the staff;
    b. The return of such information is consistent with the protection of investors.
 6. Place of Filing. -
    All filings subject to the provisions of this rule shall be filed at the principal office of the Commission, Metro Manila, Philippines.
7. Preparation of Filings Generally. -
    a. Numbers and Captions of Items. All filings shall contain the numbers and captions of all items of the appropriate form, but the text of the items may be omitted provided the answers thereto are so prepared as to indicate to the reader the coverage of the items without the necessity of his referring to the text of the items or instructions thereto. However, where any item requires information to be given in tabular form, it shall be given in substantially the tabular form specified in the item. All instructions, whether appearing under the items of the form or elsewhere therein, are to be omitted. Unless expressly provided otherwise, if any item is inapplicable or the answer thereto is in the negative, an appropriate statement to that effect shall be made.
    b. Additional Exhibits. The registrant may file such exhibits as it may desire in addition to those required by the appropriate form. Such exhibits shall be so marked as to indicate clearly the subject matters to which they refer.
    c. Substantially Identical Documents. In any case where two or more indentures, contracts, franchises, or other documents required to be filed as exhibits are substantially identical in all material respects except as to the parties thereto, the dates of execution, or other details, the registrant need file a copy of only one of such documents, with a schedule identifying the other documents omitted and setting forth the material details in which such documents differ from the document of which a copy is filed. The Commission may at any time in its discretion require the filing of copies of any documents so omitted.
8. Preparation of Registration Statement and Prospectus. -
    a. In addition to the provisions of paragraphs 1 through 7 hereof, the following provisions shall apply to the preparation and filing of registration statements:chanroblesvirtuallawlibrary
      i. A registration statement shall consist of the facing sheet of the applicable form cross reference sheet; a prospectus containing the information called for by Part I of such form; the information, list of exhibits, undertakings and signatures required to be set forth in Part II of such form; financial statements and schedules; exhibits; any other information or documents filed as part of the registration statement; and all documents or information incorporated by reference in the foregoing (whether or not required to be filed).
      ii. All general instructions, instructions to items of the form, and instructions as to financial statements, exhibits, or prospectuses are to be omitted from the registration statement in all cases.
      iii.  The prospectus shall contain the information called for by all of the items of Part I of the applicable form, except that unless otherwise specified, no reference need be made to inapplicable items, and negative answers to any item in Part I may be omitted. A copy of the prospectus may be filed as a part of the registration statement in lieu of furnishing the information in item-and-answer form. Wherever a copy of the prospectus is filed in lieu of information in item-and-answer form, the text of the items of the form is to be omitted from the registration statement, as well as from the prospectus, except to the extent provided in paragraph iv below.
      iv. Where any items of a form calls for information not required to be included in the prospectus, generally Part II of such form, the text of such items, including the numbers and captions thereof, together with the answers thereto shall be filed with the prospectus under cover of the facing sheet of the form as a part of the registration statement. However, the text of such items may be omitted provided the answers are so prepared as to indicate the coverage of the item without the necessity of reference to the text of the item. If any such item is inapplicable, or the answer thereto is in the negative, a statement to that effect shall be made. Any financial statements not required to be included in the prospectus shall also be filed as a part of the registration statement proper, unless incorporated by reference pursuant to SRC Rule 12-2.
       
    b. Securities to be issued as a result of stock splits, stock dividends and anti-dilution provisions and interests to be Issued pursuant to certain employee benefit plans.
      i.  If a registration statement purports to register securities to be offered pursuant to terms which provide for a change in the amount of securities being offered or issued to prevent dilution resulting from stock splits, stock dividends or similar transactions, such registration statement shall, unless otherwise expressly provided, be deemed to cover the additional securities to be offered or issued in connection with any such provision.
      ii. If prior to completion of the distribution of the securities covered by a registration statement, additional securities of the same class are issued or issuable as a result of a stock split or stock dividend, the registration statement shall, unless otherwise expressly provided therein, be dee