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ACT NO. 2581
ACT NO. 2581 - AN ACT TO REGULATE
THE SALE OF CERTAIN CORPORATION SHARES, STOCKS, BONDS AND OTHER
SECURITIES
Section 1. Terms defined. — The term "securities" as used in
this Act shall be taken to mean stock certificates, shares, bonds,
debentures, certificates of participation, contracts, contracts or
bonds for the sale and conveyance of lands on deferred payments or on
the installment plan, or other instruments in the nature thereof, by
whatsoever name known or called. The term "speculative securities" as
used in this Act shall be deemed to mean and include:
(a) All
securities to promote or induce the sale of
which profit, gain, or advantage unusual in the ordinary course of
legitimate business is in any way advertised or
promised;
(b) All securities the value of which materially
depend upon proposed or promised future promotion or development rather
than on present tangible assets and conditions;
(c) All securities for promoting the sale of which a
commission of more than five per cent is offered or paid;
(d) The securities of any enterprise or corporation
which has included, or proposes to include in its assets as a material
part thereof patents, formulae, good-will, promotion or other
intangible assets, or which has issued or proposes to issue a material
part of its securities in payment for patents, formulae, good-will,
promotion or other intangible assets.
Sec. 2. Sale of securities, when permitted. — It
shall be unlawful for any person, partnership, association or
corporation, either himself or through brokers or agents, directly or
indirectly, to sell or cause to be sold, offer for sale, take
subscriptions or negotiate for the sale, in any manner whatsoever
except as herein provided, of any speculative securities in the
Philippine Islands other than those expressly exempted without a
written permit from the Treasurer of the Philippine Islands as
hereinafter provided.
Exclusive of the securities specifically excepted in section three of
this Act, every person, partnership, association, or corporation
attempting to offer to sell in the Philippines speculative securities
of any kind or character whatsoever, shall be under obligation to file
previously with the Insular Treasurer, paying to the same the tax of
twenty pesos:
(a) A statement
showing in detail the plan on which
the proposed business or enterprise is to be conducted;
(b) A copy of all contracts, bonds or other
instruments which it is proposed to make with or sell to contributors;
(c) A statement which will show the name and location
of the person, partnership, association or
corporation;
(d) An itemized account of the actual financial
condition and the amount of property, debts and liabilities of the
person, partnership, association, or corporation, and any and all other
information that may be desired by the said Treasurer of the Philippine
Islands. Said statements shall be verified by the oath of a member of
the partnership, association or corporation or by the oath of a duly
authorized officer, if it be a corporation, or by a duly authorized
agent of said person, partnership, association or corporation.
Sec. 3. Certain securities exempted. — The
provisions of this Act shall not apply to:
(a) Securities
of the United States or of any foreign
government, or of any State or territory thereof, or of any province,
city, municipality, township or other public taxing subdivision of the
United States, of the Philippine Islands or of a foreign government.
(b) Securities of public or quasi-public corporations
the issue of which are regulated by the Board of Public Utility
Commissioners or other similar authority.
(c) Securities of banks, trust companies, mortgage
companies dealing exclusively in bona fide mortgages on farm and city
real estate, or insurance companies authorized to do business in the
Philippine Islands.
Sec. 4. Circulars, and so forth, filing of. —
While any such person, partnership, association or corporation is
engaged in business in the Philippine Islands by authority of a
certificate or permit issued hereunder, such person, partnership,
association or corporation shall file copies of all its circulars,
prospectuses and other advertisements with the said Treasurer.
Sec. 5. Examination. — It shall be the duty of the
Treasurer of the Philippine Islands to examine the statements and
documents filed, and if said Treasurer shall deem it advisable he shall
make or have made a detailed examination of the affairs of any person,
partnership, association or corporation desiring to engage in business
in the Philippine Islands under this Act. The expenses of such
examination, not to exceed twenty pesos per day with actual and
necessary expenses, shall be paid by such person, partnership,
association or corporation. Whenever the said Treasurer of the
Philippine Islands is satisfied, either with or without the examination
herein provided, that any person, partnership, association or
corporation is entitled to the right to offer its securities as above
defined and provided for sale in the Philippine Islands, he shall issue
to such person, partnership, association or corporation a certificate
or permit reciting that such person, partnership, association or
corporation has complied with the provisions of this Act, and that such
person, partnership, association or corporation, its brokers or agents
are entitled to offer the securities named in said certificate or
permit for sale. After the issuance of such certificate or permit the
said Treasurer of the Philippine Islands shall have authority at any
time to examine the affairs of such person, partnership, association or
corporation as to the manner in which they are transacting business
under such certificate or permit, and said Treasurer shall furthermore
have authority, whenever in his judgment it is in the public interest,
to cancel said certificate or permit. An appeal from the decision of
the Insular Treasurer may be had within the period of thirty days to
the Secretary of Finance and Justice.
Sec. 6. Service of summons. — Before any person,
partnership, association or corporation being a non-resident of the
Philippine Islands, shall sell or offer for sale any securities
hereunder, such person, partnership, association or corporation shall
file in the office of the Auditor of the Philippine Islands a power of
attorney irrevocable, authorizing such Auditor to accept service of
summons or other legal process on behalf of such person, partnership,
association or corporation, said service to be binding in every case as
personal service on such person, partnership, association or
corporation.
Sec. 7. False statements. — Any person who shall
knowingly make or file, or cause to be made or filed with said
Treasurer of the Philippine Islands any statement, document, circular,
advertisement or prospectus required by this Act or by the said
Treasurer to be made or filed which is false in any material respect or
manner; or who shall offer for sale or sell any of the securities by
this Act prohibited without the certificate or license herein provided,
shall be punished by fine of not more than ten thousand pesos or by
imprisonment for not more than five years or by both such fine and
imprisonment.
Sec. 8. This Act shall not apply to the holder of
any speculative security who is not the issuer thereof, nor to the
person who has acquired the same for his own account in the usual and
ordinary course of business and not for the direct or indirect
promotion of any enterprise or scheme within the purview of this Act,
unless such possession is in good faith. Repeated and successive sales
of any such speculative securities shall be prima facie evidence that
the claim of ownership is not bona fide, but is a mere shift, device or
plot to evade the provisions of this Act. Such speculators shall incur
the penalty provided for in section seven of this Act.
Sec. 9. Fees. — All fees herein provided shall be
collected by the Treasurer of the Philippine Islands and by him turned
into the Treasury of the Philippine Islands.
Sec. 10. Acts not affected. — Nothing in this Act
shall be construed to repeal any portion of the provisions of Act
Numbered Fourteen hundred and fifty-nine and of Act Numbered
Twenty-three hundred and thirty-three.
Sec. 11. This Act shall take effect as of January
first, nineteen hundred and sixteen.
Enacted, February 4, 1916.
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