A
collection of Philippine laws, statutes and codes
not
included or cited in the main
indices
of
the
Chan Robles Virtual Law Library
This page features the full text of
AMENDED
IMPLEMENTING
RULES AND REGULATIONS OF THE SECURITIES
REGULATION CODE
-
REPUBLIC ACT NO. 8799
REPUBLIC
ACT NO. 8799
AMENDED
IMPLEMENTING RULES AND REGULATIONS OF THE SECURITIES
REGULATION CODE
SRC
Rule 1 – Title of Rules
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These
Rules shall be referred to as the “Amended Implementing Rules and
Regulations
of the Securities
Regulation Code” or Amended SRC Rules.
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SRC
Rule 2 – Interpretation of Rules
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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.
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SRC
Rule 3 – Definition of Terms Used in the Rules and Regulations
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1.
As used in the rules and regulations adopted by the Commission under
the
Code, unless the context otherwise requires:chanroblesvirtuallawlibrary
A.
Beneficial owner or beneficial ownership means any person who, directly
or indirectly, through any contract, arrangement, understanding,
relationship
or otherwise, has or shares voting power, which includes the power to
vote,
or to direct the voting of such security; and/or investment returns or
power, which includes the power to dispose of, or to direct the
disposition
of such security; provided, however, that a person shall be deemed to
have
an indirect beneficial ownership interest in any security which is:chanroblesvirtuallawlibrary
i.
held by members of his immediate family sharing the same household;
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ii.
held by a partnership in which he is a general partner;
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iii.
held by a corporation of which he is a controlling shareholder; or
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iv.
subject to any contract, arrangement or understanding which gives him
voting
power or investment power with respect to such securities; provided
however,
that the following persons or institutions shall not be deemed to be
beneficial
owners of securities held by them for the benefit of third parties or
in
customer or fiduciary accounts in the ordinary course of business, so
long
as such shares were acquired by such persons or institutions without
the
purpose or effect of changing or influencing control of the issuer:chanroblesvirtuallawlibrary
a.
a broker dealer;
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b.
an investment house registered under the Investment Houses Law;
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c.
a bank authorized to operate as such by the Bangko Sentral ng Pilipinas;
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d.
an insurance company subject to the supervision of the Office of the
Insurance
Commission;
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e.
an investment company registered under the Investment Company Act;
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f.
a pension plan subject to regulation and supervision by the Bureau of
Internal
Revenue and/or the Office of the Insurance Commission or relevant
authority;
and
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g.
a group in which all of the members are persons specified above.
All
securities of the same class beneficially owned by a person, regardless
of the form such beneficial ownership takes, shall be aggregated in
calculating
the number of shares beneficially owned by such person.
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A
person shall be deemed to be the beneficial owner of a security if that
person has the right to acquire beneficial ownership, within thirty
(30)
days, including, but not limited to, any right to acquire, through the
exercise of any option, warrant or right; through the conversion of any
security; pursuant to the power to revoke a trust, discretionary
account
or similar arrangement; or pursuant to automatic termination of a
trust,
discretionary account or similar arrangement.
B.
Bill of Exchange is an unconditional order in writing addressed by one
person to another, signed by the person giving it, requiring the person
to whom it is addressed to pay on demand or at a fixed or determinable
future time a sum certain in money to order or to bearer.
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C.
Code means the Securities
Regulation Code.
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D.
Commission means the Securities and Exchange Commission.
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E.
Control is the power to govern the financial and operating policies of
an enterprise so as to obtain benefits from its activities. Control is
presumed to exist when the parent owns, directly or indirectly through
subsidiaries, more than one half of the voting power of an enterprise
unless,
in exceptional circumstances, it can be clearly demonstrated that such
ownership does not constitute control. Control also exists even when
the
parent owns one half or less of the voting power of an enterprise when
there is:chanroblesvirtuallawlibrary
i.
Power over more than one half of the voting rights by virtue of an
agreement
with other investors;
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ii.
Power to govern the financial and operating policies of the enterprise
under a statute or an agreement;
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iii.
Power to appoint or remove the majority of the members of the board of
directors or equivalent governing body; or
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iv.
Power to cast the majority of votes at meetings of the board of
directors
or equivalent governing body.
F.
Derivative is a financial instrument whose value changes in response to
the change in a specified interest rate, security price, commodity
price,
foreign exchange rate, index of prices or rates, a credit rating or
credit
index, or similar variable or underlying factor. It requires no initial
or little net investment relative to other types of contracts that have
similar responses to changes in market conditions. It is settled at a
future
date. This term shall include, but not limited, to the following:chanroblesvirtuallawlibrary
1.
Options are contracts that give the buyer the right, but not the
obligation,
to buy or sell an underlying security at a predetermined price, called
the exercise or strike price, on or before a predetermined date, called
the expiry date, which can only be extended by the Commission upon
stockholders’
approval.
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2.
Call options are rights to buy.
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3.
Put options are rights to sell.
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4.
Warrants are rights to subscribe or purchase new shares or existing
shares
in a company on or before a predetermined date, called the expiry date,
which can only be extended in accordance with the Commission rules and
regulations and/or the Exchange rules. Warrants generally have a longer
exercise period than options and are evidenced by warrant certificates.
G.
An investment contract means a contract, transaction or scheme
(collectively
“contract”) whereby a person invests his money in a common enterprise
and
is led to expect profits primarily from the efforts of others.
1.
An investment contract is presumed to exist whenever a person seeks to
use the money or property of others on the promise of profits.
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2.
A common enterprise is deemed created when two (2) or more investors
“pool”
their resources, creating a common enterprise, even if the promoter
receives
nothing more than a broker’s commission.
H.
Long term commercial paper means an evidence of indebtedness of any
person
with a maturity of more than three hundred sixty-five (365) days. The
term
shall include, but not limited to, bonds and notes.
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I.
Material Fact/Information means any fact/information that could result
in a change in the market price or value of any of the issuer’s
securities,
or would potentially affect the investment decision of an
investor.
See Rule 14 (1) for a non-exclusive enumeration of what constitutes
material
fact or information.
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J.
Member of an Exchange means any broker dealer who has the right,
pursuant
to Exchange rules, to trade on that Exchange.
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K.
Non-proprietary share or certificate is an evidence of interest
or
privilege over a certain property of a corporation in view
of
the amount paid by the holder for
the
said share/certificate. While the holder is entitled to the use
of
the property, he has no right over dividends or of the assets of the
company
upon liquidation thereof.
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L.
Proprietary share or certificate is an evidence of interest or
participation
or privilege in a corporation which not only entitles the holder to
enjoy
the use of a specific property but also to dividends or earnings of
said
company. Upon liquidation of the company, a holder of a proprietary
share
shall have proportionate ownership right over its assets.
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M.
Public Company means any corporation with a class of equity securities
listed on an Exchange or with assets in excess of Fifty Million Pesos
(P50,000,000.00)
and having two hundred (200) or more holders, at least two hundred
(200)
of which are holding at least one hundred (100) shares of a class of
its
equity securities.
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N.
Public Offering means a random or indiscriminate offering of securities
in general to anyone who will buy, whether solicited or unsolicited.
Any
solicitation or presentation of securities for sale through any of the
following modes shall be presumed to be a public offering:chanroblesvirtuallawlibrary
i.
Publication in any newspaper, magazine or printed reading material
which
is distributed within the Philippines or any part thereof ;
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ii.
Presentation in any public or commercial place;
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iii.
Advertisement or announcement in any radio or television, or in
any
online or e-mail system; or
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iv.
Distribution and/or making available flyers, brochures or any offering
material in a public or commercial place, or mailing the same to
prospective
purchasers.
O.
Reporting company means a corporation which has sold a class of its
securities
pursuant to a registration under Section 12 of the SRC, or a public
company
as defined under subparagraph (M) above.
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P.
Rules and regulations refers to all rules and regulations adopted by
the
Commission pursuant to the Code, including the forms for registration,
reports and accompanying instructions thereto.
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Q.
Section refers to a section of the Code.
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R.
Self-Regulatory Organization or SRO means an organized Exchange,
registered
clearing agency or any organization or association registered as an SRO
under Section 39 of the Code to enforce compliance with relevant
provisions
of the Code and rules and regulations adopted thereunder, and mandated
to make and enforce its own rules, which have been approved by the
Commission,
by their members and/or participants. It is an organization that
enforces
fair, ethical and efficient practices in the securities and commodity
futures
industries, including securities and commodities exchanges.
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S.
Short-term commercial paper means an evidence of indebtedness of any
person
with a maturity of three hundred and sixty five (365) days or less.
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T.
Transfer agent means any person who engages on behalf of an issuer of
securities,
or itself as an issuer of securities, in:chanroblesvirtuallawlibrary
i.
countersigning stock certificates upon issuance;
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ii.
monitoring the issuance of such securities with a view toward
preventing
unauthorized issuance, a function commonly performed by a person called
a registrar;
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iii.
registering the transfer of such securities;
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iv.
exchanging or converting such securities; and/or
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v.
transferring record ownership of securities by bookkeeping entry
without
physical issuance of securities certificates.
2.
Unless otherwise specifically stated, the terms used in the rules and
regulations
shall have the meaning defined in the Code.
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3.
A rule or regulation which defines a term without express reference to
the Code or to the rules and regulations, or to a portion thereof,
defines
such term for all purposes as used in the Code and in the rules and
regulations,
unless the context specifically requires otherwise.
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SRC
Rule 3.6 – Definition of Clearing Agency
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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;
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B.
reduces the number of settlements of securities transactions or
allocates
securities settlement responsibilities; and
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C.
provides for the central handling of securities so that transfers,
loans,
pledges and similar transactions can be made by bookkeeping entry, or
otherwise,
to facilitate the settlement of securities transactions without
physical
delivery of securities certificates.
2.
As used in this Rule, “facility” includes a clearing agency’s systems,
processes or services and all the tangible or intangible properties
necessary
to operate such system, processes or services, whether within or
without
its specific physical location, for purposes of performing any or all
activities
set forth in paragraph 1 of this Rule.
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3.
A registered clearing agency may perform only the activity or
activities
that the Commission has previously approved.
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SRC
Rule 3.7 – Definition of Facility of an Exchange
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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.
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SRC
Rule 4 – Securities and Exchange Commission
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These
Rules shall be implemented by the Commission as a collegial body
composed
of a Chairperson and four (4) Commissioners.
1.
The Commission has five (5) principal departments, each to be headed by
a director. Its core function of capital market regulation shall be
performed
by the Market Regulation Department, Corporation Finance Department,
and
Non-traditional Securities and Instruments Department. Its company
registration
and enforcement functions shall be performed by the Company
Registration
and Monitoring Department and Compliance and Enforcement Department,
respectively.
A.
The Market Regulation Department develops the registration criteria for
all market participants and supervises them to ensure compliance with
registration
requirements and endorses infractions of the Code and rules and
regulations
to the Compliance and Enforcement Department.
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B.
The Corporation Finance Department registers securities before they are
offered for sale or sold to the public and ensures that adequate
information
is available about the said securities. It also ensures that
investors
have access to all material disclosures regarding the said offering and
the securities of public companies. The department also monitors
compliance
by issuers with the Code and rules and regulations adopted thereunder
and
endorses infractions thereof to the Compliance and Enforcement
Department.
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C.
The Non-traditional Securities and Instruments Department registers and
licenses nontraditional securities and instruments including, but not
limited
to, pre-need plans, commodity futures contracts, proprietary or
non-proprietary
membership certificates and other similar instruments. It monitors
compliance
with related rules and endorses infractions thereof to the Compliance
and
Enforcement Department.
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D.
The Company Registration and Monitoring Department registers domestic
corporations,
partnerships and associations, including representative offices and
foreign
corporations intending to do business in the Philippines. It also
supervises
and monitors such entities relative to their compliance with laws,
rules
and regulations administered by the Commission.
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E.
The Compliance and Enforcement Department ensures compliance by all
market
participants, issuers and individuals, and takes appropriate
enforcement
action against them for legal infraction of the Code and other relevant
laws, rules and regulations implemented by the Commission.
2.
The Commission shall have support services departments, namely Human
Resource
and Administrative Department, Economic Research and Information
Department
and Financial Management Department.
A.
The Human Resource and Administrative Department is responsible for all
activities relating to personnel and human resource management,
including
benefits, training and development. It also handles the central
receiving,
records management, general administrative and maintenance services of
the Commission.
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B.
The Economic Research and Information Department provides investment
and
economic research, analysis and advice to the Commission. It is also
the
lead technical support group of the Commission for software
development,
database management, hardware procurement, and establishment and
maintenance
of a communication network.
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C.
The Financial Management Department manages the internal finances of
the
Commission which includes budgeting, accounting and cash management.
3.
The Commission shall have special offices, namely the Office of the
General
Counsel and the Office of the General Accountant.
A.
The Office of the General Counsel, headed by the General Counsel, shall
serve as the lead legal adviser to the Commission. It also serves as
legal
liaison for the Commission with other government agencies,
self-regulatory
organizations and foreign government regulators and agencies. It
oversees
non-enforcement litigations and appeals to the Commission en banc. It
likewise
oversees the office of the Commission Secretary.
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B.
The Office of the General Accountant, headed by the General Accountant,
advises the Commission and the private sector in the area of accounting
standards and on issues of accounting treatment for public offerings
and
disclosures. It also coordinates with any board or council in the
development
of accounting standards for the Philippines and its capital market.
4.
The Commission shall have Extension Offices in key cities, each to be
headed
by a Director. The Extension Offices shall perform company
registration,
supervision, monitoring and other delegated functions of the Commission
within its geographical jurisdiction. The Directors shall execute
the programs of the Commission in their respective geographical
jurisdictions,
subject to the supervision of the Commission.
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5.
The Commission shall hold regular meetings at least once a week on a
day
and time fixed by it. Special meetings may also be called as often as
may
be necessary by the Chairperson or upon the request of three (3)
Commissioners.
In such cases, the Commissioners shall be given notice of the meeting,
and the presence of three (3) Commissioners shall constitute a quorum.
In the absence of the Chairperson, the most senior Commissioner present
shall act as the presiding officer of the meeting.
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6.
The Commission may, for purposes of efficiency, delegate any of its
functions
to an individual Commissioner, any department or office of the
Commission
or any staff member of the Commission except its review or appellate
authority
and its power to adopt, alter and supplement any rule or regulation.
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7.
The Commission, motu proprio or upon a petition filed by an interested
party, may review any order, resolution, decision or action of any of
its
departments, offices, individual Commissioner, or staff member of the
Commission.
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The
petition for review shall be filed with the Office of the General
Counsel
within fifteen (15) days from receipt of the order, resolution,
decision
or any document evidencing the action taken which is the subject of the
review. The petition shall contain, among other things, its
factual
and legal basis and shall be signed by the petitioner or counsel.
SRC
Rule 5.1(a) – Supervision Over Registered Corporations
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As
used in this Rule, the word “supervision” is interpreted to mean as
follows:chanroblesvirtuallawlibrary
1.
The business operations of corporations which are grantees of secondary
licenses or franchises by this Commission, such as but not limited to
financing
companies, investment companies, investment houses, pre-need companies,
broker/dealers and exchanges, as well as public companies, shall be
under
the direct supervision of this Commission, i.e.:chanroblesvirtuallawlibrary
a.
submission of reports (monthly, quarterly, operational, annual, etc.)
required
in the different laws governing the type of activity engaged in by
these
corporations; and
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b.
compliance with provisions of the Corporation
Code including those provisions requiring submission of documents
to
effect compliance.
Additionally,
the Commission exercises regulatory authority over said companies
except
unregistered/unlisted public companies. For corporations with
registered/listed
issues, compliance with registration requirements and the conditions
imposed
by the Commission for their registration shall likewise be under its
direct
supervision.
2.
For all other business operations of companies with certificates of
registration
with the Commission as corporations but not requiring a secondary
license
from the Commission, the extent of its supervision and monitoring shall
be limited to their compliance with the Corporation
Code, i.e.:chanroblesvirtuallawlibrary
a.
submission of financial statements;
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b.
submission of General Information Sheets (GIS);
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c.
compliance with provisions in their by-laws on:chanroblesvirtuallawlibrary
i.
number of directors
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ii.
qualifications, compensation of directors
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iii.
holding of meetings, etc.
d.
declaration of dividends;
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e.
inspection of books; and
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f.
other provisions of the Code requiring submission of documents to
effect
compliance.
3.
The business operations of corporations which are grantees of secondary
licenses of franchises of other government agencies such as but not
limited
to banking and quasi-banking institutions, building and loan
associations,
trust companies and other financial intermediaries, insurance
companies,
public utilities, educational institutions, and other corporations
governed
by special laws, shall not be under the direct supervision of this
Commission,
but under the direct supervision of the concerned government agency
granting
such secondary license or franchise. The extent of the Commission’s
supervisory
powers over such corporations shall be limited to those mentioned in
Item
No. 2 hereof, except if it is a reporting company under Sec. 17.2 of
the
Code.
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4.
Notwithstanding the foregoing, the Commission, as provided in Section 5
of the Code and the effective provision of PD 902-A, shall have the
power
to do any and all acts to carry out the effective implementation of the
laws it is mandated to enforce, i.e., constitute a Management
Committee;
appoint receivers; issue Cease and Desist Orders to prevent fraud or
injury
to the public; and such other measures necessary to carry out its role
as a regulator.
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5.
All complaints regarding the operations of a company shall be directed
to its primary regulator. However, in cases where the Commission and
another
agency are both primary regulators, e.g. investment houses with
quasi-banking
function, any complaint can be lodged with either agency. Both
regulators
shall coordinate their action.
SRC
Rule 5.1(e) – Clarification of Commission Powers to Take-Over an
Exchange
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Procedures
for implementing the Commission’s power to suspend or take-over an
Exchange
are set forth in SRC Rule 40.5, Paragraph 1.
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SRC
Rule 6.2 – Rules of Conduct for Commissioners, Officers and Employees
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1.
The Commissioners, including the Chairperson, officers and employees of
the Commission (hereinafter collectively referred to as officers or
officer),
in the execution of their duties owe their undivided loyalty to the
Commission.
They shall observe the highest standards of honesty, integrity and good
faith in the performance of their duties.
A.
Officers shall not pursue private activities in any manner which may
conflict
with their duties. They shall subordinate those activities which,
although not in conflict with their duties, will require time and
effort
to the prejudice of their duties at the Commission.
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B.
Every officer who has discretionary authority shall be free from any
conflicting
interest or influence of such nature and importance which would make it
difficult for him to provide his best efforts and loyalty to the
Commission.
2.
The interest of officers shall include the interest of his or her
spouse,
children under the age of eighteen (18) and trusts for the benefit of
himself,
his or her spouse or children.
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3.
Officers shall provide the Commission with complete information with
respect
to any actual or conflicting interest by completing SEC Form 6 and
submitting
such form to the Commission Secretary no later than thirty (30) days
from
the effective date of this Rule. New officers shall fill up this form
and
submit the same to the Commission Secretary thirty (30) days prior to
the
first day of their employment.
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4.
Even if not specifically required to be disclosed in SEC Form 6,
officers
shall report any other circumstances which, in their judgment, are
regarded
as being of possible concern to the Commission. It is to such officer’s
advantage, as well as the Commission’s, that any unclear situation be
reported
in order that a policy judgment can be made. Questions of conflict will
be referred to the Office of the General Counsel. If the Office of the
General Counsel determines that such officer can not properly retain
his
outside interest or relationship while employed by the Commission, the
Office of the General Counsel (after advising those to whom the officer
reports to of the circumstances) shall require action to eliminate the
conflict, such as the disposition by the officer of his conflicting
interest
or relationship, or the narrowing of responsibilities of the officer.
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5.
SEC Form 6 shall be kept current and accurate. Any change in the
information contained therein shall be reported and filed with the
Commission
Secretary on SEC Form 6-A no later than ten (10) days from the date of
such change.
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6.
Set forth below is a description of some types of activities which may
give rise to a conflict of interest in violation of this Rule:chanroblesvirtuallawlibrary
A.
All officerships, directorships, trusteeships or partnership interests
in any organization or association, whether registered with the
Commission
or not, except in charitable or civic organizations;
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B.
Meaningful interest in any security or investment in any corporation,
partnership
or association registered under the Code, except in sports club,
social,
charitable or civic organization;
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C.
The receipt of compensation, wages, bonuses, benefits or privileges
with
monetary value from any corporation, partnership, or association
registered
with the Commission or from any person or enterprise which, though not
registered with the Commission, does business with the Commission as a
supplier, contractor or the like;
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D.
During their term of office or employment with the Commission and for a
period of one year after resignation, retirement or separation from
such
office or employment:chanroblesvirtuallawlibrary
i.
accept employment as an officer, employee, consultant, counsel, broker,
agent, trustee or nominee by any person or in any enterprise regulated
by the Commission under the Code;
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ii.
engage in private practice of their profession where such practice
conflicts
or tends to conflict with their official function (e.g. when such
practice
is in connection with any matter before the office of the Commission
where
such officer works or used to work);
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iii.
recommend any person to any position in a private enterprise which has
a regular or pending official transaction with the office where such
officer
works or used to work.
E.
Solicitation or acceptance of any gift, loan, or other benefit from any
corporation, partnership or association registered, applying or
contemplating
registration with the Commission, including any person or firm, though
not so registered, applying or contemplating registration and/or having
current or prospective dealings with the Commission as a supplier or
contractor
or the like, if the acceptance would influence or would create the
appearance
of influencing him to act other than solely in the best interest of the
Commission.
i.
Any gift having more than a nominal value, even if given on occasions
of
rejoicing or celebration such as birthdays, anniversaries or Christmas,
shall not be permitted.
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ii.
Each officer should not borrow money from subordinates and from those
entities
which he directly regulates, except from financial institutions at
prevailing
market rates.
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iii.
No entertainment should be accepted by any officer of a kind or amount
which would influence or would create the appearance of influencing him
to act other than solely in the best interest of the Commission.
SRC
Rule 7.2 – Periodic Review of Commission Structure
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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.
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SRC
Rule 8.1 – Requirement to File Registration Statement (RS)
[formerly,
SRC Rule 8]
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1.
Filing of Registration Statement and Effectivity of Offering
A.
No securities, except of a class exempt under Section 9 of the Code or
unless sold in any transaction exempt under Section 10 thereof and the
rules thereunder, shall be sold or distributed by any person or entity
within the Philippines unless such securities are duly registered with
the Commission on SEC Form 12-1 and the registration statement has been
declared effective by the Commission. No information relating to
an offering of securities shall be disseminated unless a registration
statement
has been filed with the Commission and the written communication
proposed
to be released contains the required information under SRC Rule 8.3,
Paragraph
1.
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B.
If the securities which are the subject of the RS are intended to be
listed
in an Exchange, a copy of the RS and all other pertinent documents
including
all amendments thereto shall be filed with that Exchange. Two (2)
copies
of the application for listing shall also be filed with the Commission.
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C.
The sale of the securities subject of the RS shall be commenced within
two (2) business days from the date of the effectivity of the RS and
shall
be continued until the end of the offering period or until the sale has
been terminated by action of the issuer. The registrant may be granted
exemption from this requirement upon sufficient justification that
compliance
therewith will defeat its offering objective.
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D.
A written notification of completion or termination of the offering
shall
be filed with the Commission within three (3) business days from such
completion
or termination, indicating therein the number of securities sold.
2.
Shelf Registration
If
the remaining registered but unsold securities shall be offered after
the
completion or termination mentioned under paragraph (1)(D) above, an
updated
RS shall be filed with the Commission prior to said offering or sale.
3.
Prospectus Delivery Requirements
A.
A preliminary prospectus is submitted by a registrant to the Commission
as part of a registration statement that is not yet rendered effective
under the Securities
Regulation Code. A final prospectus is submitted to the Commission
as part of a registration statement that has been rendered effective or
that has been recommended to be rendered effective under the Code.
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B.
Securities required to be registered pursuant to Sections 8 and 12 of
the
Code shall not be offered for sale or sold unless a prospectus or any
information
material, which has been filed with the registration statement in the
form
and containing the information hereinafter described, is widely
disseminated
and sufficient copies thereof have been made available so that all who
desire to have a copy may obtain one.
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C.
In addition to the requirements of this Rule, a prospectus, including a
preliminary prospectus, shall contain information as required by SRC
Rule
12.1 and SEC Form 121 and shall be prepared in accordance with the
requirements
of SRC Rule 72.1. The information contained therein shall be worded in
plain language which is understandable by an ordinary person.
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D.
A preliminary prospectus, which has been filed with the registration
statement
required by Sections 8 and 12 of the Code, may be circulated to
potential
investors prior to the effectiveness of the registration statement if
the
following requirements have been met:chanroblesvirtuallawlibrary
i.
it meets all the requirements for a prospectus contained in paragraph B
hereof above;
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ii.
it contains the following statement in bold face print, at least 12
point
type prominently displayed: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
THEREBY, AND ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT
OBLIGATION
OR COMMITMENT OF ANY KIND, AT ANY TIME PRIOR TO THE NOTICE OF ITS
ACCEPTANCE.
AN INDICATION OF INTEREST IN RESPONSE HERETO INVOLVES NO OBLIGATION OR
COMMITMENT OF ANY KIND. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER
TO SELL OR BE CONSIDERED A SOLICITATION OF AN OFFER TO BUY.
iii.
it is the only selling document utilized in the pre-offering period,
with
the exception that the information contained in SRC Rule 8.3 may be
disseminated
in whole or in part to summarize the offering;
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iv.
its use is such that wide dissemination is assured;
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v.
sufficient copies are made available so that all who desire to have a
copy
may obtain one; and
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vi.
it contains a statement whether the security is being offered in
connection
with a distribution by the issuer or by a security holder, or both, and
whether the issue represents new financing or refinancing, or both.
E.
A preliminary or final prospectus shall be presumed to have been widely
disseminated if copies have been distributed initially and additional
copies
have been furnished promptly, upon request, to at least the following:chanroblesvirtuallawlibrary
i.
each participant in the distribution (e.g., underwriters and brokers);
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ii.
the main and extension offices of the Commission;
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iii.
an Exchange, if the securities will be listed thereon;
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iv.
twenty (20) or more persons who are not qualified buyers under Section
10.1(l) of the Code.
F.
Notice of Availability of Prospectus and Preliminary Prospectus
i.
All participants in the distribution of an offering of securities to
the
public shall, when inquiries are made as to the offering, inform
interested
persons of the availability of preliminary prospectuses and final
prospectuses
and provide them with copies if requested.
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ii.
A notice shall be placed on the front of the subscription agreement
distributed
in connection with the offering informing interested persons that they
are entitled to receive a copy of a preliminary and/or final prospectus
if they so desire and how and where one can be obtained.
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iii.
Information required in paragraphs (i) and (ii) above concerning where
the preliminary and final prospectuses may be obtained shall include at
least the following: addresses of extension and main offices of the
Commission,
any Exchange wherein the securities may be listed, the issuer company,
the telephone number and the address of the contact person. A
statement
shall also be made that preliminary and final prospectuses are
available
from all underwriters and brokers participating in the distribution.
G.
The use of selling documents other than the final prospectus during the
offering period is prohibited, except that the information contained in
SRC Rule 8.3 may be disseminated in whole or in part to summarize the
offering.
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H.
A preliminary or final prospectus shall not be used unless all
information
contained therein are up to date and accurately reflect the terms of
the
offering and the condition of the company. Thus, until such time
as appropriate amendments are made thereto and have been filed with the
Commission under SRC Rule 14, the use of a preliminary or final
prospectus
and the right to sell and offer for sale may be suspended under Section
15 of the Code when any of the following events occurs:chanroblesvirtuallawlibrary
i.
there is a material change in any information contained therein
(including
but not limited to, the occurrence of a material event which would be
required
to be reported on SEC Form 17-C);
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ii.
the financial statements contained therein are over two hundred twenty
five (225) days old.
I.
Format of Prospectus
i.
The information required in the prospectus need not follow the order of
the items or other requirements in Part I of SEC Form 12-1 with the
exception
of Items 1 and 2. However, the information shall be complete and shall
not be presented in a manner that may mislead the reader thereof or
render
the required information incomprehensible.
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ii.
All information included in the prospectus must be properly captioned
or
headed in order to reasonably indicate covered subject matter.
The
information shall be divided into reasonably short paragraphs or
sections
(with the exception of financial statements and tabular data).
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iii.
Except as to information required in tabular form and financial
statements,
the information included in the prospectus shall not be expressed in
condensed
or summarized form. Reference may be made to information in other parts
of the prospectus instead of repeating the same information in the
prospectus.
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iv.
Each prospectus used after the effective date of the registration
statement
shall be dated as of the effectivity of the prospectus. An
amended
or revised prospectus used thereafter shall bear the date of its
issuance.
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v.
All information that is required to be included in the prospectus shall
be clearly understandable without the need to refer to SEC Form 12-1 or
to the general rules and regulations. The goal of registration
(disclosure
for the benefit of investors) involves, among other things, the use of
language that can be understood by the persons to whom it is
addressed.
Failure to use language that is clear and understandable to the
investor
may defeat the purpose of the prospectus.
SRC
Rule 8.3 – Written Communication Not Deemed an Offer for Sale
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1.
A notice, circular, advertisement, letter, or other communication does
not constitute an offer for sale in violation of Section 8 of the Code
if it is published or transmitted to any person after a registration
statement
has been filed and contains any or all of the following information:chanroblesvirtuallawlibrary
A.
the name of the issuer of the security;
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B.
the full title of the security and the amount being offered;
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C.
a brief indication of the general type of business of the issuer;
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D.
the price of the security or, if the price is not known, the method of
its determination or the probable price range as specified by the
issuer
or the managing underwriter;
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E.
in the case of a debt security with a fixed (non contingent) interest
provision,
the yield or, if the yield is not known, the probable yield range, as
specified
by the issuer or the managing underwriter;
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F.
the name and address of the sender of the communication and the fact
that
he is participating, or expects to participate, in the distribution of
the security;
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G.
the names of the underwriters;
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H.
the approximate date upon which the proposed sale to the public is
anticipated
to commence;
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I.
whether the security is being offered through rights issued to existing
security holders, and, if so, the class of securities the holders of
which
will be entitled to subscribe, the subscription ratio, the actual or
proposed
record date, the date upon which the rights were issued or are expected
to be issued, the actual or anticipated date upon which they will
expire,
and the approximate subscription price, or any of the foregoing;
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J.
with respect to any class of debt securities, any class of convertible
debt securities or any class of preferred stock, the security rating or
ratings assigned to the class of securities by any credit rating agency
recognized or accredited by the Commission and the name of such rating
agency/ies which assigned such rating/s.
2.
Every communication used pursuant to this Rule shall contain the
following: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 OFFERS TO BUY THE SAME BE ACCEPTED
PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS
COMMUNICATION
SHALL NOT CONSTITUTE AN OFFER TO SELL OR BE CONSIDERED A SOLICITATION
OF
AN OFFER TO BUY.
B.
A statement whether the security is being offered in connection with a
distribution by the issuer or by a security holder, or both, and
whether
the issue represents new financing or refinancing or both;
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C.
The name/s and addresses of a person/s from whom a written prospectus,
which accordingly meets the requirements of Section 12 of the Code, may
be obtained.
SRC
Rule 9.2 – Exempt Securities
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1.
Any evidence of indebtedness issued by a financial institution itself
that
has been duly licensed by the Bangko Sentral ng Pilipinas to engage in
banking/quasi-banking activity shall be exempt from registration under
Section 8.1 of the Code; provided that the purchase and sale of such
security
shall not be considered exempt from the coverage of the provisions of
the
Code on antifraud, civil liability or others.
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2.
The registration requirements shall not likewise apply to any of the
following:chanroblesvirtuallawlibrary
A.
Evidence of indebtedness issued to the Bangko Sentral ng Pilipinas
(BSP)
under its open market and/or rediscounting operations;
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B.
Evidence of indebtedness issued to the following primary institutional
lenders: banks, including their trust accounts wherein the
bank-trustee
is granted discretionary powers in the investment disposition of the
trust
funds, investment houses including their trust accounts wherein the
investment
house-trustee is granted discretionary powers in the investment
disposition
of the trust funds, trust companies, financing companies, investment
companies,
pre-need companies, non-stock savings and loan associations, building
and
loan associations, venture capital corporations, insurance companies,
government
financial institutions, pawnshops, pension and retirement funds
approved
by the BIR, educational assistance funds established by the national
government,
and other entities that may be classified as primary institutional
lenders
by the BSP, in consultation with the SEC; provided all such evidence of
indebtedness shall only be negotiated or assigned to any of the
aforementioned
primary institutional lenders or the Development Bank of the
Philippines
with respect to private development banks in relation with their
rediscounting
privileges; provided further that in case of non-banks without
underwriting
licenses, such negotiation or assignment shall be through banks or
non-banks
licensed to be an underwriter or a securities dealer; provided finally,
that in no case shall said instrument be negotiated or assigned to
non-qualified
investors;
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C.
Bills of exchange arising from a bona fide sale of goods and services
which
are distributed and/or traded by banks or investment houses duly
licensed
by SEC and BSP through an organized market properly conventioned and
governed
by rules approved by the appropriate regulatory body;
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D.
Evidence of indebtedness e.g. short or long-term commercial papers,
meeting
the following conditions:chanroblesvirtuallawlibrary
i.
Issued to not more than nineteen (19) non-institutional lenders;
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ii.
Payable to a specific person;
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iii.
Neither negotiable nor assignable and shall be held on to maturity; and
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iv.
In an amount not exceeding Fifty Million Pesos (P50,000,000.00) or such
higher amount as the Commission may prescribe by resolution.
SRC
Rule 10.1 – Exempt Transactions
[formerly,
SRC Rule 10-1]
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1.
Disclosure to Investors
Any
person claiming exemption under Section 10.1 of the Code shall provide
to any person to whom it offers for sale or sells securities in
reliance
on such exemption a written disclosure containing the following
information:chanroblesvirtuallawlibrary
i.
The provision of Section 10.1 of the Code under which exemption from
registration
is claimed;
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ii.
Whether the Commission’s confirmation that such offer or sale qualifies
as an exempt transaction has been obtained; and
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iii.
The following statement in bold face, prominent type:chanroblesvirtuallawlibrary
THE
SECURITIES BEING OFFERED OR SOLD HEREIN HAVE NOT BEEN REGISTERED WITH
THE
SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES
REGULATION CODE. ANY FUTURE OFFER OR SALE THEREOF IS SUBJECT TO
REGISTRATION
REQUIREMENTS UNDER THE CODE UNLESS SUCH OFFER OR SALE QUALIFIES AS AN
EXEMPT
TRANSACTION.
2.
Exempt Transactions Not Requiring Notice
No
notice of exemption or fee shall be required for any transaction
covered
by Section 10.1 of the Code except those covered by subparagraphs (k)
and
(l) or sale to not more than nineteen (19) persons and to qualified
buyers,
respectively.
3.
Exempt Transactions Requiring Notice
A.
Notice of exemption on SEC Form 10-1 shall be required in an offering
or
distribution of securities under Section 10.1(k) and (l) of the Code.
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B.
The issuer shall file with the Commission a notice of exemption from
the
registration requirements under Section 8 of the Code on SEC Form 10-1,
including, as an exhibit thereto, all pertinent information required to
be furnished to the investors pursuant to this paragraph, within ten
(10)
days after the sale of the securities which are subject thereto. No
filing
fee shall be required for the said notice.
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C.
Private Placements under Section 10.1(k) of the Code
i.
A prima facie presumption of circumvention of Sections 8 and 12 of the
Code shall arise when the number of non-qualified investors shall
exceed
nineteen (19) within one (1) year. The issuer shall be liable for
penalty in accordance with the Scale of Fines of the Commission,
without
prejudice to other actions which may be taken against the issuer.
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ii.
If the initial purchaser/s shall resell said securities to more than
nineteen
(19) non-qualified investors, Sections 8 and 12 of the SRC shall apply,
notwithstanding the exemption of their issuances, unless such
succeeding
sale shall qualify as an exempt transaction.
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iii.
Exemptive relief under Section 10.1(k) (Private Placement) shall be
subject
to the following terms and conditions:chanroblesvirtuallawlibrary
a.
The issuer claiming such relief shall not engage in any form of general
solicitation or advertising in connection therewith;
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b.
Securities sold in any such transaction may only be sold to persons
purchasing
for their own account;
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c.
Sale may be made to no more than nineteen (19) “non-qualified”
buyers.
A corporation, partnership or other entity shall be counted as one
buyer;
provided, however, that if the entity is organized for the specific
purpose
of acquiring the securities offered and is not a qualified buyer under
Section 10.1(l) of the Code, then each beneficial owner of equity
securities
in the entity shall count as a separate buyer under this Rule;
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d.
The issuer provides any person to whom they offer for sale or sell
securities
pursuant thereto with the following information:chanroblesvirtuallawlibrary
1)
exact name of the issuer and its predecessor, if any;
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2)
address of its principal executive office;
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3)
place of incorporation;
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4)
exact title and class of the security;
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5)
par or issue value of the security;
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6)
number of shares or total amount of securities outstanding as of the
end
of the issuer’s most recent fiscal year;
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7)
name and address of the transfer agent;
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8)
nature of the issuer’s business;
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9)
nature of products or services offered;
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10)
nature and extent of the issuer’s facilities;
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11)
name of the chief executive officers and members of the board
of
directors;
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12)
issuer’s most recent financial statements for each of the two preceding
fiscal years or such shorter period as the issuer (including its
predecessor)
has been in existence;
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13)
whether the person offering or selling the securities is affiliated,
directly
or indirectly, with the issuer;
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14)
whether the offering is being made directly or indirectly on behalf of
the issuer, or any director, officer or person who owns directly or
indirectly
more than ten percent (10%) of the outstanding shares of any equity
security
of the issuer and, if so, the name of such person; and
15)
information required under paragraph 1 of this Rule.
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Provided,
however, that where the issuer is a reporting company under Section 17
of the Code, a copy of its most recent annual report (SEC Form 17-A)
may
be used to provide any of the required information.
D.
Offer or Sale of Securities to Qualified Buyers under Section 10.1(l)
of
the Code
If
the initial qualified buyer/s shall resell their securities to more
than
nineteen (19) non-qualified buyers/investors, Sections 8 and 12 of the
Code shall apply.
4.
Application for Confirmation or Declaration of Exemption
A.
If a confirmation of exemption shall be obtained from the Commission, a
duly accomplished SEC Form 10-1 shall be filed with the corresponding
filing
fee.
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B.
In cases which involve distribution of securities by way of stock
dividend,
the Commission shall determine the sufficiency of the retained earnings
of the issuer company prior to issuing a confirmation thereto.
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C.
Where the consideration for the offered securities is other than actual
cash, a request for confirmation of exemption from registration under
Section
10 of the Code shall deem to include an application for approval of
valuation
required under Section 62 of the Corporation
Code of the Philippines, or vice versa.
5.
Exempt Commercial Paper Transactions
An
issuer of commercial papers under an exempt transaction shall:chanroblesvirtuallawlibrary
A.
File a Notice or Application for Confirmation of Exemption (SEC Form
10-1)
prior to issuance thereof. Said application shall be accompanied
by the prescribed filing fees and include a disclosure of the following
financial ratios:chanroblesvirtuallawlibrary
Current
Ratio = Current Assets
Current Liabilities
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Acid
Test Ratio = Cash, receivables and marketable securities
Current Liabilities
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Net
Profit Margin = Net income after income tax
Net Sales or revenues
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Return
on Equity =
Net income after income tax
Total Stockholders' Equity Interest Service
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Charge
Ratio = Net income before interest expense
Interest Expense
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Debt
to equity ratio = Total Liabilities
Stockholders’ Equity
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B.
Indicate in bold letters on the face of the instrument the words:chanroblesvirtuallawlibrary
“NON-NEGOTIABLE/NON-ASSIGNABLE”
C.
That any issuer with outstanding long term commercial papers shall
likewise
file the prescribed disclosure statement and quarterly reports on such
borrowings.
6.
Other Requirements and Limitations
A.
Exemptive relief under Section 10.1(c) (Isolated Transaction) of the
Code
shall not be available to an issuer of securities which shall not be
considered
as an “owner” thereof.
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B.
In connection with a transaction under Section 10.1(i) of the Code, any
fee paid pursuant to the requirements of the Corporation
Code may be applied in satisfaction of fees owed in relation to an
application for confirmation of exemption.
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C.
The Commission shall not be precluded from taking whatever action it
may
deem appropriate on any application for confirmation even if filed
after
the offer or sale of the securities without prejudice to the imposition
of penalties when warranted by the situation.
7.
Burden of Proof that Such Exemption is Available
A.
Unless confirmation of the availability of such exemption is applied
for
under paragraph 4 of this Rule, any person claiming an exemption under
Section 10 has the burden, if challenged, to establish that the
exemption
is available. The Commission may challenge such exemption at any time.
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B.
A presumption that an exemption is not available may arise from the
failure
to file a notice as required by paragraph 3 of this Rule. Failure to
file
such notice shall also subject a person claiming an exemption under
Section
10 to sanctions under the Code.
8.
The sale or offer for sale of a security in any transaction exempt
under
Section 10 shall not be exempt from antifraud, civil liability or other
provisions of the Code.
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9.
In view of the objective of full and fair disclosure under the Code,
exemptive
relief under Section 10 of the Code shall not be available to any
issuer
or other persons for any transaction or chain of transactions that,
although
in technical compliance with the Code and this Rule, shall be a part of
a plan or scheme to evade the registration provisions of the Code. In
such
cases, registration under the Code shall be required.
SRC
Rule 11 – Definition of Commodity Futures Contracts
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1.
Commodity futures contract means a contract providing for the making or
taking delivery at a prescribed time in the future of a specific
quantity
and quality of a commodity or the cash value thereof, which is
customarily
offset prior to the delivery date, and includes standardized contracts
having the indicia of commodities futures, commodity options and
commodity
leverage, or margin contracts.
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2.
Commodity means any goods, articles, services, rights and interests,
including
any group or index of any of the foregoing, in which commodity
interests
contracts are presently or in the future dealt in.
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3.
Forward means a contract between a buyer and a seller whereby the buyer
is obligated to take delivery and the seller is obliged to deliver a
fixed
amount of an underlying commodity at a predetermined price and date.
Payment
in full is due at the time of delivery.
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4.
Without prejudice to applicable Bangko Sentral ng Pilipinas rules and
circulars,
the public trading of commodities futures contracts and pertinent
Commission
rules shall remain suspended until further ordered otherwise by the
Commission.
SRC
Rule 12.1 – Requirements for Filings Pursuant to the Securities
Regulation Code and the Corporation
Code of the Philippines
[formerly,
SRC Rule 12]
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1.
This Rule sets forth the requirements applicable to the contents of an
issuer’s non-financial statement portions of the following: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
8.1 thereunder. Registration Statements under Section 12 of the Code
shall
be filed on SEC Form 121;
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B.
Prospectuses to be used in connection with the public distribution of
securities
pursuant to Section 8 of the Code and SRC Rule 8.1 paragraph 3
thereunder;
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C.
Periodic and other reports required to be filed with the Commission
under
Section 17 of the Code as provided in SRC Rule 17 which shall be made
on
SEC Forms 17-Q, 17-A, 17-C, 17-EX or 17-L, as appropriate, unless
exempt
from the provisions thereof; and
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D.
Information Statement (SEC Form 20-IS) required under Section 20 of the
Code and SRC Rule 20.
2.
Reports filed on SEC Form 17-A and SEC Form 17-C shall be deemed to
satisfy
Section 141 and Section 26 of the Corporation
Code of the Philippines, respectively; reports provided to security
holders pursuant to SRC Rule 20 shall be deemed sufficient compliance
with
Section 75 of the Corporation
Code of the Philippines.
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3.
In addition to the requirements of this Rule, the filing of forms with
the Commission is governed by the provisions of SRC Rule 72.1 under
title
"General Rules and Regulations For Filing of SEC Forms With the
Securities
and Exchange Commission." The definitions contained in that Rule
and SRC Rule 38, to the extent that they are not defined in “Annex B”
shall
assume the same meaning of similar terms as used herein.
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4.
Information required to be disclosed under this Rule is set forth in
“Annex
C”
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5.
Definitions of terms used in the forms described in paragraph 1 of this
Rule are set forth in “Annex B”.
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6.
Requirements for Registration of Commercial Papers
A.
This rule shall apply to commercial papers issued by corporations to
the
public, the offer or sale of which is required to be registered under
the
Code.
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B.
For purposes of this rule, a credit rating agency (CRA) means any
corporation
principally and regularly engaged in the business of performing credit
evaluation of corporations and business projects or of debt issues with
the intention of assessing the overall creditworthiness or of
ascertaining
the willingness and ability of the issuer to pay its financial
obligations
as they fall due, and which assessment is translated by credit ratings
periodically and publicly announced.
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C.
The conditions for registration of commercial papers are the following:chanroblesvirtuallawlibrary
i.
Filing of a registration statement under SEC Form 12-1, in accordance
with
SRC Rules 8.1 and 12.1.
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ii.
The issuer shall enter into a firm commitment underwriting agreement
for
the commercial paper with a universal bank or an investment house or
any
other financial institution which is duly licensed under the Investment
Houses Law; provided that if the underwriter is part of a group
composed
of such institutions, they shall agree on a syndicate manager who shall
act on behalf of and be responsible to the group and whose actions
shall
be binding thereto.
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iii.
Except for issuance amounting to not more than twenty five percent
(25%)
of the issuer’s networth or where there is an irrevocable committed
credit
line with a bank covering one hundred percent (100%) of the proposed
issuance,
a commercial paper issue shall be rated by a rating agency accredited
by
the Commission, in accordance with the following rules:chanroblesvirtuallawlibrary
a.
Confidentiality of information
All
information received by a credit rating agency (CRA) from an issuer
shall
be kept confidential, except for those which:chanroblesvirtuallawlibrary
1)
Are publicly disclosed by the Ratee or Issuer itself prior to or
subsequent
to the receipt of such information by the CRA; 2) Have become generally
known in the trade or by the public through no fault or negligence or
fault
of the CRA; 3) Have been lawfully disclosed to the CRA by a
third party.
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If
any officer, director or staff of a CRA comes into possession of
non-public
material information about the issuer whose securities are being rated,
he (and all other staff members, officers/directors) shall be
disallowed
to trade in that issuer’s securities, or may not disclose such
information
nor withhold any rating recommendation on the relevant issuer until the
reason for the rating is satisfied.
b.
Monitoring of Issuers Whose Securities Have Been Rated
To
ensure that a rating is accurate and with best objectivity, a CRA shall
monitor on a continuing basis each issuer, if an issuer rating was
given,
or each issue, for an issue rating. The CRA shall raise or lower
ratings
to reflect significant changes in the creditworthiness of the issuer or
in the credit quality of the issue.
c.
Change, suspension or withdrawal of rating
1)
A rating may be changed, suspended or withdrawn as a result of changes
in, unavailability or non-submission of, information, misleading
statements
or actions of the issuer, or for other relevant or material
circumstances
which may be determined by the Commission.
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2)
A credit rating agency shall advise an issuer in advance of any
proposed
change in the rating; provided, however, that a credit rating agency
may
withdraw a rating without prior notice based on lack of information
and/or
receipt of material adverse information and/or if there is a compelling
reason to make any change in rating for the information and protection
of investors and/or based on other relevant or material circumstances
as
the Commission may determine.
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3)
The credit rating agency need not get the approval of the issuer to
downgrade
its rating on the issuer or an issue.
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4)
Issuers shall not suppress, curtail or otherwise prevent a rating
change
under pain of sanctions under the Code.
d.
Rating criteria
Ratings
shall be based on the following considerations:chanroblesvirtuallawlibrary
1)
nature and provisions of the debt obligation;
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2)
likelihood of default by an issuer;
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3)
protection afforded by, and relative position of, the obligation in the
event of a bankruptcy, reorganization or other arrangement under the
bankruptcy
law,
and other factors affecting creditors’ rights;
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4)
economic risk;
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5)
industry risk;
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6)
market position of the issuer;
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7)
business diversification of the issuer;
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8)
management and strategy;
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9)
financial risks;
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10)
capital structure/leverage;
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11)
financial flexibility, and
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12)
compliance with leading practices and principles on corporate
governance.
e.
Application for accreditation
To
apply for accreditation, a credit rating agency shall:chanroblesvirtuallawlibrary
1)
Be a stock corporation.
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2)
Have a minimum paid-up capital of at least Ten Million Pesos
(P10,000,000.00).
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3)
Submit to the Commission the following:chanroblesvirtuallawlibrary
i.
list of shareholders and their corporate affiliations;
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ii.
list of other business activities, if any;
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iii.
copies of the company’s Articles of Incorporation and By-Laws;
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iv.
a statement pertaining to ownership structure and possible conflict/s
of
interest;
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v.
names, professional qualification and independence of staff involved in
the rating decision (“rating specialists”);
vi.
a written code of conduct which insures the independence of the rating
specialists and the rating agency from the issuers it is rating;
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vii.
disclosure of affiliations, training, assistance or support it receives
from international rating agencies, if any;
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viii.
rating scales, criteria, measurements, symbols and the like, which it
has
in use;
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ix.
operating procedures, rating policies, rating criteria and other
rationale
used in arriving at a rating;
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x.
copy of model written agreement with issuers; and
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xi.
Manual on Corporate Governance.
4)
An applicant may request confidentiality of the foregoing information
except
its operating procedures, rating policies and rating criteria.
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5)
Within sixty (60) days from receipt of a written application for
accreditation
on the prescribed SEC Form, the SEC shall either approve registration
outright
or schedule a hearing to resolve issues which may result in such
registration
being denied based on concern/s that the Commission may deem important.
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6)
All applications for accreditation shall be accompanied by an initial
filing
fee of Fifty Thousand Pesos (P50,000.00) or such amount as the
Commission
may determine.
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7)
The accreditation thus granted shall continue to be effective until
revoked
by the Commission. However, an annual fee of Ten Thousand Pesos
(P10,000.00)
or such amount as the Commission may determine, shall be paid yearly at
least forty five (45) days prior to the anniversary date of its
accreditation.
If such annual fee is not paid, the registration of such person shall
be
suspended until payment is made, provided that if the same is not paid
prior to the thirtieth (30th) day after the required payment date, such
accreditation shall be automatically terminated and any issuer which
has
been rated by such rating agency shall be required to obtain a new
credit
rating within thirty (30) days after notification by such agency of
such
termination.
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8)
All accredited credit rating agencies shall ensure that the information
set forth in their application form, and all documents appended
thereto,
are current, true and correct. Any change to such information shall be
filed with the Commission no later than ten (10) business days from the
occurrence of such change.
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9)
Failure to provide an informed and objective assessment of an issuer’s
credit quality or any violation of the foregoing rules shall be a
sufficient
ground, after due notice and hearing, for the revocation or suspension
of the accreditation of a rating agency.
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10)
No person or entity shall under pain of sanctions under the Code hold
itself
out as an accredited credit rating agency or otherwise regulated in
providing
credit rating services unless it has been accredited by this Commission
under this rule.
D.
The issuer shall comply with such other terms and conditions that the
Commission
may impose from time to time in the exercise of its mandate to protect
the investors.
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E.
The issuer shall comply with the conditions imposed for the
registration
of its commercial papers during the effectivity of the registration
statement
covering said securities. Non-compliance therewith shall be a
sufficient
ground, after notice and hearing, for the revocation or suspension of
said
registration.
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F.
Term of Registration and Reissuance
i.
Registration of short term commercial papers shall be valid for one (1)
year or any lesser period and may be renewed annually with respect to
the
unissued balance of the authorized amount upon showing that the issuer
has strictly complied with the SRC and applicable rules, including this
rule, and has paid all required fees; Provided, however, that any
application
for renewal of registration shall be filed at least forty five (45)
days
prior to the expiry date.
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ii.
Registration of long-term commercial papers shall be a closed-end
process
whereby the issued portion of the authorized amount may no longer be
subject
of reissuance to the public unless re-applied for registration in
accordance
with this Rule.
G.
Pre-termination
i.
Long-term commercial papers, except bonds, which have maturity period
of
five (5) years or more shall not be pre-terminated by the issuer or the
lender within seven hundred thirty (730) days from issue date.
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ii.
Pre-termination shall include optional redemption, partial installments
and amortization payments; however, installments and amortization
payments
may be allowed if so stipulated in the loan agreement.
H.
Default
i.
If an issuer of short-term commercial papers fails to pay in full any
interest
due thereon, or the principal upon demand at maturity date appearing
thereon,
said issuer shall, within the next business day after such failure,
notify
in writing its underwriter/selling agent and the Commission of such
failure
and the latter shall forthwith issue a formal Cease and Desist Order
enjoining
both the issuer and the underwriter/selling agent from further offering
for sale the subject commercial papers.
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ii.
If an issuer of long-term commercial papers fails to pay in full any
interest
due thereon, or the principal upon demand at maturity date stated
thereon,
said issuer shall, within the next business day after such failure,
notify
in writing its underwriter/selling agent and the Commission of such
failure.
In the event that the failure occurs within the one-year effectivity of
the permit, the Commission shall issue a formal Cease and Desist Order
enjoining both the issuer and the underwriter/selling agent from
further
offering for sale the subject commercial papers.
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iii.
In both cases, an issuer of commercial papers which is a publicly
listed
company shall, within the next business day after the aforementioned
failure,
inform in writing the Exchange of such failure.
I.
Registration Fees
The
filing fee shall be based on the total amount of commercial papers
proposed
to be issued and shall be subject to a diminishing fee in inverse
proportion
in accordance with the table presented in SEC Form 12-1.
J.
Compliance with Quasi-Banking Requirements
Nothing
in these rules shall be construed as an exemption from or a waiver of
applicable
BSP requirements governing the performance of quasi-banking functions
of
financial intermediaries duly authorized to engage in such
activities.
As such, all applications covering the registration of commercial
papers
that shall be issued for relending purposes shall be endorsed by the
Commission
to the BSP. Otherwise, only Commission approval shall be
necessary.
7.
Requirements for Registration of Derivatives
A.
Warrants
i.
Definitions
a.
“Warrant Certificate” – means the certificate representing the right to
a Warrant, which may be detachable or not, duly issued by the
Issuer
to the Warrantholder.
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b.
“Warrant Instrument” – means the written document or deed containing
the
terms and conditions of the issue and exercise of a Warrant, which
terms
and conditions shall include:chanroblesvirtuallawlibrary
1.
the maximum underlying shares that can be purchased upon exercise;
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2.
the exercise period;
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3.
such other terms and conditions as the Commission may require.
c.
“Detachable Warrant” – means a Warrant that may be sold,
transferred
or assigned to any person by the Warrantholder separate from, and
independent
of, the corresponding Beneficiary Securities.
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d.
“Nondetachable Warrant” – means a Warrant that may not be sold,
transferred
or assigned to any person by the Warrantholder separate from, and
independent of, the Beneficiary Securities.
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e.
“Beneficiary Securities” – means the shares of stock and other
securities
of the Issuer which form the basis of the entitlement in a Warrant.
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f.
“Underlying Shares” – means the unissued shares of a corporation which
may be purchased by the Warrantholder upon the exercise of the right
granted
under the Warrant.
ii.
Registration
a.
Upon proper registration of its warrants under Sections 8 and 12 of the
Code and SRC Rules 8.1 and 12.1, a corporation may offer and issue such
securities to the public.
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b.
The registration of the Warrants shall include its underlying shares.
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c.
The issuer shall disclose in its registration statement the terms and
conditions
of the warrant plan including computational data relative thereto.
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d.
A person proposing to offer Warrants to the public shall file SEC Form
12-1 with the prescribed filing fee. Notwithstanding the Warrants
having no issue value, the filing fee for the same shall be Fifty
Thousand
Pesos (P50,000.00) in addition to the fees which may be due on the
underlying
shares.
iii.
Form and Content and Other Requirements of Warrant Certificates
a.
All Warrants authorized for issuance by the Commission shall be
evidenced
by Warrant Certificates which shall be signed by the President (or such
other officer as may be duly authorized by the Board of Directors) and
the Corporate Secretary of the Issuer.
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b.
In case of Detachable Warrants, the Warrant Certificate shall state the
following on its face: “The Warrant contained herein does not by
itself represent any share of stock, but a right to purchase shares of
stock of the Issuer under the terms and conditions herein contained”.
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c.
In case of Non-detachable Warrants, the right granted under the Warrant
shall be described in the stock transfer or instrument evidencing the
Beneficial
Securities. A Warrant Certificate or the stock certificate or
instrument
evidencing the Beneficial Securities where the non-detachable Warrant
is
described shall also state the following (whether on its face or on its
reverse side):chanroblesvirtuallawlibrary
1)
The warrant certificate number;
2)
The par or issue value, class and number of the corresponding
underlying
shares;
3)
The exercise price, or the formula for computing the same, or
adjustments
thereto;
4)
The exercise period and the expiry date of the Warrant;
5)
The procedure for the exercise;
6)
The summary of the provisions contained in the Warrant Instrument; and
7)
Exchange ratio or the number of underlying shares which may be
purchased
by each Warrantholder.
iv.
Exercise Period
Warrantholders
may exercise the right granted under a Warrant within the period set by
the company and disclosed in its registration statement. No extension
of
said period shall be allowed.
v.
Exercise Price
a.
The Exercise Price shall be at a price fixed at the time of
registration,
or computed using the stated formula, and disclosed by the company in
its
registration statement.
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b.
The Exercise Price shall be paid in full upon exercise, and shall not
be
less than the par value of the underlying shares or not less than Five
Pesos (P5.00) per share, if the underlying shares are without par value.
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c.
The Exercise Price shall be adjusted only if the Warrant Instrument
provides
for (i) the conditions under which adjustments in Exercise Price can be
made and (ii) the formula under which the adjusted Exercise Price can
be
determined. The Exercise Price may be adjusted only in any of the
following circumstances occurring after the issuance of the Warrant:chanroblesvirtuallawlibrary
1)
a change in the par value of the underlying shares;
2)
a declaration of stock dividends;
3)
an offering of additional shares at a price different from the original
exercise price;
4)
a merger, consolidation or quasi-reorganization;
5)
a disposition of a substantial portion of the assets of the
corporation;
and
6)
such other similar instances as may be approved by the Commission.
vi.
Warrants Registry Book
Any
corporation authorized to issue Warrants shall have a Warrants Registry
Book maintained by the designated Warrants Registrar who shall be
preferably
the Stock and Transfer Agent of the Issuer. Upon the exercise of
the right granted under a Warrant, a notation to this effect shall be
duly
recorded in the Warrants Registry Book, and the purchase of the
Underlying
Shares shall be recorded in the Stock and Transfer Book of the
Issuer.
Any sale, transfer, or assignment of a Warrant must be duly recorded in
the Warrants Registry Book, including the names of the transferor and
transferee,
the number of Warrants transferred and the number of Underlying Shares
covered by said transfer. Unless recorded in the Warrants Registry
Book,
the transfer of Warrants shall not be binding on the Issuer.
vii.
Transferability of Warrants
All
registered Warrants shall be transferable without need of approval from
the Commission. In case of Non-detachable Warrants, they shall be
transferred only together with the Beneficial Securities.
viii.
Listing Requirements
Warrants
authorized for issuance by the Commission may be listed in an exchange
together with the Beneficiary Securities under existing rules for
listing
of securities, and under such other rules as the exchange may adopt and
approved by the Commission; provided, however, that the Warrants shall
be automatically delisted upon the lapse of the Exercise Period.
Warrants
issued by listed companies are required to be listed.
B.
Options
i.
No corporation shall grant or offer any Option to the public unless the
same is registered in accordance with Sections 8 and 12 of the Code and
SRC Rules8.1 and 12.1, except when said security is exempt from
registration
under Sections 9 and 10 of the Code.
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ii.
The registration of the Options shall include its underlying shares.
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iii.
A person proposing to offer any Option to the public shall file SEC
Form
12-1, with the prescribed filing fee based on the aggregate issue price
of the Options and the underlying shares. Notwithstanding the
Options
having no issue value, the filing fee for the same shall be Fifty
Thousand
Pesos (P50,000.00) in addition to the fees which may be due on
the
underlying shares.
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iv.
The issuer shall disclose in its registration statement the terms and
conditions
of the Option plan including computational data relative thereto.
The Plan shall be submitted as exhibit to the registration statement.
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v.
In considering registration of stock Options, the Commission shall be
guided
by the following:chanroblesvirtuallawlibrary
a.
Stocks granted to stockholders proportionately with their shareholdings
may be allowed.
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b.
Stock Options may be granted to employees or officials who are not
members
of the board subject however to a review of the scheme by the board and
subject to approval by the stockholders, pursuant to the policy of the
government to widen corporate base and to distribute corporate profits
wider and more equitably,
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c.
Stock Options granted to persons who are not stockholders may be
granted
only upon showing that the Board has been duly authorized to grant the
same by its charter or by a resolution of the stockholders owning at
least
two-thirds (2/3) of all the outstanding capital stock, voting or
nonvoting,
excluding treasury stock.
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d.
Stock Options granted to directors or managing groups and its officers
must be approved in a meeting of stockholders owning at least
two-thirds
(2/3) of all the outstanding capital stock, voting or non-voting,
excluding
treasury stock. Certification by the Corporate Secretary as to the
number
of shares represented in said meeting and the number of votes cast for
or against the grant of optional rights to the directors or managing
groups
and its officers shall be submitted.
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e.
Exercise of Options must be done within the period set by the company
and
disclosed in its registration statement.
vi.
Every corporation granting Options shall maintain an Option Registry
Book
where all Options granted including transfers shall be recorded with
the
entries showing the name of person to whom the Option is granted, the
basis
or authority for such grant, the date granted, the number of shares,
the
price per share, the exercise date, the total cost and official receipt
number.
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vii.
No underlying shares for stock Options shall come from the treasury
shares
of the issuer company.
C.
Other Types of Derivatives
i.
All companies proposing to issue derivatives to the public, unless
covered
by the Rules on Futures Market, shall file a registration statement
under
SEC Form 12-1, in accordance with SRC Rules 8.1 and 12.1.
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ii.
Such registration statement shall include financial statements prepared
in accordance with the Generally Accepted Accounting Principles (GAAP)
in the Philippines and the applicable International Accounting
Standards
on Financial Instruments.
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iii.
It shall likewise include a description of the company’s financial risk
management objectives and policies, including its policies for hedging.
Each major type of forecasted transaction shall be provided in its
prospectus.
8.
Additional registration requirements for Proprietary and
Non-Proprietary
Shares/Certificates
A.
The registrant shall clearly indicate in its Articles of Incorporation,
By-Laws and prospectus the following:chanroblesvirtuallawlibrary
i.
A description of the nature and type of the shares/certificates, rights
and privileges of the holders thereof particularly their right over the
facilities of the Club;
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ii.
The certificates or shares shall be issued within sixty (60) days from
the date of full payment of the same;
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iii.
The Club shall qualify the prospective club members before actual
sale/transfer
of the share/certificate is executed.
B.
The registrant shall clearly indicate in its prospectus an undertaking
that, in the event the project or the underlying asset for which the
securities
are sold is for whatever reasons, not completed as disclosed, it shall
refund the amount of the investment of the purchaser of the securities
within ten (10) days from receipt of the written demand.
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C.
The Club shall:chanroblesvirtuallawlibrary
i.
Not collect membership dues unless the project is fifty percent (50%)
usable
as indicated in the prospectus, unless the Club’s by-laws provide a
higher
percentage of usability;
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ii.
Submit to the Commission a report under oath of any increase in fees
and
the rationale for said increase within thirty (30) days from Board
approval;
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iii.
Notify club members of any increase in fees upon the Board’s approval
of
the said increase; and
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iv.
Cause the posting of proper notices and other communications on the
charging
of fees on bulletin boards situated at conspicuous place/s at the site,
for the benefit of secondary markets.
D.
The conditions under paragraph (C) shall be reflected in the company’s
prospectus.
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E.
The following documents shall be submitted with the registration
statement
as exhibits thereof:chanroblesvirtuallawlibrary
i.
Copy of Subscription Agreement containing the required undertaking
under
paragraph (B) above;
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ii.
Copy of a Credit Line Agreement with a reputable domestic bank.
Such
credit line shall be availed of in the event that an insufficiency of
fund
for the completion of the project shall occur. The terms of the
credit
line agreement shall be disclosed in the prospectus;
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iii.
Copy of a Custodianship/Escrow Agreement with a reputable bank covering
the proceeds from the sale of said shares/certificates, providing among
others, the withdrawal of the same only upon presentation of the
company’s
work progress report; and
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iv.
Copy of the Environmental Compliance Certificate from the Department of
Environment and Natural Resources covering the location of the project.
SRC
Rule 12.2 – Incorporation by Reference
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1.
Except for information filed as an exhibit, which is subject to the
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 17.1 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
(2) or more fiscal years or periods shall not be incorporated by
reference
unless the material incorporated by reference includes the entire
period
for which the comparative data are given;
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B.
Information in any part of the registration statement or other reports
may be incorporated by reference in answer, or partial answer, to any
other
item of the registration statement or other report; and
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C.
Copies of any information or financial statement incorporated into a
registration
statement or other report by reference, or copies of the pertinent
pages
of the document containing such information or statements, shall be
filed
as an exhibit to the statement or report.
2.
A material incorporated by reference shall be clearly identified in the
reference by page, paragraph, caption or otherwise. Where only certain
pages of a document are incorporated by reference and filed as an
exhibit,
the document from which the material is taken shall be clearly
identified
in the reference. An express statement that the specified matter
is incorporated by reference shall be made at the particular place in
the
statement or report where the information is required. A matter shall
not
be incorporated by reference in any case where such incorporation would
render the statement or report incomplete, unclear or confusing.
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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.
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B.
If any modification has occurred in the text of any document
incorporated
by reference since the filing thereof, the registrant shall file with
the
reference a statement containing the text of any such modification and
the date thereof.
4.
Information shall not be incorporated by reference in a prospectus.
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SEC
Rule 12.5 (b) – Publication of Notice of Filing
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1.
The registrant shall prepare and file with its registration statement a
notification of such 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 everyone requesting the same for a reasonable cost.
Said notice shall be signed by the Director of the Corporation Finance
Department or any officer duly designated by the Commission. The
issuer shall, upon or before filing, publish the notification, at its
own
expense, in two (2) newspapers of general circulation in the
Philippines,
once a week for two (2) consecutive weeks. The required format
for
this publication appears as “Annex A”.
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2.
As part of its registration statement, the registrant shall submit to
the
Commission an affidavit of publication with a copy of the notice that
was
published, or with a copy of the pro-forma notice to be published,
containing
an attestation that such publication has been or will be undertaken
immediately.
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SRC
Rule 13 – Suspension or Revocation of Registration of Securities
(formerly,
SRC Rule 13 - Obligation of Issuers Where Registration of
Securities
Has Been Suspended or Revoked During a Public Offering)
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1.
If during a public offering, the Commission, after due notice and
hearing,
revokes the effectivity of a registration statement under Section 13 of
the Code, or suspends registration under Section 15 thereof:chanroblesvirtuallawlibrary
A.
The Commission shall publish a notice of the order of revocation or
suspension
in a newspaper of general circulation in the Philippines and/or post on
the Commission’s website along with a statement that the offering in
its
current form has been cancelled and that the issuer, subject to such
order,
or any person acting on behalf of the issuer in the distribution of the
subject securities and has in his possession any payment for the
purchase
of securities, pursuant to paragraph 3 hereof if applicable, has the
duty
to return any and all payments made by purchasers of the subject
securities
within ten (10) days of such publication, and simultaneously furnish
the
issuer a copy of this notice.
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B.
Upon receipt of a notice under paragraph 1(A) above, the issuer and all
persons acting on its behalf in the distribution of the subject
securities
shall immediately terminate the offering and return any and all
payments
received from purchasers within ten (10) days after the notice is first
published.
2.
If the public offering is already terminated and the Commission, after
due notice and hearing, revokes the effectivity of the registration
statement
under Section 13 of the Code, or suspends registration under Section 15
thereof, the Commission shall publish a notice of the order of
revocation
or suspension in a newspaper of general circulation in the Philippines
and/or post in the Commission’s website.
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3.
If a registration statement which on its face is incomplete or
inaccurate
in any material respect and/or includes any untrue statement of a
material
fact and/or omits to state a material fact required to be stated
therein
or that is necessary to make the statements therein not
misleading,
has not yet become effective, the issuer shall amend the same in
accordance
with SRC Rule 14. If the said registration statement has already
become effective, such registration shall be suspended or revoked by
the
Commission in accordance with paragraph 1 of this Rule.
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4.
Voluntary Revocation
A.
An Application for the Voluntary Revocation of Registration of
Securities
shall be effected by filing the following:chanroblesvirtuallawlibrary
i.
Verified Petition for Revocation of Registration and Permit to Sell
Securities
to the Public;
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ii.
Board Resolution approving said revocation, certified under oath by the
Corporate Secretary and attested to by the President or one performing
similar function;
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iii.
List of Stockholders indicating their respective shareholdings as of
the
latest date;
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iv.
Proposed Notice of Filing of Petition for Voluntary Revocation of
Registration
of its Securities, reciting the facts supporting the said petition and
that the same is subject to the approval of the Commission; and
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v.
Copy of Official Receipt representing payment of filing fee in the
amount
of Five Thousand Pesos (P5,000.00) or such amount as the Commission may
determine.
B.
The Commission may impose such other requirements or conditions as it
may
deem necessary. The same may include an Order to produce all the books
and papers of the petitioner and to administer oaths to, and examine
its
officers or other persons connected therewith.
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C.
Procedures
i.
Upon presentation of the documents required for voluntary revocation of
registration of securities, the Notice of Filing of Petition for
Voluntary
Revocation shall be immediately published by the Commission, at the
expense
of the petitioner, once in a newspaper of general circulation;
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ii.
If after fifteen (15) business days from the aforesaid publication, the
Commission finds that the petition together with all other papers and
documents
attached thereto, is on its face complete and that no party stands to
suffer
damage thereby, it shall prepare an Order revoking said Registration,
without
prejudice to the filing of claims for damages, by the affected persons
or stockholders, with the regular courts of justice.
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iii.
The Order of Revocation shall be published once, in a newspaper of
general
circulation, at the expense of the company and/or uploaded at the SEC
Website.
5.
The Order of Revocation shall not exempt the company from its reporting
obligations under Section 17.2 of the Securities
Regulation Code.
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SRC
Rule 14 – Amendments to the Registration Statement and Prospectus
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1.
For purposes of this Rule, material information shall include, but not
limited to, the following:chanroblesvirtuallawlibrary
A.
Any event or transaction which increases or creates a risk on the
investments
or on the securities covered by the registration;
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B.
Increase/decrease in the volume of the securities being offered at an
issue
price higher/lower than the range set and disclosed in the registration
statement and which results to a derogation of the rights of existing
security
holders, as may be determined by the Commission;
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C.
Major change in the primary business of the registrant;
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D.
Reorganization of the company;
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E.
Change in the work program or use of proceeds;
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F.
Loss, deterioration or substitution of the property underlying the
securities;
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G.
Significant or ten percent (10%) or more change in the financial
condition
or results of operation of the registrant unless a report to that
effect
is filed with the Commission and furnished the prospective purchaser;
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H.
Classification, de-classification or re-classification of securities
which
results to derogation of rights of existing security holders, as may be
determined by the Commission.
2.
If a registration statement or a prospectus on file with the Commission
under the Code becomes incomplete or inaccurate in any material respect
or if the issuer wants to change any material information therein, the
issuer shall: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;
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B.
where the registration statement has been declared effective by the
Commission,
publish a notice of the proposed amendment/s, including the reasons
therefor,
in two (2) newspapers of general circulation in the Philippines stating
that the offering in its current form has been cancelled;
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C.
if the changes shall result to a derogation of rights of existing
security
holders or purchasers of subject securities who have paid a portion of
the selling price thereof, the issuer shall include in the
above-mentioned
publication an offer to rescind all transactions that have been
completed
for sale to date, without making any deduction pursuant to paragraph
(D)
below and wait for thirty (30) days for purchasers to respond to the
rescission
offer before initiation of the amended offering; and
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D.
where the conditions under paragraph (C) are present, purchasers may,
within
thirty (30) days from the date of such notification, renounce their
purchase
of securities. Whereupon the issuer, or any person acting on behalf of
the issuer in connection with the distribution of said securities,
shall,
within ten (10) days from receipt of notification of such election,
return
the contributions paid by such purchasers without making any deduction.
Purchasers who decide not to renounce their purchase of securities
shall
be subject to the terms of the amended offering.
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E.
In case of an increase in the volume or offering price of securities to
a level higher than the range previously disclosed by the company, the
amended registration statement or prospectus shall be accompanied by a
filing fee based on the difference between the highest aggregate amount
per old range and the total amount based on new volume or price. For
amendments
other than the offering price, the minimum filing fee for the amended
registration
statement or prospectus shall be Ten Thousand Pesos (P10,000.00) or
such
amount as the Commission may determine.
3.
If after commencement of a public offering, the Commission becomes
aware
that the prospectus is on its face incomplete or inaccurate in any
material
respect, or there is a material omission therefrom, the Commission may
require an issuer to comply with paragraph 2 above or suspend or revoke
its registration under Section 13 or 15 of the Code and SRC Rule 13.
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4.
If, during a public offering, an information other than material
information
in the prospectus changes, the issuer shall file a report on SEC Form
17-C
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 from 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.
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5.
Every amendment to a registration statement shall be signed by the
persons
specified in Section 12.4 of the Code or by any executive officer duly
authorized by the Board of Directors. The final registration statement
and the final prospectus shall, however, be signed by all required
signatories
under Section 12.4 of the Code.
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6.
There shall be filed with the Commission one (1) complete, unmarked
copy
of every amendment, including exhibits and other papers and documents
filed
as part of the amendment and one (1) additional copy, marked to
indicate
clearly and precisely, by underlining or in some other appropriate
manner,
the changes effected in the registration statement by the
amendment.
Four (4) copies of the final prospectus and final amended registration
statement shall be duly signed by required signatories and filed with
the
Commission.
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7.
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.
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8.
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.
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SRC
Rule 16 – Transition Rule for Pre-Need Plans
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Rules
and related Commission circulars governing pre-need plan companies and
persons involved in the sale and distribution of pre-need plans adopted
under the Securities
Regulation Code shall continue in force and effect until said rules
are amended, modified or replaced by new rules adopted under the Code.
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SRC
Rule 17.1 – Reportorial Requirements
(formerly,
SRC Rule 17 - Requirements to File Annual, Quarterly, Current,
Predecessor
and Successor Reports)
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1.
Reporting and Public Companies
The
reportorial provisions of this paragraph shall apply to reporting and
public
companies, as defined under SRC Rule 3. However, the obligation
of
a company, which has sold a class of its securities pursuant to a
registration
under Section 12 of the Code shall be suspended for any fiscal year if
as of the first day of any such fiscal year, it has less than one
hundred
(100) holders of such class of securities and the Commission is duly
notified
of the same. Such suspension shall only be availed of after the year
said
registration becomes effective.
A.
Every issuer set forth in paragraph 1 hereof, shall file with the
Commission:chanroblesvirtuallawlibrary
i.
An annual report on SEC Form 17-A for the fiscal year in which the
registration
statement was rendered effective by the Commission, and for each fiscal
year thereafter, within one hundred five (105) days after the end of
the
fiscal year.
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ii.
A quarterly report on SEC Form 17-Q, within forty five (45) days after
the end of each of the first three quarters (3) of each fiscal
year.
The first quarterly report of the issuer shall be filed either within
forty
five (45) days after the effective date of the registration statement
or
on or before the date on which such report would have been required to
be filed if the issuer had been required previously to file reports on
SEC Form 17-Q, whichever is later.
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iii.
1. a current report on SEC Form 17-C, as necessary, to make a
full,
fair and accurate disclosure to the public of every material fact
or event that occurs, which would reasonably be expected to affect
investors'
decisions in relation to those securities. In the event a news report
appears
in the media involving an alleged material event, a current report
shall
be made within the period prescribed herein, in order to clarify said
news
item, which could create public speculation if not officially denied or
clarified by the concerned company.
2.
The disclosure required by paragraph 1(A)(iii)(1) above shall be made
by
the issuer:chanroblesvirtuallawlibrary
a.
promptly to the public through the news media;
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b.
if the issuer is listed on an Exchange, to that Exchange within
ten
(10) minutes after occurrence of the event and prior to its release to
the public through the news media, copy furnished the Commission;
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c.
to the Commission on SEC Form 17-C within five (5) days after
occurrence
of the event being reported, unless substantially similar information
as
that required by Form 17-C has been previously reported to the
Commission
by the registrant.
3.
An illustrative, non-all inclusive, list of events which shall be
reported
pursuant to this paragraph is contained in SEC Form 17-C. Merely
because an event does not appear in that list does not mean that it
does
not have to be reported if, in fact, it is material.
iv.
In addition to the above reports, issuers of registered commercial
papers
shall file the following in the form prescribed by the Commission until
all the outstanding commercial papers have been paid:chanroblesvirtuallawlibrary
1.
Monthly reports (M-101-40) on commercial paper total
issuances/outstanding
as at the end of each month, to be submitted within ten (10) business
days
following the end of the reference month;
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2.A
list of issuances, outstanding balance and maturing commercial papers
as
at the end of each quarter, to form part of the required SEC Form 17-Q.
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The
obligation to file reports under this item shall not be suspended even
when the number of holders of the issuer’s commercial papers shall be
reduced
to less than one hundred (100).
B.
Any disclosure signed and filed with the Commission and the Exchange
where
the securities of the issuer are listed, or released in mass media, in
the personal capacity of any director, executive officer or a
substantial
stockholder (as defined under SRC Rule 38.1) direct or indirect, of an
issuer shall be considered as part of any report mentioned in paragraph
1(A)(iii) hereof and deemed as an official filing of such company if it
does not deny the subject information within two (2) days from the
filing/release
of the aforementioned disclosure. Any misleading statement,
misrepresentation
or omission of a material fact therein shall be the joint
responsibility
of the issuer and the reporting director, officer or substantial
stockholder.
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C.
An owner of more than five percent (5%) of the voting rights of a
listed
company or any related party thereof, who holds material information
which
may materially affect such company may be required by the Commission to
disclose such information within the period prescribed under paragraph
1(A)(iii) of this Rule. Failure to provide the required
information
shall subject said stockholder to sanctions applicable to violations of
this Rule.
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D.
Every issuer having securities registered with the Commission shall
file
an annual report on SEC Form 17-A for each of its predecessors which
had
securities registered with the Commission covering the last full fiscal
year of the predecessor prior to the registrant’s succession, unless
such
report has been filed by the predecessor. Such annual report
shall
contain the information that would be required if filed by the
predecessor.
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E.
In the event that a non-reporting issuer (in connection with succession
by merger, consolidation, exchange of securities or acquisition of
assets)
issues equity securities to holders of equity securities issued by a
reporting
issuer, the non-reporting issuer shall assume the same obligation as
the
reporting issuer to file reports pursuant to Section 17 of the Code,
and
the non-reporting issuer shall file such reports on the same forms as
the
reporting issuer.
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F.
Notification of Inability to File On Time All or Any Required Portion
of
SEC FORM 17-A or 17-Q
i.
If all or any required portion of an annual report (SEC Form 17-A) or
quarterly
report (SEC Form 17-Q) required to be filed pursuant to Section 17 of
the
Code and SRC Rule 17.1 thereunder is not filed within the period
prescribed
for such report, the issuer shall, no later than the due date for such
report, file with the Commission and, if applicable, with the Exchange
where any class of its securities are listed, a SEC Form 17-L which
shall
contain a disclosure in reasonable detail of its inability to file the
report timely and the reasons therefore. All information which are
available
on the date of the required filing shall be filed.
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ii.
With respect to any report or portion of any report described in
paragraph
(A) above which is not timely filed because the issuer is unable to do
so without unreasonable effort or expense, such report shall be deemed
to be filed on the prescribed due date for such report if:chanroblesvirtuallawlibrary
1.
The issuer files SEC Form 17-L in compliance with paragraph (i) hereof
and, when applicable, furnishes the exhibit required by paragraph (iii)
hereof;
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2.
The issuer represents in SEC Form 17-L that:chanroblesvirtuallawlibrary
a.
The reason(s) causing the inability to file timely could not be
eliminated
by the issuer without unreasonable effort or expense; and
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b.
Either the subject annual report on SEC Form 17-A, or portion thereof,
will be filed no later than the fifteenth calendar day following the
prescribed
due date, or the subject quarterly report on SEC Form 17-Q, or portion
thereof, will be filed no later than the fifth calendar day following
the
prescribed due date; and
3.
The report/portion thereof is actually filed within the period
specified
by paragraph 1(A) hereof.
iii.
If paragraph (ii) above is applicable and the reason the subject
report/portion
thereof cannot be filed timely without unreasonable effort or expense
relates
to the inability of any person, other than the issuer, to furnish any
required
opinion, report or certification, SEC Form 17-L shall have attached as
an exhibit a statement signed by such person stating the specific
reasons
why such person is unable to furnish the required opinion, report or
certification
on or before the date such report must be filed.
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iv.
Notwithstanding paragraph (ii) above, a registration statement filed on
SEC Form 12-1 pursuant to SRC Rule 8.1, the use of which is predicated
on timely filed reports, shall not be declared effective until the
subject
report is actually filed pursuant to paragraph A hereof.
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v.
If SEC Form 17-L filed pursuant to paragraph (ii) above relates only to
a portion of a subject report, the issuer shall:chanroblesvirtuallawlibrary
1.
File the balance of such report and indicate on the cover page thereof
which disclosure items are omitted; and
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2.
Include, on the upper right corner of the amendment to the report which
includes the previously omitted information, the following statement:chanroblesvirtuallawlibrary
"The
following items were the subject of SEC FORM 17-L and are included
herein:
(List Item Numbers)"
2.
Issuers of Exempt Securities
A.
Issuers of exempt commercial papers shall file the following
i.
Monthly reports (M-2-3-01) within ten (10) days after the end of the
month;
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ii.
Quarterly reports (Q-EPS for non-banks and Q-2-3-01 for banks) within
forty-five
(45) days after the end of the quarter, respectively.
B.
Issuers shall furnish BSP copies of said reports.
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C.
Underwriters or issuers of commercial papers shall file an annual
information
statement (SEC Form 85-18-1) on commercial paper transactions on or
before
January 30 of each year. A fee of Ten Thousand Pesos (P10,000.00) shall
be paid in connection therewith.
SRC
Rule 18.1 – Reports to be Filed by 5% Beneficial Owners
(paragraphs
6, 7 & 8 deleted; disclosure requirements incorporated to SEC Form
23-A/B)
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1.
The provisions of this Rule shall apply to any person who directly or
indirectly
acquires the beneficial ownership of more than five percent (5%) or
such
lesser per centum as the Commission may prescribe, of any class of
equity
securities of a company that satisfies the requirements of Subsection
17.2
of the Code.
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2.
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.
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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 percent
(5%),
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 BSP;
c.
An insurance company subject to the supervision of the Insurance
Commission;
d.
An investment house registered under the Investment Houses Law;
e.
An investment company registered under the Investment Company Act;
f.
A pension plan subject to regulation and supervision by the BIR and/or
the Insurance Commission; or
g.
A group where all of the members are persons specified above, and
iii.
such person has promptly notified any other person on whose behalf it
holds,
on a discretionary basis, securities exceeding five percent (5%) of the
class, of any acquisition or transaction on behalf of such other person
which might be reportable by that person under Section 18.1(a) of the
Code.
B.
Any person who has reported an acquisition of securities on SEC Form
18-AS
but thereafter ceases to be a person specified in paragraph 3(A)(i) or
3(A)(ii) (a) through (g) of this Rule shall file within three (3)
business
days thereafter a sworn statement on SEC Form 18-A in the event such
person
is a beneficial owner at that time of more than five percent (5%) of
the
class of equity securities.
4.
A person, in determining the amount of outstanding securities of a
class
of equity securities, may rely upon information set forth in the
issuer’s
most recent quarterly or annual report, and any current report
subsequent
thereto unless he knows or has reason to believe that the information
contained
therein is inaccurate.
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5.
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;
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B.
A person engaged in the business of an investment house who acquires
his
securities through his participation in good faith in a firm commitment
underwriting shall not be deemed to be the beneficial owner of such
securities
until the expiration of six (6) months after the date of such
acquisition;
and
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C.
When two (2) or more persons agree to act together for the purpose of
acquiring,
holding, voting or disposing of equity securities of an issuer, the
group
formed thereby shall be deemed to have acquired beneficial ownership,
for
purposes of Section 18 of the Code, as of the date of such agreement,
of
all equity securities of that issuer beneficially owned by such persons.
SRC
Rule 19 – Tender Offers
[formerly,
SRC Rule 19.1]
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1.
Definitions
A.
Affiliate means any person, controlling, controlled by, or under common
control with the issuer.
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B.
Beneficial owner shall have the same meaning as set forth in SRC Rule 3.
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C.
Bidder means any person who makes a tender offer or on whose behalf a
tender
offer is made.
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D.
Commencement means the date a tender offer is first published, sent or
given to security holders.
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E.
Issuer means any issuer subject to reporting obligations under Section
17.2 of the Code.
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F.
Issuer Tender Offer means a publicly announced intention by an issuer
to
reacquire any of its own class of equity securities, or by an affiliate
of such issuer to acquire such securities.
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G.
Security holders mean holders of record and beneficial owners of
securities
that are the subject of a tender offer.
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H.
Target company means any issuer of securities that are sought by a
bidder
pursuant to tender offer.
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I.
Tender offer means a publicly announced intention by a person acting
alone
or in concert with other persons (hereinafter referred to as “person”)
to acquire equity securities of a public company as defined in SRC Rule
3.
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J.
Tender offer materials mean: (i) the bidder’s formal offer, including
all
the material terms and conditions of the tender offer and all
amendments
thereto; (ii) the related transmittal letter (whereby securities of the
target company which are sought in the tender offer may be transmitted
to the bidder or its depository) and all amendments thereto; and (iii)
press releases, advertisements, letters and other documents published
by
the bidder or sent or given by the bidder to security holders which,
directly
or indirectly, solicit, invite or request tenders of the securities
being
sought in the tender offer.
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K.
Termination means the date after which securities may not be tendered
pursuant
to the tender offer.
2.
Mandatory tender offers
A.
Any person or group of persons acting in concert, who intends to
acquire
thirty five percent (35%)1 or more of equity shares in a public company
shall disclose such intention and contemporaneously make a tender offer
for the percent sought to all holders of such class, subject to
paragraph
(9)(E) of this Rule.
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In
the event that the tender offer is oversubscribed, the aggregate amount
of securities to be acquired at the close of such tender offer shall be
proportionately distributed across both selling shareholder with whom
the
acquirer may have been in private negotiations and minority
shareholders.
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B.
Any person or group of persons acting in concert, who intends to
acquire
thirty five percent (35%)1 or more of equity shares in a public company
in one or more transactions within a period of twelve (12) months,
shall
be required to make a tender offer to all holders of such class for the
number of shares so acquired within the said period.
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C.
If any acquisition of even less than thirty five percent (35%) would
result
in ownership of over fifty one percent (51%) of the total outstanding
equity
securities of a public company, the acquirer shall be required to make
a tender offer under this Rule for all the outstanding equity
securities
to all remaining stockholders of the said company at a price supported
by a fairness opinion provided by an independent financial advisor or
equivalent
third party. The acquirer in such a tender offer shall be
required
to accept any and all securities thus tendered.
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D.
In any transaction covered by this Rule, the sale of the shares
pursuant
to the private transaction shall not be completed prior to the closing
and completion of the tender offer. Transactions with any of the
seller/s of significant blocks of shares with whom the acquirers may
have
been in private negotiations shall close at the same time and upon the
same terms as the tender offer made to the public under this
Rule.
For paragraph (2)(B), the last sale meeting the threshold shall not be
consummated until the closing and completion of the tender offer.
3.
Exempt from Mandatory Tender Offer Requirement
A.
The mandatory tender offer requirement shall not apply to the following:chanroblesvirtuallawlibrary
i.
any purchase of shares from the unissued capital stock provided that
the
acquisition will not result to a fifty percent (50%) or more ownership
of shares by the purchaser;
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ii.
any purchase of shares from an increase in authorized capital stock;
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iii.
purchase in connection with foreclosure proceedings involving a duly
constituted
pledge or security arrangement where the acquisition is made by the
debtor
or creditor;
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iv.
purchases in connection with privatization undertaken by the government
of the Philippines;
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v.
purchases in connection with corporate rehabilitation under court
supervision;
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vi.
purchases through an open market at the prevailing market price;
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vii.
merger or consolidation.
B.
Purchasers of shares in the foregoing transactions shall, however,
comply
with the disclosure and other obligations under SRC Rule 18.1 and SRC
Rule
23.
4.
Tender Offer by an Issuer/Buy Back
The
thresholds of fifteen percent (15%) or more for a single acquisition or
thirty percent (30%) for creeping acquisition as provided for in
Section
19 of the Code are increased to thirty five percent (35%), pending the
passage of the proposed amendments to the SRC.
A.
A reacquisition or repurchase by an issuer of its own securities shall
only be made if such issuer has unrestricted retained earnings in its
books
to cover the amount of shares to be purchased, and the same is pursuant
to any of the following purposes:chanroblesvirtuallawlibrary
i.
to implement a stock option or stock purchase plan;
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ii.
to meet short-term obligations which can be settled by the re-issuance
of the repurchased shares;
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iii.
to pay dissenting or withdrawing stockholders entitled to payment for
their
shares under the Corporation
Code;
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iv.
such other legitimate corporate purpose/s.
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In
case of acquisition pursuant to subparagraph (i) or (ii) above, the
same
may be accounted for as “Investment in Marketable Securities”, in
accordance
with International Accounting Standards.
B
Any issuer or any of its affiliates which intend to reacquire its own
securities
through active and widespread solicitation from the stockholders in
general
and in substantial amount of its shares, shall comply with disclosure
and
procedural requirements set forth under subparagraphs (C) and (D)
below,
and the preceding provisions of this Rule.
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C.
If an issuer or an affiliate publishes, sends or disseminates its
tender
offer to security holders by means of a summary publication in the
manner
prescribed in this Rule, the summary publication shall disclose only
the
following information:chanroblesvirtuallawlibrary
i.
The identity of the issuer or affiliate making the tender offer;
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ii.
The amount and class of securities being sought and the price being
offered;
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iii.
The information required by paragraph 8 of this Rule;
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iv.
A statement of the purpose of the issuer tender offer; and
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v.
The appropriate instruction for security holders on how to obtain
promptly,
at the expense of the issuer or affiliate making the issuer tender
offer,
the information required by paragraph 7 of the Rule.
D.
Until the expiration of at least ten (10) business days after the date
of termination of the issuer tender offer, neither the issuer nor any
affiliate
shall make any repurchase, otherwise than pursuant to the tender offer
of:chanroblesvirtuallawlibrary
i.
Any security which is the subject of the issuer tender offer, or any
security
of the same class and series, or any right to repurchase such
securities;
and
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ii.
In the case of an issuer tender offer which is an exchange offer,
any security being offered pursuant to the exchange offer, or any
security
of the same class and series, or any right to repurchase any such
security.
E.
This rule shall not apply to:chanroblesvirtuallawlibrary
i.
Calls or redemption of any security in accordance with the terms and
conditions
of its governing instruments;
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ii.
Offers to repurchase securities evidenced by a certificate, order form
or similar document which represents a fractional interest in a share
of
stock or similar security.
5.
Any person making a tender offer shall make an announcement of his
intention
in a newspaper of general circulation, prior to the commencement of the
offer; Provided, however, that such announcement shall not be made
until
the bidder has the resources to implement the offer in full. A copy of
said notice shall be submitted to the Commission on the date of
publication
thereof.
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6.
Filing Requirements
A.
No bidder shall make a tender offer unless at least two (2) business
days
prior to the date of the commencement of the tender offer, such bidder:chanroblesvirtuallawlibrary
i.
Files with the Commission copies of SEC Form 19-1, including all
exhibits
thereto, with the prescribed filing fees; and
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ii.
Hand delivers a copy of such SEC Form 19-1, including all exhibits
thereto
to the target company at its principal executive office and to each
Exchange
where such class of the target company’s securities are listed for
trading.
B.
The bidder shall file with the Commission copies of any additional
tender
offer materials as exhibit to SEC Form 19-1 and, if a material change
occurs
in the information set forth in such SEC Form, copies of an amendment
to
such form. Copies of such additional tender offer materials and
amendments
shall be hand delivered to the target company and to any Exchange as
required
above.
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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 under paragraph 9 of this Rule, a report containing the
following
information:chanroblesvirtuallawlibrary
i.
The identity of the bidder including his/its present principal
occupation;
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ii.
The identity of the target company;
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iii.
The amount of class of securities being sought and the type and amount
of consideration being offered therefor;
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iv.
The scheduled expiration date of the tender offer, whether the tender
offer
may be extended and, if so, the procedures for extension of the tender
offer;
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v.
The exact dates when security holders who deposit their securities will
have the right to withdraw their securities pursuant to this Rule and
the
manner in which shares will be accepted for payment and in which
withdrawal
may be effected;
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vi.
If the tender offer is for less than all of the securities of the class
and the bidder is not obligated to purchase all securities tendered,
the
exact date of the period during which securities will be accepted on a
pro rata basis under this Rule and the present intention or plan of the
bidder with respect to the tender offer in the event of an
oversubscription
by security holders;
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vii.
The confirmation by the bidder’s financial adviser or another
appropriate
third party that resources available to the bidder are sufficient to
satisfy
full acceptance of the offer; and
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viii.
The information included in SEC Form 19-1.
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 Requirements
A.
A bidder or an issuer shall disseminate the tender offer by complying
fully
with one of the following methods of dissemination:chanroblesvirtuallawlibrary
i.
Long Form Publication. The bidder shall publish in two (2) newspapers
of
general circulation in the Philippines on the date of commencement of
the
tender offer and for two (2) consecutive days thereafter the
information
required by paragraph 7 (A) of this Rule; or
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ii.
Summary Publication. The bidder shall publish in two (2) newspapers of
general circulation in the Philippines on the date of commencement of
the
tender offer and for two (2) consecutive days thereafter the
information
required by paragraph 7(A)(i) through (viii) of this Rule, including
appropriate
instructions for security holders on how to obtain promptly, at the
expense
of the bidder, the information included in SEC Form 19-1, and furnish
promptly
a copy of such form to any security holder who requests a copy of such
information.
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.
Period and 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 the intention to acquire is publicly announced; or
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ii.
At least ten (10) business days from the date the notice of a change in
the percentage of the class of securities being sought or in the
consideration
offered is first published, sent or given to security holders.
B.
Where a mandatory tender offer is required, the bidder is compelled to
offer the highest price paid by him for such shares during the past six
(6) months. Where the offer involves payment by transfer or allotment
of
securities, such securities must be valued on an equitable basis.
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C.
In case of a tender offer other than by an issuer, a target company
shall
not engage in any of the following transactions during the course of a
tender offer, or before the commencement thereof if its board has
reason
to believe that an offer might be imminent, except if such transaction
is in pursuance of a contract entered into earlier, or with the
approval
of shareholders in a general meeting or, where special circumstances
exist,
Commission approval has been obtained:chanroblesvirtuallawlibrary
i.
Issue any authorized but unissued shares;
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ii.
Issue or grant options in respect to any unissued shares;
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iii.
Create or issue, or permit the creation or issue of, any securities
carrying
rights of conversion into, or subscription for, shares;
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iv.
Sell, dispose of or acquire, or agree to acquire, any asset, the value
of which amounts to five percent (5%) or more of the total value of
assets
prior to acquisition; or
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v.
Enter into contracts otherwise done in the ordinary course of business.
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
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ii.
If not yet accepted for payment, after the expiration of sixty (60)
business
days from the commencement of the tender offer.
E.
If the tender offer shall be for less than the total outstanding
securities
of a class but a greater number of securities is tendered pursuant
thereto,
the bidder shall be bound to take up and pay for the securities on a
pro
rata basis, disregarding fractions, according to the number of
securities
tendered by each security holder during the period such offer remains
open.
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F.
In the event the bidder in a tender offer shall increase the
consideration
offered after the tender offer has commenced, such bidder shall pay
such
increased consideration to all security holders whose tendered
securities
are accepted for payment by such bidder, whether or not the securities
were tendered prior to the variation of the tender offer’s terms.
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G.
The bidder in a tender offer shall either pay the consideration
offered,
or return the tendered securities, not later than ten (10) business
days
after the termination or the withdrawal of the tender offer.
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H.
No tender offer may be made unless:chanroblesvirtuallawlibrary
i.
The tender offer shall be open to all security holders of the class of
securities subject to the tender offer; and
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ii.
The consideration paid to any security holder pursuant to the tender
offer
shall be the highest consideration paid to any other security holder
during
such tender offer.
I.
The bidder in a tender offer shall not extend the length of a tender
offer
without prior clearance from the Commission and without issuing a
notice
of such extension by press release or other public announcement, which
notice shall include disclosure of the appropriate number of securities
deposited to date and shall be issued no later than the scheduled
original
expiration date of the offer.
10.
Transactions on the Basis of Material, Non-Public Information
If
a person shall become aware of a potential tender offer before the
tender
offer has been publicly announced, such person shall not buy or sell,
directly
or indirectly, the securities of the target company until the tender
offer
shall have been publicly announced. Such buying or selling shall
constitute
insider trading under Section 27.4 of the Code.
11.
Withdrawal/Lapse of Tender Offer
Except
with the consent of the Commission, where an offer has been announced
but
has not become unconditional in all respects and has been withdrawn or
lapsed, neither the bidder nor any person who acted in concert with it
in the course of the offer may, within six (6) months from the date on
which such offer has been withdrawn or lapsed, announce an offer for
the
target company nor acquire any securities of the target company
which
would require such person to make a mandatory tender offer under this
Rule
and Section 19.1 of the Code.
12.
Prohibited practices
It
shall be a fraudulent, deceptive or manipulative act or practice, in
connection
with any tender offer:chanroblesvirtuallawlibrary
A.
to employ any device, scheme or artifice to defraud any person;
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B.
to make any untrue statement of a material fact or to omit to state a
material
fact necessary in order to make the statements made, in the light of
the
circumstances under which they were made, not misleading; or
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C.
to engage in any act, practice or course of business which
operates
or would operate as a fraud or deceit upon any person.
13.
Violation
If
there shall be violation of this Rule by pursuing a purchase of equity
shares of a public company at threshold amounts without the required
tender
offer, the Commission, upon complaint, may nullify the said purchase
and
direct the holding of a tender offer. This shall be without prejudice
to
the imposition of other sanctions under the Code.
SRC
Rule 20 – Disclosures to Stockholders Prior to Meeting
(formerly,
SRC Rule 20 – The Proxy Rule)
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virtual law library
1.
Applicability of SRC Rule 20
For
the purpose of holding any stockholders’ meeting, the provisions of
this
Rule shall apply to any corporation enumerated in Section 17.2 that is
subject to the reporting requirements of Section 17 of the Code and to
any person who shall solicit votes for a stockholders’ meeting of a
particular
corporation.
2.
Definitions
A.
As used in this Rule and SEC Form 20-IS, the following terms shall have
the following meaning:chanroblesvirtuallawlibrary
i.
Employee Benefit Plan means any purchase, savings, option, bonus,
profit
sharing, incentive, pension or similar plan primarily for employees,
directors,
trustees or officers.
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ii.
Entity that exercises fiduciary powers means any entity that holds
securities
in nominee name or otherwise on behalf of a beneficial owner.
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iii.
Information statement means the statement required by this Rule.
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iv.
Proxy includes every proxy, consent or authorization within the meaning
of Section 20 of the Code.
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v.
Record date means the date on which the record holders of securities
entitled
to vote at the meeting in person or by written consent or authorization
shall be determined.
B.
Solicitation
i.
The terms solicit and solicitation shall include:chanroblesvirtuallawlibrary
a.
any request for a proxy or authorization;
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b.
any request to execute or not to execute, or to revoke, a proxy or
authorization;
or
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c.
the furnishing of a form of proxy or other communication to security
holders
under a circumstance reasonably calculated to result in the
procurement,
withholding or revocation of a proxy.
ii.
The terms shall not apply to:chanroblesvirtuallawlibrary
a.
the performance by any person of ministerial acts on behalf of a person
soliciting a proxy; or
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b.
any solicitation made otherwise than on behalf of the registrant where
the total number of persons solicited is not more than nineteen (19).
3.
Obligations of a Registrant Proposing to Hold a Stockholders’ Meeting
A.
In connection with an annual or other meetings of stockholders, the
registrant
shall transmit a written information statement and proxy form (in case
of a proxy solicitation) containing the information specified under SEC
Form 20-IS, and a management report under paragraph (4) of this Rule,
if
applicable, to every security holder of the class that is entitled to
vote.
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B.
The proxy form shall be prepared in accordance with paragraph (5)
hereof.
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C.
Filing Requirements
i.
Preliminary copies of the information statement and proxy form shall be
filed with the Commission at least ten (10) business days prior to the
date definitive copies of such material shall be first sent or given to
security holders.
The
registrant shall contact the Commission for any comment on the
preliminary
materials.
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ii.
At the time of filing the preliminary information material, the
registrant
shall pay the Commission the fee of Five Thousand Pesos (P5,000.00) or
such other amount as the Commission may prescribe.
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iii.
Copies of the definitive information statement, proxy form and all
other
materials (if any), shall be filed with the Commission prior to the
date
such material/s shall be first sent or given to security holders. One
(1)
copy of such material shall at the same time be filed with, or mailed
for
filing to, any Exchange in which any class of securities of the
registrant
is listed for trading.
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iv.
The information statement, proxy form and the management report under
paragraph
(4) of this Rule, if applicable, shall be distributed to security
holders
at least fifteen (15) business days from the date of the stockholders’
meeting.
D.
If the solicitation or distribution shall be made personally in whole
or
in part, copies of all written instructions or other materials which
shall
discuss or review, or comment upon the merits of, any matter to be
acted
upon and which shall be furnished by the persons making the actual
solicitation
for their use directly or indirectly in connection with the
solicitation
shall be filed with, or mailed for filing to, the Commission by the
person
on whose behalf the solicitation shall be made not later than the date
any such material is first sent or given to such individuals.
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E.
If any information statement or form of proxy or other materials (if
applicable)
filed pursuant to this Rule shall be amended or revised, copies of such
amended or revised material shall be filed pursuant to this Rule and
shall
be marked to indicate clearly and precisely the changes effected
therein.
4.
Report to be Furnished to the Stockholders
A.
If the information statement shall relate to an annual (or special
meeting
in lieu of the annual) meeting of stockholders at which directors shall
be elected, it shall be accompanied or preceded by a management report
to such stockholders containing the following:chanroblesvirtuallawlibrary
i.
Consolidated audited financial statements and interim unaudited
financial
statements (if applicable), as required by SRC Rule 68, as amended;
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ii.
Information concerning disagreements with accountants on accounting and
financial disclosure required by Part III(B) of “Annex C”;
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iii.
A management’s discussion and analysis or plan of operation required by
Part III(A) of “Annex C”;
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iv.
A brief description of the general nature and scope of the business of
the registrant and its subsidiaries;
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v.
Identity of each of the registrant's directors and executive officers
including
their principal occupation or employment, name and principal business
of
any organization by which such persons are employed;
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vi.
The market price of and dividends on the registrant’s common shares
required
by Part II (A) of “Annex C”;
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vii.
Discussion on compliance with leading practices on corporate governance
as required by Part V of Annex “C”; and
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viii.
An undertaking in bold face prominent type to provide without charge to
each person solicited, on the written request of any such person, a
copy
of the registrant's annual report on SEC Form 17-A and the name and
address
of the person to whom such a written request is to be directed. At the
discretion of management, a charge may be made for exhibits, provided
such
charge is limited to reasonable expenses incurred by the registrant in
furnishing such exhibits.
B.
Any information that is required to be disclosed in the information
statement,
which is also contained in the registrant’s annual report, need not be
provided in the said statement. Reference to the page of the
annual
report shall be made.
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C.
In case of a special meeting where the registrant has already
distributed
to its stockholders its annual report on SEC Form 17-A for the fiscal
year
preceding its annual stockholders’ meeting date, it shall no longer be
required to comply with paragraph (A) above except with respect to the
disclosure of updated financial and non-financial information.
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D.
Copies of the management report for distribution to security holders
shall
be filed with the Commission prior to the date on which such report
shall
be first sent or given to security holders.
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E.
The distribution of management report to security holders is deemed to
satisfy Section 75 of the Corporation
Code of the Philippines with respect to presenting a financial
report
of operations including financial statements to stockholders at their
regular
meeting.
5.
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;
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ii.
provide a specifically designated blank space for dating the proxy card;
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iii.
identify clearly and impartially each separate matter intended to be
acted
upon;
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iv.
be in writing, signed by the stockholder or his duly authorized
representative;
and
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v.
be filed with the Corporate Secretary before the scheduled meeting.
B.
Means shall be provided in the proxy form whereby the person solicited
is afforded an opportunity to specify by boxes a choice between
approval
or disapproval of, or abstention with respect to, each separate matter
referred to therein as intended to be acted upon, other than election
to
office. A proxy may confer discretionary authority with respect
to
matters as to which a choice is not specified by the security holder
provided
that the form of proxy states in bold-face type how it is intended to
vote
the shares represented by the proxy in each such case.
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C.
A proxy form which provides for the election of directors shall set
forth
the names of persons nominated for election as directors. Such
form
of proxy shall clearly provide any of the following means for security
holders to withhold authority to vote for each nominee:chanroblesvirtuallawlibrary
i.
a box opposite the name of each nominee which may be marked to indicate
that authority to vote for such nominee is withheld;
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ii.
an instruction in bold-face type which indicates that the security
holder
may withhold authority to vote for any nominee by lining through or
otherwise
striking out the name of the nominee; or
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iii.
designated blank spaces in which the shareholder may enter the names of
nominees with respect to whom the shareholder chooses to withhold
authority
to vote.
D.
Any proxy form which is executed by the security holder in such manner
as not to withhold authority to vote for the election of any nominee
shall
be deemed to grant such authority, provided that the proxy form so
states
in prominent bold-face type.
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E.
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 information statement or proxy form;
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ii.
Approval of the minutes of the prior meeting;
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iii.
The election of any person to any office for which a bona fide nominee
is named in the information statement and such nominee is unable to
serve
or for good cause will not serve; or
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iv.
Matters incident to the conduct of the meeting.
F.
No proxy shall confer authority:chanroblesvirtuallawlibrary
i.
to vote for any person to any office for which a bona fide nominee is
not
named in the information statement or in any material attached thereto;
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ii.
to vote with respect to more than one meeting (and any adjournment
thereof),
unless a specific statement is made in the information statement and
form
of proxy that the proxy is valid for more than one meeting.
Provided,
however, that no proxy shall be valid and effective for a period longer
than five (5) years from the date of the proxy; or
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iii.
to consent to or authorize any action other than the action proposed to
be taken in the information statement or matters referred to above.
G.
The proxy form shall provide, subject to reasonable specified
conditions,
that the shares represented by the proxy will be voted and that, where
the person solicited specifies by means of a ballot provided pursuant
to
this Rule a choice with respect to any matter to be acted upon, the
shares
will be voted in accordance with the specifications so made.
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H.
Prohibition of Certain Solicitations
No
person making a solicitation which is subject to this Rule shall
solicit:chanroblesvirtuallawlibrary
i.
any undated or post-dated proxy; or
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ii.
any proxy which provides that it shall be deemed to be dated as of any
date subsequent to the date on which it is signed by the security
holder.
6.
Obligations of Registrant to Provide a List of, or Mail Meeting
Material/s
to Security Holders
A.
When a record or beneficial holder of securities of the class entitled
to vote at the meeting makes a written request to be provided with a
list
of stockholders or to mail the meeting material, the registrant shall
grant
the request either by providing the list or mailing the materials to
the
requesting stockholder.
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B.
If the registrant elects to mail the materials 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 materials will be sent;
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ii.
advise the requesting stockholder of the estimated cost of mailing an
information
statement, form of proxy or other forms of communication to such
holders;
and
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iii.
mail the materials to the stockholders with reasonable promptness.
7.
Providing Copies of Material for Certain Beneficial Owners
A.
If the registrant or the solicitor knows that securities of any class
entitled
to vote at a meeting with respect to which the SEC Form 20-IS being
furnished
are held of record by a broker, dealer, investment house, voting
trustee,
bank, association, or other entity that exercises fiduciary powers in
nominee
name or otherwise, the registrant or the solicitor shall by first class
mail or other equally prompt means, inquire of such record holders at
least
twenty (20) business days prior to the record date of the meeting: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
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ii.
in the case of an annual (or special meeting in lieu of the annual)
meeting
at which directors are to be elected, the number of copies of the
management
report to security holders necessary to supply such report to
beneficial
owners to whom such reports are to be distributed by such record holder.
B.
The registrant or the solicitor shall supply, in a timely manner, each
record holder of whom the inquiries required by paragraph 7(A) of this
Rule are made with copies of the information statement and/or the
management
report to security holders in such quantities, assembled in such form
and
at such place(s), as the record holder may reasonably request in order
to send such material to each beneficial owner of securities who is to
be furnished with such material by the record holder.
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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.
8.
Special Provisions Applicable to Solicitation of Votes Other Than by
the
Registrant
A.
This paragraph applies to any solicitation by any person or group of
persons
other than by the registrant, with respect to any item/s to be taken up
in an annual or special stockholders’ meeting.
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B.
Notwithstanding the provisions of paragraph 3 of this Rule, a
solicitation
subject to this Rule may be made without furnishing the security
holders
with a written information statement on SEC Form 20-IS, provided that:chanroblesvirtuallawlibrary
i.
The following information shall be set forth in the communication which
shall be attached and distributed with the proxy form prepared in
accordance
with paragraph (5) of this Rule:chanroblesvirtuallawlibrary
a.
The name of the solicitor and person who shall shoulder the expenses,
and
the mode of solicitation;
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b.
In case of election of directors, the name/s of nominee/s including his
business experience for the past five (5) years, involvement in legal
proceedings,
family relationship with any other nominee, incumbent director or
officer,
and his interest, direct or indirect, by security holdings or otherwise;
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c.
A discussion of the reason/s for the solicitation of votes against the
proposed action/s by the registrant;
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d.
A brief description of any substantial interest, direct or indirect, by
security holdings or otherwise, of each solicitor or participant to the
solicitation, in any matter to be acted upon at the meeting and include
with respect to each solicitor the following information, or a fair and
accurate summary thereof:chanroblesvirtuallawlibrary
1.
Name and business address of the solicitor;
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2.
Present principal occupation or employment and the name, principal
business
and address of any corporation or other organization in which such
employment
is carried on;
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3.
Amount of each class of securities of the registrant which the
solicitor
owns beneficially, directly or indirectly;
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4.
Amount of each class of securities of the registrant which the
solicitor
owns of record but not beneficially;
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5.
All securities of the registrant purchased or sold by the solicitor
within
the past two years, the dates on which they were purchased or sold and
the amount purchased or sold on each date;
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6.
If the solicitor is, or was within the past year, a party to any
contract,
arrangement or understanding with any person with respect to any
security
of the registrant, including, but not limited to joint ventures, loan
or
option arrangements, puts or calls, guarantees against loss or
guarantees
of profit, division of losses or profits, or the giving or withholding
of proxies. If so, name the parties to such contracts,
arrangements
or understandings and give the details thereof; and
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7.
Amount of each class of securities of any parent or subsidiary of the
registrant
which the solicitor owns beneficially, directly or indirectly.
e.
If specially engaged employees, representatives or other persons have
been
or are to be employed to solicit security holders, the (1) material
features
of any contract or arrangement for such solicitation and the identity
of
the parties, (2) cost or anticipated cost thereof, and (3) approximate
number of such employees or employees of any other person (naming such
other person) who will solicit security holders; and
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f.
The total amount estimated to be spent and the total expenditures in
furtherance
of, or in connection with the solicitation of security holders.
ii.
All matters to be taken up in the meeting shall be considered and
reflected
in the proxy form and its attachments.
C.
Copies of the proxy form with its attachments shall be filed with the
Commission
at least fifteen (15) business days prior to the date such materials
shall
be distributed, sent or given to any security holder. The
solicitor
shall contact the Commission for any comment on the said materials
before
said distribution.
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D.
A filing fee of Two Thousand Pesos (P2,000.00) or such amount as the
Commission
may determine, for each proxy solicitation other than by the
registrant,
shall be paid to the Commission.
9.
False or Misleading Statements
a.
No information subject to this Rule shall be made containing any
statement
which, at the time and in the light of the circumstances under which it
is made, is false or misleading with respect to any material fact, or
which
omits to state any material fact necessary in order to make the
statements
therein not false or misleading or necessary to correct any statement
in
any earlier communication with respect to the solicitation of a proxy
for
the same meeting or subject matter which has become false or misleading.
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b.
The fact that a statement or other material has been filed with or
examined
by the Commission shall not be deemed a finding by the Commission that
such material is accurate or complete or not false or misleading, or
that
the Commission has passed upon the merits of or approved any statement
contained therein or any matter to be acted upon by security
holders.
No representation contrary to the foregoing shall be made.
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
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ii.
in the case of an annual (or special meeting in lieu of the annual)
meeting
at which directors are to be elected, the number of copies of the
management
report to security holders necessary to supply such report to
beneficial
owners to whom such reports are to be distributed by such record holder.
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 information statement, proxy form (if applicable), other proxy
soliciting
material, and/or the management report to security holders, in such
quantities,
assembled in such form and at such place(s), as the record holder may
reasonably
request in order to send such material to each beneficial owner of
securities
who is to be furnished with such material by the record holder.
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c.
Upon the request of any record holder that is supplied with the said
documents
pursuant to this paragraph 10(b), the registrant shall reimburse the
record
holder for its reasonable expenses in completing the mailing of such
material
to beneficial owners.
11.
Other Procedural Requirements
a.
Annual Meeting
i.
Regular meeting of stockholders for the election of Directors and
Officers
of the corporation shall be held annually on the date fixed in the
by-laws,
or if not so fixed, on any date in April as determined by the Board of
Directors. If the date of the annual meeting falls on a legal holiday,
the annual meeting shall be held in the next succeeding business day
which
is not a legal holiday.
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ii.
The annual stockholders’ meeting shall be held in the city or
municipality
where the principal office of the corporation is located, and if
practicable
in the principal office of the corporation. Metro Manila shall, for
purposes
of said meeting, be considered a city or municipality.
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iii.
Written notice, stating the date, time and place of the annual meeting
shall be sent to all stockholders of record at least two (2) weeks
prior
to the scheduled annual stockholders’ meeting, unless a different
period
is required by the bylaws. The distribution to stockholders of
information
statement (SEC Form 20-IS) within the prescribed period under this Rule
shall be sufficient compliance with the notice requirement.
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iv.
If for any justifiable and valid reason, the annual stockholders’
meeting
has to be postponed, the corporation shall notify the Commission in
writing
of such postponement within ten (10) days from the date of such
postponement.
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v.
No postponement of annual stockholders’ meeting shall be allowed except
for justifiable reasons to be stated in writing signed under oath by
the
President or Secretary of the corporation.
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vi.
The Commission en-banc may, motu propio, or upon the written request of
any stockholder, direct the calling of an annual stockholders’ meeting
under its supervision, if the corporation fails or refuses to call said
meeting for any justifiable reason.
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vii.
The Commission may send its representatives/observers to stockholders’
meetings, under such terms and conditions it deems appropriate.
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viii.
Unless otherwise provided by the by-laws, the stock and transfer book
shall
be closed at least twenty (20) days before the scheduled date of the
annual
stockholders’ meeting to enable the corporation to prepare a list of
stockholders
entitled to vote.
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ix.
A copy of the list of stockholders entitled to vote shall be made
available
at the company’s principal office at least fifteen (15) days prior to
the
date of the annual stockholders’ meeting and the corporation shall
furnish
a copy thereof to any stockholder who may request the same at the
expense
of said stockholder.
b.
Proxy
i.
The corporate by-laws shall be controlling in determining the proper
procedure
to be followed in the execution and acceptance of proxies, provided
that
the minimum required formalities prescribed under Section 58 of the
Corporation
Code and SRC Rule 20 shall be complied with.
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ii.
The notice of stockholders’ meeting shall also set the date, time and
place
of the validation of proxies, which in no case shall be less than five
(5) days prior to the annual stockholders’ meeting to be held. The
presence
of any stockholder who may wish to be present in person or through
counsel
shall be allowed.
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iii.
Failure to affix documentary stamps shall not affect the validity of
the
proxy. The only adverse effect of such failure is that the same cannot
be recorded as a public document and cannot be admitted or used as
evidence
in Court until the required documentary stamp is affixed and cancelled.
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iv.
Unless required by the corporate by-laws, a proxy need not be notarized.
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v.
If the name of the proxy is left in blank, the person to whom it is
given
or the issuer corporation receiving the proxy is at liberty to fill in
any name he/it chooses.
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vi.
If a duly accomplished and executed proxy is undated, the postmark or,
if not mailed, its actual date of presentation shall be considered.
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vii.
A proxy executed by a corporation shall be in the form of a board
resolution
duly certified by the Corporate Secretary or in a proxy form executed
by
a duly authorized corporate officer accompanied by a Corporate
Secretary's
certificate quoting the board resolution authorizing the said corporate
officer to execute the said proxy.
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viii.
If the by-laws provide for a cut-off date for the submission of proxies
the same should be strictly followed. In the absence of a provision in
the by-laws fixing a deadline, proxies shall be submitted not later
than
ten (10) days prior to the date of the stockholders meeting.
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ix.
Where the corporation receives more than one (1) proxy from the same
stockholder
and they are all undated, the postmark dates shall be considered. If
the
proxies are mailed on the same date, the one bearing the latest time of
day of postmark is counted. If the proxies are not mailed, then the
time
of their actual presentation is considered. That which is presented
last
will be recognized.
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x.
Where a proxy is given to two (2) or more persons in the alternative in
one instrument, the proxy designated as an alternate can only act as
proxy
in the event of non-attendance of the other designated person.
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xi.
Where the same stockholder gives two (2) or more proxies, the latest
one
given is to be deemed to revoke all former proxies.
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xii.
A proxy shall be valid only for the meeting for which it is intended.
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xiii.
Executors, administrators, receivers and other legal representatives
duly
appointed by the court may attend and vote on behalf of the
stockholders
without a need of any written proxy.
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xiv.
If the stockholder intends to designate several proxies, the number of
shares of stock to be represented by each proxy shall be specifically
indicated
in the proxy form. If some of the proxy forms do not indicate the
number
of shares, the total shareholdings of the stockholder shall be tallied
and the balance thereof, if any, shall be allotted to the holder of the
proxy form without the number of shares. If all are in blank, the
stocks
shall be distributed equally among the proxies. The number of persons
to
be designated as proxies may be limited by the By-laws.
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xv.
In case of shares of stock owned jointly by two (2) or more persons,
the
consent of all co-owners shall be necessary to appoint or revoke a
proxy.
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xvi.
For persons owning shares in an "and/or" capacity, any one of them may
appoint and revoke a proxy.
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xvii.
Proxies executed abroad shall be duly authenticated by the Philippine
Embassy
or Consular Office.
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xviii.
No member of the Stock Exchange and no broker/dealer shall give any
proxy,
consent or authorization, in respect of any security carried for the
account
of a customer to a person other than the customer, without the express
written authorization of such customer. The proxy executed by the
broker
shall be accompanied by a certification under oath stating that before
the proxy was given to the broker, he had duly obtained the written
consent
of the persons in whose account the shares are held.
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xix.
A proxy shall not be invalidated on the ground that the stockholder who
executed the same has no signature card on file with the Corporate
Secretary
or Transfer Agent, unless it can be shown that he/she had refused to
submit
the signature card despite written demand to that effect duly received
by the said stockholder at least ten (10) days before the annual
stockholders’
meeting and election.
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xx.
There shall be a presumption of regularity in the execution of proxies
and shall be accepted if they have the appearance of prima facie
authenticity
in the absence of a timely and valid challenge.
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xxi.
In the validation of proxies, a special committee of inspectors shall
be
designated or appointed by the Board of Directors which shall be
empowered
to pass on the validity of proxies. Any dispute that may arise
pertaining
thereto, shall be resolved by the Securities and Exchange Commission
upon
formal complaint filed by the aggrieved party, or by the SEC officer
supervising
the proxy validation process.
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xxii.
All issues relative to proxies including their validation shall be
resolved
prior to the canvassing of votes for purposes of determining a quorum.
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xxiii.
All shares which are subject of a case where ownership is at issue,
shall
be set aside for purposes of proxy validation unless there is a court
appointed
representative who shall then vote on said shares.
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xxiv.
Any violation of this Rule on Proxy shall be subject to the
administrative
sanctions provided for under Section 144 of the Corporation
Code and Section 54 of the Securities
Regulation Code, and shall render the proceedings null and void.
SRC
Rule 23 – Reports to be Filed by Directors, Officers and Principal
Stockholders
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1.
Every person who is directly or indirectly the beneficial owner of ten
percent (10%) or more of any class of any 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 securities of such
issuer of which he is the beneficial owner;
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B.
within ten (10) days after the close of each calendar month thereafter,
if there has been any change in such ownership during the month, file a
statement with the Commission, and with an Exchange if the security is
listed on that Exchange, on Form 23-B indicating his ownership at the
close
of the calendar month and such changes in his ownership as have
occurred
during that calendar month;
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C.
notify the Commission if his direct or indirect beneficial ownership of
securities falls below ten percent (10%), or if he ceases to be an
officer
or director of the issuer. After filing such notification, he
shall
no longer be required to file Form 23-B; and
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D.
Newly appointed officer who has no beneficial ownership over the shares
of the company shall notify the Commission of such fact within the
above-stated
reporting period, otherwise, the obligation to file SEC Form 23-A shall
accrue against him.
2.
In determining, whether a person is the beneficial owner, directly or
indirectly,
of more than ten percent (10%) of any class of any registered
security,
such class shall be deemed to consist of the amount of such class which
has been issued, regardless of whether any part of such amount is held
by or for the account of the issuer; except that for the purpose of
determining
the percentage of ownership of voting trust certificate or certificates
of deposit for securities, the class of voting trust certificate or
certificates
of deposit shall be deemed to consist of the entire amount of voting
trust
certificates or certificates of deposit issuable in respect of the
class
of securities which may be deposited under the voting trust agreement
or
deposit agreement in question, whether or not all of such class has
been
so deposited.
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3.
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.
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4.
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 interest.
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SRC
Rule 24.1(b)-1 – Manipulative Practices
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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.
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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.
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3.
In considering whether an order violates Section 24 of the Code, a
Broker
Dealer shall consider:chanroblesvirtuallawlibrary
i.
Whether the order or execution of the order, would materially alter the
market for, and/or the price of, the securities;
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ii.
The time the order is entered or any instructions concerning the time
of
entry of the order;
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iii.
Whether the person on whose behalf the order is placed, or another
person
who the Broker Dealer knows to be a related party of that person, may
have
an interest in creating a false or misleading appearance of active
trading
in any security or with respect to the market for, or the price of, any
security;
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iv.
Whether the order is accompanied by settlement, delivery or security
arrangements
which are unusual;
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v.
Whether the order appears to be part of a series of orders, which when
put together with the orders which appear to make up the series, the
order
or the series is unusual having regard to the matters referred to in
this
paragraph 3; and
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vi.
Whether there appears to be a legitimate commercial reason or basis in
placing the order, unrelated to an intention to create a false or
misleading
appearance of active trading in or with respect to the market for, or
price
of, any security.
Failure
to consider these factors shall raise a presumption that the
transaction/s
is/are manipulative.
4.
Set forth below are examples of prohibited conduct.
i.
Engaging in a series of transactions in securities that are reported
publicly
to give the impression of activity or price movement in a security
(e.g.
painting the tape);
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ii.
Buying and selling securities at the close of the market in an effort
to
alter the closing price of the security (marking the close);
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iii.
Engaging in transactions where both the buy and sell orders are entered
at the same time with the same price and quantity by different but
colluding
parties (improper matched orders);
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iv.
Engaging in buying activity at increasingly higher prices and then
selling
securities in the market at the higher prices (hype and dump) or vice
versa
(i.e. selling activity at lower prices and then buying at such lower
prices);
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v.
Engaging in transactions in which there is no genuine change in actual
ownership of a security (wash sales) taking into consideration internal
control systems adopted by the firms to prevent manipulative practices;
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vi.
Taking advantage of a shortage of securities in the market by
controlling
the demand side and exploiting market congestion during such shortages
in a way as to create artificial prices (squeezing the float);
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vii.
Disseminating false or misleading market information through media,
including
the internet, or any other means to move the price of a security in a
direction
that is favorable to a position held or a transaction; and
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viii.
Other types of prohibited conduct and/or manipulative practices which
include,
among others, the creation of temporary funds for the purpose of
engaging
in other manipulative practices.
5.
Obligations imposed on registered persons under this rule apply in
respect
of all orders, irrespective of the trading system used and whether
executed
or not.
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SRC
Rule 24.1(d) – Manipulation of Security Prices; Devices and
Practices
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1.
Advertisements and Communications with the Public
A.
All communications by Broker Dealers or associated persons or salesmen
of Broker Dealers (hereinafter “registered persons”), with the public
shall
be based on principles of fair dealing and good faith and should
provide
a sound basis for evaluating the facts in regard to any particular
security
or securities or type of security, industry discussed, or service
offered.
No material fact or qualification shall be omitted if the omission, in
the light of the context of the material presented, would cause the
advertising
or sales literature to be misleading.
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B.
Exaggerated, unwarranted or misleading statements or claims are
prohibited
in all public communications of registered persons. In preparing
such literature, it must be borne in mind by registered persons that
inherent
in investment are the risks of fluctuating prices and the uncertainty
of
dividends, rates of return and yield, and no registered person shall,
directly
or indirectly, publish, circulate or distribute any public
communication
that he knows, or had reason to know, contains any untrue statement of
a material fact or is otherwise false or misleading
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C.
Communications with the public shall not contain promises of specific
results,
exaggerated or unwarranted claims, or unwarranted superlatives,
unfounded
opinions for which there is no basis, or forecasts of future events
which
are unwarranted, or which are not clearly labeled as forecasts.
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D.
In judging whether a communication or a particular element of a
communication
may be misleading, several factors should be considered, including but
not limited to:chanroblesvirtuallawlibrary
i.
the
overall context in which the statement/s is/are made. A statement
made in one context may be misleading even though such a statement
could
be perfectly appropriate in another context. An essential test in
this regard is the balance of treatment of risks and potential benefits;
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ii.
the audience to which the communication is directed. Different
levels
of explanation or detail may be necessary depending on the audience to
which a communication is directed and the ability of the registered
person
given the nature of the media used, to restrict the audience
appropriately.
If the statements made in a communication would be applicable only to a
limited audience, or if additional information might be necessary for
other
audiences, it should be kept in mind that it is not always possible to
restrict the readership of a particular communication; and/or
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iii.
the clarity of the communication. A statement or disclosure made
in an unclear manner can result in a failure to understand the
statement,
or in a serious misunderstanding. A complex or overly technical
explanation
may worse cause even greater misunderstanding than too scant
information.
Likewise material disclosure relegated to legends or footnotes may not
generally enhance the reader's understanding of the communication.
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 that purports to report any transaction as a purchase or
sale
of any security unless he believes that such transaction was a
bona
fide purchase or sale of such security; or that it purports to
quote
the bid price or asked price for any security, unless he believes that
such quotation represents a bona fide bid for, or offer of, such
security.
3.
Payment to Influence Market Prices
No
Broker Dealer shall, directly or indirectly, give, permit to be given,
or offer to give, anything of value to any person for the purpose of
influencing
or rewarding the action of such person in connection with the
publication
or circulation in any newspaper, investment service, or similar
publication,
of any matter which has, or is intended to have, an effect upon the
market
price of any security, provided that this rule shall not be construed
to
apply to a matter which is clearly identifiable as paid advertising.
SRC
Rule 24.2-2 Short Sales
[new
provision]
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1.
Definition of Short Sale
The
term “short sale” shall mean any sale of a security which the seller
does
not own or any sale which is consummated by the delivery of a security
borrowed by, or for the account of the seller. A person shall be deemed
to own a security if: (1) he or his agent has title to it; (2) he
has purchased, or has entered into an unconditional contract, binding
on
both parties thereto, to purchase it and has not yet received it;
(3) he owns a security convertible into or exchangeable for it and has
tendered such security for conversion or exchange; (4) he has an option
to purchase or acquire it and has exercised such option; or (5) he has
rights or warrants to subscribe to it and has exercised such rights or
warrants provided, however, that a person shall be deemed to own
securities
only to the extent he has a net long position in such securities.
2.
Determination of Good Delivery
No
broker or dealer shall accept a long sale order from a customer unless
he has made a determination that the customer owns the security and
will
deliver in good deliverable form within three (3) business days of the
execution of the order. The determination must include a notation
on the order ticket at the time the order is taken which reflects the
conversation
with the customer as to the present location of the securities, whether
they are in good deliverable form, and the customer’s ability to make
delivery.
3.
Execution of Short Sale
No
broker or dealer shall use any facility of a securities exchange to
effect
a short sale of any security unless (1) at a price higher than the last
sale or (2) at the price of the sale if and only if that price is above
the next preceding different sale price on such day.
4.
Failure to Deliver
No
person shall, directly or indirectly, by the use of any facility of a
securities
exchange, effect a short sale in a security registered or listed on any
securities exchange, where the seller does not intend to make delivery
of the securities within the period specified in the contract.
Failure
on the part of the seller to make delivery on such date will be taken
by
the Commission as prima facie evidence of the lack of intention on his
part to make such delivery.
5.
Mandatory Close-Out
A
contract involving a short sale which has not resulted in a delivery by
the Broker Dealer within the settlement period must be closed by the
Broker
Dealer by purchasing for cash or guaranteed delivery securities of like
kind and quantity on the next business day after settlement date,
unless
such purchase cannot be effected within said period for justifiable
reasons
in which case, notification in writing shall be made with the Exchange
and the Commission
6.
Directors, Officers or Principal Stockholders
No
director, officer or principal stockholder of a corporation shall make
a short sale in securities of the corporation in which he is a
director,
officer or principal stockholder.
7.
Order for Short Sale
Upon
receiving an order to sell short, the same should be indicated on the
selling
order and throughout all the records pertinent to the sale. Prior
to acceptance of any short sale order, the broker or dealer shall
arrange
to borrow the securities to make delivery by settlement date.
8.
Exempt Transaction
This
rule notwithstanding, the Exchange may prohibit short selling in the
Exchange
indefinitely or for such period of time as it may deem necessary or
advisable
for the protection of investors, and the Commission may also prohibit
short
selling on any exchange as an emergency measure or whenever the same is
necessary or appropriate in the public interest or for the protection
of
investors.
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 – Regulation of Options Trading
[formerly,
SRC Rule 25.1 – Definition of Put, Call, Straddle and Option]
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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(d).
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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.
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3.
The terms put, call, straddle, option, or privilege shall not include
any
registered warrant, right or convertible security.
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SRC
Rule 26.3 – Fraudulent Transactions
[formerly,
SRC Rules 26.3-1 and 26.3-2]
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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, paragraph 9, provide such information to any person
who
does not need such information to fulfill his responsibilities under
the
Code.
2.
Prohibited Representations
It
shall be unlawful for any: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;
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B.
Broker Dealer to represent that the registration of the Broker Dealer
under
the Code, or the failure of the Commission to deny, suspend, or revoke
such registration, indicates in any way that the Commission has passed
upon or approved the financial standing, business, or conduct of such
Broker
Dealer, or the merits of any security or any transaction/s conducted
thereby;
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C.
Person to represent that a security is a particular type of security
when
such representation is inconsistent with a stated definition under the
Code or rules or regulations adopted thereunder, or internationally
accepted
practice.
D.
Person to represent that a security to be sold, transferred, pledged,
mortgaged,
encumbered, used for delivery, or any other purpose to another entity
or
itself has been legally authorized by the recorded owner when such
representation
is not true and documented in writing at the time and date it was used.
SRC
Rule 28.1 – Registration of Brokers and Dealers
[formerly
SRC Rules 28.1-1, 2, 3, 4, 5]
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1.
Registration of Broker Dealer
A.
A person applying for registration as a Broker Dealer under Section 28
shall indicate in the application form for registration, or in an
amendment
thereto:chanroblesvirtuallawlibrary
i.
Whether he is an Exchange Trading Participant or a Non-Exchange Broker
Dealer
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ii.
If an Exchange Trading Participant, whether it is a clearing trading
participant
or a non-clearing trading participant;
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iii.
If an Exchange Trading Participant, whether he shall engage in market
making
transactions;
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iv.
If a non-Exchange Broker Dealer, whether he is operating a seat for or
is using the trading rights of an Exchange member Trading Participant;
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v.
For both non-Exchange member Broker Dealer and Exchange Trading
Participant,
whether they shall deal only with proprietary shares, equity
securities,
or fixed income/debt securities, or they are registered/licensed as
government
securities eligible dealers (GSED).
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For
purposes of this section and subsequent provisions that refer to this
classification,
the following terms are used interchangeably and shall have the same
meaning:
(1) “Exchange member” with that of “Exchange Trading Participant;” and
(2) “Non-Exchange Member” with that of “Non-Exchange Broker
Dealer.”
B.
“Market making transactions” shall mean transactions in a particular
security/ies:chanroblesvirtuallawlibrary
i.
by a Broker Dealer which complies with the Commission and Exchange
rules
regarding its duty as a market maker;
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ii.
to ensure two way quotes, provide liquidity, and maintain a fair
and
orderly trading market therein.
C.
An applicant for registration as a Broker Dealer shall be solely
engaged
in the business of a Broker Dealer.
D.
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
i.
A continuing authorization for the Commission’s duly authorized
representative
to verify the applicant’s bank accounts. The authorization shall be for
all banks wherein accounts are maintained by the Broker Dealer and
shall
be continuous with registration by the Commission;
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ii.
Proof of compliance with paid up capital requirements pursuant to
Paragraph
1 (E) (v) of this rule;
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iii.
Certified True Copy of valid work permit of foreigners who are
employees
or officers of the applicant corporation duly issued by the Department
of Labor and Employment (DOLE) or any appropriate agency;
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iv.
Copies of identity cards/passports of the following:chanroblesvirtuallawlibrary
1.
Individual applicants (salesman/ associated person);
2.
Officers;
3.
Directors; and
4.
Persons who control more than ten percent (10%) of a class of voting
securities
of corporate applicants.
v.
Written supervision and control procedures, including procedures for
establishing
and maintaining a “Chinese Wall” pursuant to SRC 34.1, paragraph 2;
taking
into consideration the applicable requirements under the Anti-Money
Laundering
Act of 2001 (RA 9160, as amended) and the Code of Corporate Governance
(SEC Memorandum Circular No. 2, Series of 2002);
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vi.
A schedule of minimum commission charges as required by SRC Rule 30.2,
paragraph 5;
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vii.
Calculation of net capital requirements in accordance with paragraph
(E)
(ii) of this Rule and SRC Rule 49.1,paragraph 1 or any other
financial
ratio/measure which the Commission may in the future mandate;
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viii.
Certified True Copy of educational, professional/technical or other
academic
qualifications of Officers, Associated Persons and Salesmen;
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ix.
Latest audited financial statement;
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x.
Where applicant has been in existence for more than one year, certified
copies of income tax returns for the two years preceding date of
application;
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xi.
Organization chart, including branch offices;
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xii.
If the applicant is a corporation, a certified copy of the following
documents
under oath, by the corporate secretary: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;
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2.
Articles of Incorporation indicating that the purpose of the applicant
is to engage in the business of a Broker Dealer;
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3.
Board resolution attesting to particulars contained in the application.
xiii.
Business plan regarding proposed and/or current operations, including
projected
volume of business. Such plan should reflect applicant’s ability
and plans to engage in a profitable level of business; and
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xiv.
A yearly schedule/timetable on the implementation of the training
program
for the staff, which specifies, among others, the description of the
training
program, date of implementation and name of participants.
E.
Terms and Conditions for registration and subsequent renewal of
license
(1)
Applicable to Exchange Trading Participants
i.
Membership in good standing in an Exchange; provided, however that any
applicant who is not a member of an Exchange may only be granted
registration
conditioned upon future membership in an Exchange;
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ii.
Membership or participation in a Trust Fund accredited by the
Commission
under SRC Rule 36.4 5 (a);
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iii.
Where the Broker Dealer is a participant in a registered clearing
agency,
fulfillment of its obligation to contribute to the guarantee fund;
(2)
Applicable to both Exchange Trading Participants and Non-Exchange
Broker
Dealers
iv.
Net Capital in the amount of Five Million Pesos or five percent (5%) of
aggregate indebtedness whichever is higher, calculated in accordance
with
SRC Rule 49.1, paragraph 1 for firms falling under paragraphs (v) (a)
and
(b) below; or the Net capital in the amount of Two Million Five Hundred
Thousand (P2.5 Million) or two and one-half percent (2.5%) of his
aggregate
indebtedness whichever is higher for firms falling under paragraph (v)
(c); provided, however, that the Commission may set a different
requirement
for those firms authorized to use the Risk-based capital adequacy model.
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“Risk
Based Capital Adequacy Requirement/Ratio shall refer to the minimum
levels
of capital that has to be maintained by firms which are licensed, or
securing
a Broker Dealer license, taking into consideration the firm size,
complexity
and business risk. Such risks that are considered in determining the
capital
requirement include, among others, Operational, Position, Counterparty,
Large Exposure, Underwriting, and Margin Financing Risks.”
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v.
a. Unimpaired paid up capital of One Hundred (100) million pesos for
the
following types of Broker Dealers:chanroblesvirtuallawlibrary
(1)
First time registrants who will be participating in a registered
clearing
agency upon the effectivity of the Code;
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(2)
Those acquiring the business of existing Broker Dealer firms pursuant
to
SRC Rule 28.1, paragraph 2 and will be participating in a registered
clearing
agency;
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Provided,
however, that the Commission may authorize a lower capitalization for
applicants
not participating in a registered clearing agency.
b.
Other existing Broker Dealer applicants not meeting the One Hundred
Million
(P100,000,000.00) capitalization and not seeking authorization to
engage
in market making transactions shall maintain a Ten Million Pesos
(P10,000,000.00)
unimpaired paid up capital and file the required surety bond in lieu of
the 100 Million pesos as prescribed under SRC Rule 28.1 (5).
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c.
Unimpaired paid up capital of Two Million Five Hundred Thousand Pesos
(P2,500,000.00)
for applicants dealing purely in proprietary shares and who are not
holding
securities.
vi.
Registration of each branch office;
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vii.
At least one trained and registered salesman at each registered branch
office. All salesmen of the applicant shall apply for registration as a
salesman under SRC Rule 28.1, paragraph 4;
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viii.
At least one registered Associated Person. Any person with supervisory
responsibility for the applicant shall apply for registration as an
Associated
Person under SRC Rule 28.1, paragraph 4;
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ix.
A sufficient number of back office staff at the main office of the
applicant;
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x.
A computerized and effective recording and accounting system;
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xi.
Separate bank accounts for client funds;
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xii.
Separate bank account for firm funds;
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xiii.
Reporting, using SEC Form 28-BDA of changes in the information provided
in the application form to the Commission in writing within seven (7)
days
of such changes;
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xiv.
Compliance with the provisions of the Code of Corporate Governance and
Anti Money Laundering Act;
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xv.
Filing of reports required under the rules and regulations, including
but
not limited to the filing of the Manuals on Good Governance and Anti-
Money
Laundering; and
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xvi.
A certificate of Membership in good standing from a duly-accredited or
recognized broker/dealer association; and
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xvii.
Such other requirements which the Commission may prescribe.
F.
Every registered broker dealer shall apply for issuance of an annual
license
in November of each year. Upon filing and payment of the required
annual
fee, the Commission will issue a new license which shall be effective
for
one (1) year provided, however, that the applicant is cleared by the
Commission
and/or the SRO of all derogatory reports and cases. The filing
and
payment of the required annual fee after the prescribed period will be
treated as a new application and the applicant shall be charged the
filing
fee of a new registrant.
2.
Registration of Successor to Broker Dealer
A.
In the event that a Broker Dealer succeeds to and continues the
business
of another Broker Dealer, the registration of the predecessor Broker
Dealer
shall be deemed to remain effective for a period of forty five (45)
days
from date of sale or succession as the registration of the successor if
the successor within thirty (30) days after such succession, (i) files
an application for registration on SEC Form 28-BD and the Commission,
within
an equivalent period, approves such registration; and simultaneously
(ii)
publishes a notice of such application in any newspaper of general
circulation
expenses of which shall be borne by the successor broker.
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B.
The following are examples of the types of reorganizations that require
the successor of a Broker Dealer to file a new application:chanroblesvirtuallawlibrary
i.
An entity purchases or assumes substantially all of the assets and
liabilities
of a Broker Dealer, and, after so doing, the said entity decides to
operate
the business of the Broker Dealer;
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ii.
If two or more registered Broker Dealers consolidate their firms and
conduct
their business through a new entity which assumes substantially all of
the assets and liabilities of the predecessor broker dealer the new
entity
shall file a complete application on SEC Form 28-BD, while the
predecessor
firms shall each be required to file a Request for Withdrawal of
Business and/or Cancellation of Registration as Broker Dealer
under
SRC Rule 28.1, paragraph 3.
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iii.
An entity invests in the Broker Dealer, such investment resulting in a
change in the management and/or ownership control of the Broker Dealer.
C.
Notwithstanding paragraph 2 (A) of this Rule, the successor may file an
amendment to the registration of the predecessor Broker Dealer on SEC
Form
28-BDA instead of an original application for registration, within
thirty
(30) days after the succession in the following instances:chanroblesvirtuallawlibrary
i.
A corporate reorganization or restructuring that does not result in a
change
in control of the Broker Dealer.
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ii.
A succession resulting from a change in the form of business, such as
from
a partnership to a corporation.
3.
Withdrawal of Business and/or Cancellation of Registration as Broker
Dealer
A.
The Request for Withdrawal of Business and/or Cancellation of
Registration
as a Broker Dealer shall be filed on SEC Form 28-BDW in accordance with
the instructions contained therein.
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B.
A request to withdraw business and/or cancel registration filed by a
Broker
Dealer shall become effective on the sixtieth (60th) day after the
filing
thereof with the Commission unless another date has been determined by
the Commission for its effectivity. If the request to cancel
registration
is filed with the Commission at any time subsequent to the date of
issuance
of a Commission order instituting proceedings pursuant to Section 29 of
the Code to suspend or revoke the registration of such Broker Dealer,
or
if, prior to the effective date of the cancellation of registration,
the
Commission institutes such proceeding(s) to impose terms and conditions
for its cancellation, the request to withdraw business and/or cancel
registration
as broker dealer shall not become effective except at such time and
upon
such terms and conditions as the Commission deems necessary or
appropriate
in the public interest or for the protection of investors.
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C.
Subsequent to filing of such Notice or Request to withdraw business
and/or
cancel registration, the Broker Dealer shall perform the following:chanroblesvirtuallawlibrary
i.
The company will execute within five (5) days an affidavit under oath,
undertaking to comply with the following conditions:chanroblesvirtuallawlibrary
1.
The company will cease to solicit new business and that should the
company
remain inoperative for five (5) years, its Certificate of Incorporation
will be revoked;
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2.
The company will no longer execute orders from clients within five (5)
days from actual cessation of operation;
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3.
The terms and conditions of the Surety Bond shall remain effective
until
its expiration;
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4.
There will be no disposal or transfer of clients’ securities to
successor
broker without the knowledge or instruction from the client;
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5.
The company will continually inform the client of its corporate
activities
until the transfer to successor broker;
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6.
The company will preserve for a period of not less than five (5) years
from the date the Exchange and/or the Commission has approved its
operation
to cease, all records required to be maintained pursuant to the Books
and
Records Rule. The company shall inform the Exchange and the
Commission
of the names and residence addresses and contact numbers of at least
two
(2) person/s responsible for the safekeeping of all the records,
reporting
any change in the person/s responsible, if there is any. If money
laundering,
criminal or administrative cases have been filed in court or an
investigation
is being conducted wherein the customer is involved or impleaded as a
party
to the case or investigation, the file must be retained beyond the five
(5) year period until it is confirmed that the case has been finally
been
resolved or terminated by the court;
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7.
It shall be the responsibility of the Compliance Officer or
Associated
Person to oversee compliance with the requirements of the Commission
and/or
Exchange relative to the closure of its business;
ii.
Following the submission of SEC Form 28 BDW Notice of Withdrawal
from Registration, the company is given a maximum of 45 days to effect
the transfer of its clients’ securities to the successor broker duly
approved
by the Exchange (in the case of Exchange Trading Participants) or the
Commission
(in the case of Non-Exchange Broker Dealer) or any broker chosen by the
client. During such period the following requirements shall be
complied
with:chanroblesvirtuallawlibrary
1.
Submit to the Exchange (in the case of Exchange Trading Participants)
or
the Commission (in the case of Non-Exchange Broker Dealer) for
its
approval a draft letter informing the clients of the closure of
business
including the procedures that it will undertake to service the clients
and the creditors;
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2.
Issue latest statement of accounts to individual clients to give them
the
opportunity to validate their stock positions with the company
including
their payables;
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3.
Submit to the Exchange (in the case of Exchange Trading Participants)
or
the Commission (in the case of Non-Exchange Broker Dealer) a summary of
clients’ account balances;
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4.
Execute clients’ instructions on how to effect transfer/ liquidate
their
securities and cash positions;
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5.
Provide the Exchange (in the case of Exchange Trading Participants) or
the Commission (in the case of Non-Exchange Broker Dealer) with a
status
report of clients’ complaints with the corresponding action/s taken; and
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6.
Submit to the Exchange (in the case of Exchange Trading Participants),
copy furnished the Commission, or the Commission (in the case of
Non-Exchange
Broker Dealer) an undertaking to be accomplished by the persons
responsible
in the safekeeping of all the records of the company pursuant to AMLA
and
SRC’s IRR.
iii
The Exchange (in the case of Exchange Trading Participants) or the
Commission
(in the case of Non-Exchange Broker Dealer), if it deems necessary,
will
conduct a post audit of the company to ensure compliance with the
aforementioned
requirements after the end of the forty five (45) day period.
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iv.
After effecting the transfer of clients’ securities to the successor
broker
duly approved by the Exchange (in the case of Exchange Trading
Participants)
or the Commission (in the case of Non-Exchange Broker Dealer) or any
broker
of their choice, the company is required to submit to the Commission
the
following documents:chanroblesvirtuallawlibrary
1.
A list, executed under oath, of all transfers of customer accounts from
the time notice of cessation of business or withdrawal of registration
has been communicated to the Commission or the Exchange;
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2.
Certificate of Good Standing from the Commission;
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3.
Clearance from the Exchange that the company has no outstanding
liabilities
to the Exchange;
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4.
Clearance from the Exchange’s Compliance and Surveillance Group that
the
company can settle or has settled all of its trading related
liabilities
and obligations prior to the date of effectivity of the termination of
operation;
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5.
Clearance from the registered clearing agency that all obligations have
been settled, delivered and/or securities intact and in good control
location;
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6.
Current original licenses of the Broker Dealer, salespersons and its
associated
person; and
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7.
Filing of SEC Form 28 T for each of the company’s associated person/s
and
salesperson/s.
v.
Notwithstanding, the filing of the notice of cessation of operation
with
the Commission, the liabilities and obligations of the company to third
parties shall continue until full compliance with and submission of the
abovementioned conditions/requirements. Furthermore, the primary
license
of the company will be cancelled/revoked should it remain
non-operational
for five years pursuant to Section 22 of the Corporation Code.
4.
Registration of Salesmen and Associated Persons of Broker Dealers
A.
A person may not be employed as a salesman or associated person of a
Broker
Dealer unless registered as a salesman or associated person under this
Rule. The Broker Dealer may be allowed to employ trainees for a
one-time,
non-extendible period of six (6) months provided however that:chanroblesvirtuallawlibrary
i.
The trainees are supervised by a registered salesman;
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ii.
The trainees are not soliciting clients or dealing directly with
clients;
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iii.
The trainees are not receiving any form of commission or salary from
the
Broker Dealer other than a reasonable allowance; and
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iv.
The Broker Dealer immediately informs the Commission in writing of the
hiring of such trainees.
The
Commission shall consider the attendant conditions to warrant the
determination
of compliance with the above requirements.
B.
For purposes of this Rule:chanroblesvirtuallawlibrary
i.
Salesman shall refer to a natural person hired to buy and sell
securities
on a salary or commission basis properly endorsed to the Commission by
the employing Broker Dealer. It shall also include any employee of an
issuer
company whose compensation is determined directly or indirectly on
sales
of the issuer’s securities.
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ii.
Associated person shall mean any person employed full time by the
Broker
Dealer whose responsibilities include internal control supervision of
other
employees, agents, salesmen, officers, directors, clerks and
stockholders
of such Broker Dealer for compliance with the Code and rules and
regulations
adopted thereunder. He cannot perform other duties without Commission
approval
and subject to the condition that the broker dealer will maintain the
appropriate
Chinese Wall between the functions of an Associated Person and that of
his other duties.
C.
Notice of discontinuation of employment of a salesman or associated
person
and the reasons therefore, shall be provided to the Commission by the
employing
Broker Dealer by filing SEC Form 28-T no later than thirty (30) days
after
the discontinuation of employment.
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D.
Every application for registration as a salesman or associated person
shall
be filed on SEC Form 28-S, or SEC 28-AP, respectively, verified under
oath
by the Broker Dealer who is the employer of the salesman or associated
person, be accompanied by the prescribed fee and the following papers
and
documents:chanroblesvirtuallawlibrary
i.
If an applicant is a foreigner, certified true copy of valid work
permit
duly issued by the Department of Labor and Employment (DOLE) or any
appropriate
agency;
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ii.
Copies of identity cards/passports of applicant;
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iii.
Evidence, preferably a certified true copy, that such person has
complied
with applicable examination requirements and/or meets other
educational,
professional or technical qualifications; and
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iv.
Written evidence that a Broker Dealer has agreed to employ such person
contingent upon such person’s registration as a salesman or associated
person.
E.
Terms and conditions for applicants for registration:chanroblesvirtuallawlibrary
i.
Only natural persons can apply and be employed by a Broker Dealer.
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ii.
Applicants for salesmen shall be at least eighteen (18) years of age
and
applicants for associated person shall be at least twenty one (21)
years
of age.
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iii.
Applicants for registration as a salesman must have no disciplinary
history
that would subject them to disqualification from registration under
Section
29 of the Code.
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iv.
Applicants for registration as an associated person, must not have been
censured or reprimanded by a professional (e.g. IBP, PRC, etc.), or
regulatory
body (e.g. SEC, BSP, IC, etc.) for negligence, incompetence or
mismanagement,
or dismissed or requested to resign from any position or office for
negligence,
incompetence or mismanagement, or be subject to any other
disqualification
under Section 29 of the Code.
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v.
Any applicant applying for registration as a salesman or associated
person
for the first time, must have taken and passed the applicable
examination
within the last three (3) years immediately preceding the date of his
application.
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vi.
Any applicant applying for a license in the year subsequent to his
original
registration must have a minimum of three (3) years experience as a
registered
salesman or associated person or passed the applicable examination,
within
the last three (3) years immediately preceding the date of his
application.
Any applicant who has not been engaged as a salesman or associated
person
for a continuous period of at least three (3) years prior to the date
of
his application, shall not be allowed to renew his license until he has
undergone training and a refresher course and passed the related
examination;
provided, further, that all applicants must be able to demonstrate an
understanding
of the Code and rules and regulations adopted thereunder, the
particular
Exchange and/or clearing agency rules that apply to the functions that
they would perform, any obligations imposed by those provisions and
rules,
and the fiduciary obligations owed to clients and the general
obligations
owed to employers.
F.
The registration of a salesman or associated person shall cease when he
is no longer employed by the Broker Dealer identified in his
registration
application.
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G.
Duties of an Associated person. Taken in conjunction with
SRC
Rule 30.2 (6), an Associated person shall:chanroblesvirtuallawlibrary
i.
Have a general knowledge of the operations of the Broker Dealer without
necessarily engaging or actively participating in the day-to-day
operations
of the firm;
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ii.
Supervise and provide trainings as prescribed under SRC Rule 30.2 (7)
to
other employees, agents, salesmen, officers, directors, clerks and
stockholders
of the Broker Dealer for compliance with the Code and rules and
regulations
adopted thereunder;
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iii.
Oversee compliance with legislative and other regulatory requirements
(such
as notifying the Commission of material changes in information
previously
filed, maintaining registers, books of accounts and other records,
compliance
with rules, orders and laws relating to trading, issuing confirmation
receipts,
compliance with margin rules, net capital and other financial
requirements);
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iv.
Ensure that all salesmen of the Broker Dealer are registered and that
the
Commission is notified when any salesman is no longer employed by the
Broker
Dealer;
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v.
Develop procedures and monitor on a daily basis compliance with
financial
resource requirements; and
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vi.
Ensure that there is an audit trail which enables compliance with
applicable
laws, Exchange, clearing agency and other SRO rules.
H.
As a condition for continuing registration, registered salesmen and
associated
persons shall:chanroblesvirtuallawlibrary
i.
Report any change in the information provided in the application form
to
the Commission in writing within seven (7) days of such changes, using
SEC Form 28AMD;
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ii.
Observe at all times the provisions of this Code, all rules and
regulations
adopted thereunder, and applicable Exchange, clearing agency and other
SRO rules; and
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iii.
Demonstrate an on-going understanding of applicable regulatory
requirements
and Exchange, clearing agency, and other SRO rules.
I.
Every registered salesman or associated person who shall change his
registration
category during the year (i.e., salesman to associated person and vice
versa) shall be assessed the appropriate fee for the issuance of a new
license.
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J.
Every registered salesman and associated person shall apply for
issuance
of annual license in November of each year. Upon filing and payment of
the required annual fee, the Commission will issue a new license which
shall be effective for one (1) year provided, however, that the
applicant
is cleared of all derogatory reports and cases by the Commission and/or
any duly recognized professional or regulatory body or, in appropriate
cases, the SRO,. The filing and payment of the required annual
fee
after the prescribed period will be treated as a new application and
the
applicant shall be charged the filing fee of a new registrant.
5.
Broker Dealer Surety Bond and Self-Insurance Bond
The
amount of surety bonds required to be filed pursuant to SRC Rule 28.1,
paragraph 1 by Broker Dealers who have elected to defer compliance with
the One Hundred Million (P100,000,000.00) unimpaired paid up capital
requirements
pursuant to that Rule is fixed at not
less
than Five Million Pesos (P5, 000,000.00) for Brokers and not less than
One Million Pesos (P1, 000,000.00) for Dealers, or such other amount
which
the Commission may prescribe. Such bonds shall be conditioned
upon
the faithful compliance with the provisions of the Code and rules and
regulations
adopted thereunder by said Broker Dealer and by all salesmen and
Associated
Persons while acting for him. Such bond shall be executed by a
surety
company authorized to do business in the Philippines. In lieu of
such bond, the Broker Dealer may file bonds of the Government of the
Philippines.
If a bond is filed, any person damaged by the failure of such Broker
Dealer
or of any salesman or Associated Person while acting for him, to comply
with the provisions of this Code and rules and regulations adopted
thereunder
shall be entitled to sue the sureties under such bond and to recover
the
damages so suffered thereunder. If other securities are filed in
lieu thereof, such person may subject such securities to the payment of
such damage.
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With
the adoption of the risk based capital adequacy model as required under
SRC Rule 28.1, paragraph 1 (E) (v) (d), the Commission may prescribe
Broker
Dealers to file the required surety bonds pursuant to SRC Rule 28.1-1
paragraph
1(e) (v) (b).
6.
Any registered transfer agent existing prior to the effectivity of
these
Rules shall, within 45 days from effectivity of these Rules, comply
with
all the requirements provided under this Rule, which were not provided
for in its original registration.
Nothing
in this Rule shall be construed as precluding the Commission from
requiring
an applicant for registration or a registered Broker Dealer, Salesman,
Associated Person to submit other requirements it may deem reasonably
necessary
to effectively regulate and supervise these persons and/or to protect
the
interest of the investing public.
SRC
Rule 28.2– Compliance with Qualification Requirements of
Self-Regulatory
Organizations
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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.
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SRC
Rule 29 – Protection of Customer Accounts Where Registration of a
Broker
Dealer is Suspended or Revoked
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Where
the Commission has suspended or revoked the registration of a Broker
Dealer
under Section 29 of the Code, the following procedure shall be observed:chanroblesvirtuallawlibrary
1.
Where such Broker Dealer is a Member of an Exchange (or an Exchange
Trading
Participant), the Exchange shall immediately arrange for another Member
(or Exchange Trading Participant) to take over any outstanding
contracts
relating to securities and simultaneously notify the Commission in
writing
of such transfer and the affected customers that said contracts have
been
transferred.
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2.
Where such Broker Dealer is not a Member of an Exchange (or an Exchange
Trading Participant), the Commission shall notify the affected
customers,
if any, of such suspension or revocation and require that they transfer
their account to another Broker Dealer.
SRC
Rule 30.1 – Monitoring of Affiliated Transactions by Broker Dealers
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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 conditions set forth
in Section 30. 1 of the Code.
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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 must report pursuant to Section 30.1 of the Code, and shall file
an amendment thereto with the Commission, within twenty four (24)
hours of any change thereto.
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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
amendment
thereto within twenty four (24) hours of such amendment so as to
reflect
any change/s thereto.
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4.
The failure of any director to comply with this rule shall be deemed a
violation of the Code.
SRC
Rule 30.2 - Transactions and Responsibilities of Brokers and Dealers
[formerly,
SRC Rules 30.2-1, 2, 3, 4, 5, 6, 7, 8, and 9]
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1.
Ethical Standards Rule
A.
Every Broker Dealer, associated person and salesman of a Broker Dealer
(hereinafter referred to as a “registered person”), in the conduct of
his
business, shall observe high standards of commercial honor and just and
equitable principles of trade.
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B.
In considering whether a registered person is conducting his business
in
an ethical and fair manner, the Commission, in addition to requirements
imposed under other SRC rules, will be guided by the following
principles
and requirements which incorporate International Organization of
Securities
Commission standards:chanroblesvirtuallawlibrary
i.
Honesty and fairness - In conducting his business activities, a
registered
person should act honestly, fairly and in the best interest of his
client
and for the integrity of the market.
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Where
a registered person advises or acts on behalf of a client, he shall
ensure
at all times that any representations or other communications made and
information provided to the client are accurate and not misleading and
do not violate SRC Rule 24.1 (d), paragraph 1.
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ii.
Diligence - In conducting his business activities, a registered person
should act with due skill, care and diligence, in the best interest of
his clients and for the integrity of the market.
a.
A registered person shall take all reasonable steps to promptly execute
client orders and in conformity with the instruction of the
client.
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b.
A registered person when acting for or with a client shall always
execute
client orders on the best available terms in compliance with SRC Rule
32.2
(a).
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c.
A registered person shall ensure that transactions executed on behalf
of
clients are promptly and fairly allocated to the accounts of the
clients
on whose behalf the transactions were executed.
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d.
When providing advice to a client, a registered person shall act
diligently
and ensure that his advice and recommendations in relation to clients
are
based on thorough analysis and take into account available alternatives.
iii.
Capabilities -A registered person should have and employ effectively
the
resources and procedures which are needed for the proper performance of
his business activities.
a.
A registered person shall ensure at all times that any person he
employs
or appoints to conduct business for or with clients or other registered
persons is qualified, including having relevant training or experience
to act in the capacity so employed or appointed in compliance with SRC
Rules 28.1, paragraph 4 and 28.2.
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b.
A registered person shall ensure that at all times, pursuant to SRC
Rule
30.2, paragraph 7, he has:chanroblesvirtuallawlibrary
(1)
Adequate resources to diligently supervise and does diligently
supervise
his employees and all persons appointed by him to conduct business for
or with clients or any other registered persons; and
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(2)
Satisfactory internal control procedures and financial and operational
capabilities which can be reasonably expected to protect his
operations,
his clients and other registered persons from financial loss arising
from
the theft, fraud and other dishonest acts, or professional misconduct
or
omissions of all company officers, employees and authorized
representatives.
iv.
Information about clients
a.
A registered person should seek from his clients, information about
their
financial situation, investment experience and investment objectives
relative
to the services to be provided pursuant to SRC Rule 52.1, paragraph 6
and
other applicable laws.
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b.
A registered person shall take all reasonable steps to establish the
true
and full identity of each of his clients, their financial situation,
investment
experience, and investment objectives.
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c.
Having regard to information disclosed by a client and other
circumstances
relating to the client which the registered person is or should be
aware
of through the exercise of due diligence, the registered person shall
ensure
that such recommendation or solicitation for that client is reasonable
and suitable in all circumstances pursuant to SRC Rule 30.2,
paragraph
4.
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d.
A registered person providing services to any client, in relation to
derivatives,
including options and warrants, or any leveraged transaction, shall
assure
himself that the client understands the nature and risks of these
instruments
and has sufficient net worth to be able to assume the risks and bear
the
potential losses of trading in such instruments.
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e.
A registered person should be reasonably satisfied about the identity,
address and contact details of the person ultimately responsible for
originating
the instruction in relation to a transaction, the person who stands to
gain the commercial or economic benefit of the transaction and/or bears
the commercial or economic risk; provided, however, that in relation to
an investment company, or discretionary account, the person referred to
above is the investment company or account, not those who hold a
beneficial
interest therein.
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f.
A registered person shall keep in the Philippines a record of the
details
referred to above and provide the Commission with access to those
records
upon request pursuant to Section 52 of the Code and SRC Rule 52.1,
paragraph
1.
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g.
A registered person shall not do anything to effect a transaction
unless
he has first complied with the requirements of this rule, as
required
in SRC Rule 30.2, paragraph 4
v.
Information for clients - A registered person shall make adequate
disclosure
of material information in his dealings with his clients.
a.
A registered person shall ensure that a written agreement which
complies
with SRC Rule 30.2, paragraph 3 is entered into with a client before
any
services are provided to that client.
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b.
A registered person shall provide clients with adequate information
about
his firm, including his business address, any relevant conditions or
restrictions
under which the registered person conducts his business, and the
identity
or status of employees and others acting on his behalf with whom the
client
may have contact.
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c.
After a registered person has effected a transaction for a client, he
shall
endeavor to confirm promptly with the client, in writing, the essential
features of the transaction pursuant to SRC Rule 30.2.
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d.
A registered person shall comply with SRC Rule 52.1, paragraph 8,
regarding
customer account statements.
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e.
A registered person shall disclose the financial condition of his
business
to a client upon request by providing a copy of the most recent report
required to be filed with the Commission under SRC Rule 52.1, paragraph
5 (Audited Financial Statements) and SRC Rule 49.1 paragraph 1 (A)
(iii)
(Net Capital) and disclose any material changes which adversely affect
the registered person’s financial condition after the date of such
filing.
vi.
Conflicts of Interest - A registered person should avoid conflicts of
interest
and when they cannot be avoided, should ensure that his clients are
fairly
treated and properly informed of such conflicts of interest.
a.
Client priority - A registered person shall handle orders of
clients
fairly and in the order in which they are received in
compliance with SRC Rule 34.1, paragraph 1.
(1)
Orders of clients, or transactions to be undertaken on behalf of
clients,
shall have in all cases priority over orders for the account of the
registered
person, and otherwise comply with SRC Rule 34.1, paragraph 1 where the
Broker is a Member of an Exchange;
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(2)
A registered person shall, where he has aggregated an order for a
client
with an order for another client, or with an order for his own account,
give priority to satisfying orders of clients, in any subsequent
allocation,
if all orders can not be filled;
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(3)
A registered person shall not deal in any securities for himself or for
any account in which he has an interest based upon advance knowledge he
possesses of pending transactions for or with clients or any other non
public information, the disclosure of which would be expected to affect
the price of such securities and violate Section 27 of the Code
(insider
trading prohibition);
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(4)
A registered person who withdraws in whole or in part from providing
any
investment or related service shall ensure that affected clients are
promptly
notified of such action and that any business which remains outstanding
is promptly completed or transferred to another registered person in
accordance
with SRC Rule 29 and any instruction of the affected clients.
b.
Conflicts of interest - Where a registered person has a material
interest
in a transaction with or for a client, or a relationship which gives
rise
to an actual or potential conflict of interest in relation to such
transaction,
he shall neither advise, nor deal in relation to the transaction unless
he has disclosed that material interest or conflict to the client and
has
taken all reasonable steps to ensure fair treatment of the client.
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c.
Client assets -A registered person shall, in the handling of client
transactions
and assets, act to ensure that client assets are accounted for properly
and promptly and comply with SRC Rule 52.1, paragraph 10. Where the
registered
person, or a third party on behalf of the registered person, is in
possession
or control of client positions or assets, the registered person shall
ensure
that client positions or assets are adequately safeguarded.
vii.
Compliance - A registered person shall comply with all regulatory
requirements
applicable to the conduct of his business activities so as to promote
the
best interest of clients and the integrity of the market.
a.
A registered person shall comply with the Code, rules and regulations
adopted
thereunder, and rules of any Exchange, clearing agency, or other SRO,
of
which he is a member of or participant in.
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b.
A registered person shall have a policy, which has been communicated to
employees in writing, on whether employees are permitted to deal for
their
own accounts in securities. If employees are permitted to deal, the
conditions
on which they may do so, including those imposed under SRC Rule 34.1,
paragraph
1, shall be set out in writing and communicated to each employee.
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c.
A registered person shall ensure that complaints from clients relating
to his business are adequately addressed in compliance with SRC Rule
30.2,
paragraph 6 (B) (vii) and sufficient records of such complaints
are
made in compliance with SRC Rule 52.1, paragraph 9.
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d.
A registered person shall at all times be responsible for the acts or
omissions
of his employees and agents in respect to the conduct of his business,
pursuant to Section 51 of the Code.
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e.
All registered persons, as a condition of their registration, shall
undertake
in
writing to uphold the Code, and rules and regulations adopted
thereunder.
C.
This rule applies to all registered persons, although the Commission
recognizes
that certain requirements of the Code and rules adopted thereunder may
not be within the control of an associated person. In considering the
conduct
of an associated person, the Commission will consider such person’s
level
of responsibility within the Broker Dealer firm, and the level of
control
or knowledge he may have considering any failure by his firm or persons
under his supervision to follow the Code.
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D.
Where the Commission makes an inquiry under Section 53 of the Code, the
Commission will refer to the requirements set forth in this Rule in
considering
whether any person is guilty of a violation of this Code and should
remain
registered.
2.
Confirmation of Customer Orders
A.
A Broker Dealer shall report to its customers all transactions entered
into for the customer's account, and to this end, shall send the
customer
a written confirmation of purchases and sales as promptly as possible
on
the day on which they are made. An employee or salesman of a Broker
Dealer
shall not be authorized to accept a confirmation for or on behalf of a
customer.
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B.
The Broker Dealer shall give its clients the option to choose whether
confirmation
of customer orders will be done by way of courier, facsimile
transmission
or electronic mail and such preference should be clearly stated in the
Customer Account Information Form (CAIF). The confirmation shall
be sent to the customer at the address indicated in the CAIF. Parties
subscribing
to facsimile transmission or electronic mail confirmation of customer
orders
are governed by the special procedure provided in the immediately
succeeding
paragraph.
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C.
Broker Dealers shall send to their clients, during office hours and on
the day of the transaction, their confirmations. Clients subscribing to
such arrangements are required to attest to the accuracy of the
information
communicated by replying via facsimile transmission or electronic mail
to the Broker Dealer, not later than 12:00 noon of the next business
day.
The Broker Dealer shall then keep a printout of such reply together
with
the file notifications and transaction data being confirmed.
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D.
The confirmation required by paragraph 2A above shall contain at least
the following information:chanroblesvirtuallawlibrary
i.
A statement as to whether the Broker Dealer is broking for a
customer
or another Broker Dealer or is dealing for himself pursuant to
Section
34.1 (a) to (d) of the Code and SRC Rule 34.1, paragraph 1;
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ii.
That the Broker Dealer is controlled by, or controls, or is under
common
control with the issuer of such security if such be the fact;
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iii.
Whether the transaction was solicited or unsolicited by the Broker
Dealer
or whether the transaction was executed pursuant to the exercise of
discretionary
power; and
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iv.
For facsimile transmission and electronic confirmations, the reminder
that
clients must confirm their orders, not later than 12 noon of the next
business
day.
E.
The Commission, when it deems necessary, may require a Broker Dealer to
submit a report of his commission or remuneration on a particular
transaction.
3.
Client Agreement
A.
A Broker Dealer and its registered persons who deal directly with
clients
shall ensure that a written agreement (hereinafter “Client Agreement”)
is entered into with a client before any service is provided to that
client.
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B.
The Client Agreement shall be in a language understood by the client.
The
registered persons who deal directly with clients shall explain to the
client the contents of the agreement.
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C.
A Client Agreement shall contain, among others, the following
information:chanroblesvirtuallawlibrary
i.
the full name and address of the client, as evidenced by a retained
copy
of the identity card, relevant sections of the passport, business
registration
certificate, corporation documents, or any other official document
which
uniquely identifies the client;
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ii.
the full name and registered address of the Broker Dealer;
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iii.
the Broker Dealer’s registration status with the Commission;
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iv.
undertakings by the Broker Dealer and the client to notify the other in
the event of any material change to the information provided in the
agreement;
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v.
a description of the nature of services to be provided to or available
to the client, such as securities cash account, securities margin
account,
discretionary account, portfolio management, investment advice,
derivatives
trading;
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vi.
a description of any remuneration (and the basis for payment) that is
to
be paid by the client to the Broker Dealer, such as commission,
brokerage,
and any other fees and charges;
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vii.
a statement indicating the circumstances under which the Broker Dealer
will be acting as principal in relation to the client and that in all
other
circumstances the Broker Dealer will be acting as agent for the client;
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viii.
if the Broker Dealer is acting as a Dealer in relation to securities
and
is a member of an Exchange (or an Exchange Trading Participant), a
statement
explaining the application of Section 34 of the Code, and if the client
specifically authorizes the Dealer to pledge the client’s securities or
subject such securities to liens of third parties;
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ix.
if margin or short selling facilities are to be provided to the client,
details of margin requirements, interests charges, margin calls, and
the
circumstances under which a client’s position may be closed without the
client’s consent; and
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x.
risk disclosure statement as set forth in Annex 30.2-A
D.
A registered person shall ensure that he complies with his obligations
under this rule and the Client Agreement and that the Client Agreement
does not operate to remove, exclude, or restrict any rights of a client
or obligations of a Broker Dealer under the Code.
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E.
A Broker Dealer shall not effect a transaction on behalf of a client
unless
before the transaction is effected, the client, or a person designated
by the client, specifically authorizes the transaction, or the client
has
authorized in writing the Broker Dealer to effect transactions on
behalf
of the client without the client’s specific authorization. If the
Broker Dealer has obtained such an authorization, the Client Agreement
shall specify that the account is a discretionary account.
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F.
A copy of the required Client Agreement is set forth in Annex 30.2-B.
4.
Suitability Rule
A.
In recommending to a customer the purchase, sale or exchange of any
security,
a Broker Dealer or an associated person or salesman of a Broker Dealer,
shall have reasonable grounds for believing that the recommendation is
suitable for such customer upon the basis of the facts disclosed
by such customer as to his other security holdings and as to his
financial
situation and needs.
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B.
Except as provided in SRC Rule 52.1, paragraph 6, prior to the
execution
of a transaction recommended to a customer, a Broker Dealer shall
execute
a customer account information form which complies with SRC Rule 52.1,
paragraph 6.
5.
Commissions and Charges for Services Performed by a Broker Dealer
A.
Charges by a Broker Dealer for services performed, including:chanroblesvirtuallawlibrary
i.
miscellaneous services such as collection of monies due for principal,
dividends or interest;
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ii.
exchange or transfer of securities; and
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iii.
appraisals, safekeeping or custody of securities, and other services,
shall
be reasonable.
B.
All Broker Dealers, in compliance with existing laws, shall file
a schedule of their minimum commission rates with the Commission. No
discounts
and/or rebates shall be permitted from the minimum rates.
6.
Supervision
A.
The management of every Broker Dealer shall establish and maintain an
appropriate
and effective compliance function within the firm which is independent
of all operational and business functions. The compliance
function
shall be performed by an Associated Person who shall be registered with
the Commission and required to report directly to the board of
directors
and the company President. The management shall ensure that the
Associated
Person/s performing the compliance function possesses sufficient
training
and experience in securities regulation matters and an understanding of
the securities activities of the firm enabling them to effectively
execute
their duties.
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B.
Associated Persons shall be responsible, in addition to the duties
enumerated
under SRC Rule 28.1 (4) (G) for maintaining a system to supervise the
activities
of all persons employed by the Broker Dealer who are directly or
indirectly
related to the conduct of its securities business. The
supervisory
system shall be reasonably designed to achieve compliance with the Code
and rules and regulations adopted thereunder, with the rules of any
self
regulatory organization which the Broker Dealer is a member of or
participant
in, other applicable laws, including, but not limited to, the
Anti-Money
Laundering Act (RA 9160, as amended), and the Broker Dealer’s own
internal
policies and procedures. A firm’s supervisory system shall
include
at least the following:chanroblesvirtuallawlibrary
i.
establishment and maintenance of written supervisory procedures;
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ii.
designation of one or more Associated Persons with the authority and
responsibility
to carry out the supervision of each type of business in which it
engages;
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iii.
titles, registration status and locations of the required Associated
Person/s
and the responsibilities of each Associated Person as these relate to
the
types of business engaged in;
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iv.
written documentation to prove that all Associated Persons are
qualified
by virtue of experience or training to carry out their assigned
supervisory
responsibilities;
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v.
written documentation to prove that each person engaged in securities
transactions,
either collectively or individually, has participated no less than
annually
in an interview or meeting conducted by the Associated Person/s
designated
by the firm at which compliance matters relevant to the activities of
these
persons are discussed. There shall be prompt notification in writing to
each such person of new or modified compliance obligations;
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vi.
establishment of an effective management and organizational structure
which
ensures that the operations of the business are conducted in a sound,
efficient
and effective manner; and
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vii.
establishment, maintenance and enforcement of policies and procedures
to
ensure the proper handling of complaints from clients and that
appropriate
remedial action is promptly taken. Where possible, complaints
should
be investigated by the Associated Person performing the compliance
function
who is not directly involved in the subject matter of the complaint.
Where
a complaint is not remedied promptly, the client shall be advised of
any
further steps which may be available to the client under the law.
C.
Although final responsibility for proper supervision shall rest with
the
Broker Dealer firm, diligence of a good father of the family is
required
from the Associated Person/s in the conduct of their compliance
function.
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D.
Associated Person/s shall promptly report to management all occurrences
of material noncompliance by the firm or its staff with legal and
regulatory
requirements, as well as with the firm’s own policies and
procedures.
Management shall then promptly notify the Commission and any self
regulatory
organization of which such Broker Dealer is a trading participant of
such
findings and action taken. For this purpose, the Associated Person must
maintain a logbook of all material non-compliance reports with the
appropriate
notation of the action taken by management on the said occurrences.
Such
logbook must be duly registered with the Commission within fifteen (15)
days from issuance of the Associated Person/s new/renewal license.
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E.
Notwithstanding the requirement in the immediately preceding paragraph,
all Associated Persons must prepare, sign and file with the Commission
not later than fifteen (15) days after the end of each calendar
quarter,
a Compliance Report on the firm’s compliance and /or non-compliance
with
the provisions of the Code and its implementing rules and regulations
including,
but not limited to, the following concerns:chanroblesvirtuallawlibrary
i.
whether the firm complies with the requirements of the Code and the
implementing
rules;
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ii.
the significant findings of non-compliance; and
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iii.
information on the action taken by management to address the issue.
Said
Report shall also include a summary of all occurrences of material
non-compliance
by the firm or its staff with legal and regulatory requirements and the
actions taken by management on such violations.
7.
Internal or Accredited Training Program
A.
Every Broker Dealer shall establish, implement and maintain a
reasonably
comprehensive system of training towards –
i.
ensuring the continuing improvement in critical areas of its principal
activities and operations; and
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ii.
enhancing the technical knowledge of its employees to enable them to
understand
the operational and internal control policies and procedures of that
Broker
Dealer and all applicable legal and regulatory requirements.
B.
Such system of training shall be properly documented in a manual
which shall:chanroblesvirtuallawlibrary
i.
set out details of the training programs that the Broker Dealer
proposes
to implement; and
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ii.
be regularly updated in line with the development in the securities
industry.
C.
All Broker Dealers shall submit to the Commission at the time of
renewal
of their license a yearly schedule/timetable of the implementation of
its
training program. At a minimum, such report should contain the
following
information:chanroblesvirtuallawlibrary
i.
The implementation of the previous year’s internal training program
with
details on seminar dates, number of participants, and other pertinent
information;
and
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ii.
Current year’s seminar topics (with description), projected dates,
target
market, and planned speaker.
D.
The Broker Dealer may, at its option, substitute its internal training
program submitted at the time of renewal of its license by enrolling in
training programs sponsored by associations or organizations duly
accredited
or recognized by the Commission, provided, however, that proper
approval
is obtained from the Commission on such substitution. It is the
responsibility
of Broker Dealers, through its Associated Person, to provide periodic
training
to its officers and employees whether externally or internally, the
occurrence
of which shall not be dependent solely on the expectation that an
external
seminar will be sponsored at a later time.
8.
Block Sale
A.
A Broker Dealer may engage in block sales on an Exchange, and an
Exchange
may execute block sales, provided that:chanroblesvirtuallawlibrary
i.
such transaction complies with Exchange rules, which have been approved
by the Commission; and
ii.
the Exchange notifies the Commission in writing, not later than
one
business day after the date such transaction has been executed, of the
price and volume thereof or in such form and manner that the Commission
may prescribe.
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B.
A block sale shall mean a matched trade that does not go through the
automated
order matching system of an Exchange trading system but instead has
been
prearranged by and among the Broker Dealer’s clients and is then
entered
as a done deal directly into the trading system.
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C.
Other transactions such as but not limited to options, warrants or
those
emanating from a tender offer, rights offering, and conversion of a
security
with convertibility features, shall be allowed to be consummated within
the Exchange trading system using the block sale facility of an
Exchange,
and in accordance with the relevant rules of the Exchange as approved
by
the Commission.
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 and/or duly authorized by the Commission
pursuant
to Section 5(h) of the Code, the names of their owners/stockholders,
members,
participants, and clients, and other related information in its or his
possession, upon order of the Commission, or as required by the rules
of
a self regulatory organization in which he is a member or participant,
in pursuance of an investigation, examination, official inquiry or as
part
of a surveillance procedures, and/or in compliance with other pertinent
laws.
SRC
Rule 31 – Commission Role in the Development of Securities Market
Professionals
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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.
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2.
The Commission, in coordination with such organizations, associations
and
institutions, shall help facilitate the organization of, and
participate
in, workshops on regulatory requirements.
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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 – Trading Limited to Listed Securities and Exchanges
Registered
under the Code
[formerly
SRC Rule 32.1-1]
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No
Broker Dealer or any registered person shall effect any transaction in
any security in an Exchange or any other trading market, unless such
Exchange
or any other trading market and the securities listed or allowed to be
traded therein are registered under the Code or exempt from
registration
pursuant to Sections 9 and 10 thereof.
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SRC
Rule 32.2 (a) – Best Execution
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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.
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SRC
Rule 33.1 – Registration of Exchange
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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
33SRO shall also be accompanied by the statements and exhibits
prescribed
under Section 40 of the Code. Any registered Exchange existing
prior
to the effectivity of these Rules shall, within 45 days from
effectivity
of these Rules, comply with all the requirements provided under this
Rule,
which were not provided for in its original registration.
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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.
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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.
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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 completely new statement together with all
exhibits
which are prescribed to be filed in connection with SEC Form 33.
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5.
Nothing in this Rule shall be construed as precluding the Commission
from
requiring an applicant for registration or a registered Exchange to
submit
other requirements it may deem reasonably necessary to effectively
regulate
and supervise the Exchange and/or to protect the interest of the
investing
public.
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SRC
Rule 33.2(c) – Ownership of an Exchange
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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.
A.
The Exchange Controller shall become registered with the Commission as
a Self Regulatory Organization under Section 40 of the Code and comply
with its duties regarding rulemaking under this section and rules
adopted
thereunder; provided, however, that for purposes of Section 40 and SRC
Rule 30.1, paragraph 1, the enforcement responsibilities of an SRO
shall
be delegated to the Exchange which is being controlled by the Exchange
Controller or to another entity which the Commission may order.
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B.
The Board of an Exchange Controller shall include in its composition
the
president of the Exchange Controller, and unless the Commission
otherwise
agrees to a different governance structure based on findings that the
Exchange
Controller can operate the Exchange in the public interest and that the
Exchange can effectively operate as an SRO, no less than fifty one
(51%)
percent of the remaining members of the Board shall be comprised of
three
(3) independent directors and persons who represent the interest of
issuers,
investors and other market participants who are not associated with any
Broker Dealer, member or participant of the Exchange controlled by the
Exchange Controller, for a period of two (2) years prior to his/her
appointment.
No officer or employee of a Broker Dealer, its subsidiaries or
affiliates
or related interests may become an independent director.
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C.
Unless the Commission prescribes otherwise, no person shall
beneficially
own or control, directly or indirectly, more than five percent (5%) of
the voting rights of the Exchange Controller and no industry or
business
group shall beneficially own or control, directly or indirectly, more
than
twenty percent (20%) of the voting rights of the Exchange Controller;
Provided
that pursuant to paragraph 3 below, the Exchange Controller shall
disclose
the names of its beneficial owners, their business or industry
affiliation,
and share ownership to the Commission and, no less than once a month,
update
such disclosure.
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D.
An Exchange Controller shall obtain prior Commission approval regarding
share ownership or any other investment in any clearing agency, other
securities
related business, or any other non-related business.
2.
For purposes of Section 33.2 (c) of the Code, an industry or business
group
shall include the following sectors which are based on the Philippine
Standard
Industrial Classification Code:chanroblesvirtuallawlibrary
A.
Agriculture, Hunting, Forestry, Fishing, Mining and Quarrying
B.
Manufacturing
C.
Electricity, Gas, Water Supply, and Construction
D.
Wholesale and Retail Trade, Hotels and Restaurants
E.
Transport, Storage and Communications
F.
Banking and other Financial Institutions
G.
Brokers and Dealers
H.
Compulsory Social Security (Government)
I.
Real Estate including leasing
J.
Education, Health, Social Work and other community, social and personal
services
3.
To insure diversification of ownership of an Exchange or that of the
Exchange
Controller, the Commission may consolidate different industry or
business groups into one group or divide one group into several groups
or redesignate the industry classification chosen by a business group;
provided, however that where the shares of stock of the Exchange or
Exchange
Controller are not yet listed or traded in an exchange or any
other
trading market, prior to the sale of shares of an Exchange or Exchange
Controller to any person, the Exchange or Exchange Controller shall
disclose
in writing to the Commission the proposed ownership to ensure
compliance
with ownership restrictions. No shares of an Exchange or Exchange
Controller may be transferred without prior Commission approval.
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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.
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SRC
Rule 33.2(d) – Protection of Customer Accounts in Case of Business
Failure
of an Exchange Member (or Trading Participant)
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1.
When an Exchange Member Firm has filed or is the subject of a petition
for insolvency, or when an Exchange determines that the Member Firm’s
financial
condition has so deteriorated that it cannot readily meet the demands
of
its customers for the delivery of securities and or payment of sales
proceeds,
the Commission may issue ex parte an order compelling the insolvent or
failed member firm [hereinafter Failed Member Firm and the Exchange to
take the necessary action to protect customer accounts including, but
not
limited to, the preservation of the member firm’s books and records.
Said
order shall remain in effect until lifted by the Commission motu
proprio
or upon petition of the Failed Member Firm.
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2.
The Commission, after proper investigation or verification, motu
proprio
or upon verified complaint by any party, order an Exchange to take over
the operation of the Failed Member Firm for the purpose of settling the
member firm’s liabilities to its customers.
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3.
Where the Commission has ordered an Exchange to take over the
operations
of a failed member firm, an Exchange shall:chanroblesvirtuallawlibrary
A.
Suspend such Failed Member Firm’s membership immediately arrange
for another Member to take over the outstanding contracts relating to
securities,
and simultaneously notify the Commission of such suspension and
take-over;
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B.
Promptly notify customers of the Failed Member that their accounts have
been transferred to another Member and provide such customers with the
opportunity to re-transfer their accounts to another Member of their
choice;
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C.
Settle the Failed Member’s (or Trading Participant’s) liabilities to
customers
through the sale of the Member’s trading rights and other trade-related
assets as may be prescribed by the Commission; liquidation of paid up
capital;
and/or overseeing the payment of claims against the surety bond.
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D.
Simultaneously inform the Accredited Trust Fund referred to in Sec.
36.5
of the Code, where such Failed Member (or Trading Participant) is a
Member
or Participant, of such takeover and inform the customers that they may
also claim compensation for losses from the Trust Fund, subject to the
validation of their claims by the Exchange and the Trust Fund;
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E.
Where after such settlement and liquidation of the Failed Member Firm’s
trade-related assets, there are outstanding liabilities to customers of
the Failed Member (or Trading Participant), refer the same to the
Accredited
Trust Fund and inform the customers of the further steps necessary for
claiming compensation for unsatisfied losses; and
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F.
The Accredited Trust Fund, based on its rules and regulations or upon
order
of the Commission, shall release payments to the Failed Member’s (or
Trading
Participant’s) customers even before the Exchange has finalized the
settlement
of the Failed Member Firm’s liabilities, subject to the validation as
provided
in subsection D herein; Provided, however, that the Trust Fund shall be
subrogated to the customers’ rights to claim before the Exchange to the
extent that it has paid the customers’ claims before final settlement
of
the Failed Member’s liabilities by the Exchange.
SRC
Rule 34.1 – Segregation and Limitation of Functions of
Members,
Brokers and Dealers
[formerly
SRC Rules 34.1-2 and 34.1-3]
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1.
Segregation of Broker and Dealer Function. Affiliations and
Practices.
A.
A Member Broker of an Exchange (herein referred to as “Member Broker”)
shall not effect any transaction on such Exchange for its own account,
the account of an associated person, salesmen, or any other person
associated
with the Member Broker, including affiliated persons, or an account
with
respect to which an associated person exercises investment discretion,
unless it complies with the “Customer First” Policy as prescribed below:chanroblesvirtuallawlibrary
1.
The Member-Broker gives priority to the execution of customer orders
over
its orders at the same price according to the following rules:chanroblesvirtuallawlibrary
a.
When the Member Broker’s Order is pre-existing (and has priority in
terms
of time) and thereupon the Member-Broker receives a customer’s order
and/or
holds a wholly or partially unexecuted customer’s Order, then the
Member-Broker
shall surrender priority and give precedence to his client’s order;
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b.
When the Member-Broker holds an unexecuted customer’s Order with
priority
(pre-existing order), then any Broker’s Order that intends to improve
the
price shall do so by at least three (3) fluctuations better than the
pre-existing
highest bid or lowest offer from a customer.
2.
The Procedures for executing the above-referenced priority rule shall
be
programmed into the Exchange trading system so that full compliance can
be achieved prior to the execution of any Member Broker’s Order under
this
interpretation, in accordance with SRC Rule 34.1, paragraph 1 (B).
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3.
Orders of stockholders, officers, directors, associated persons, and
salesmen,
or any other person associated with the Member-Broker, including
affiliated
persons, traded within the Member-Broker shall be treated as the
proprietary
account of the Member Broker’s account, in which case, the “Customer
First”
Policy shall apply.
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4.
The order ticket shall indicate that the order is for the account of
the
Member-Broker, associated person or other employee thereof, owner,
officer
or director of the Member-Broker
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5.
The Member-Broker retains a copy of the order ticket with the date and
time of its transmittal, which shall be time stamped thereon.
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6.
The Member-Broker dates and time stamps the order ticket to reflect the
time that the order was received or made in compliance with SRC Rule
52.1,
paragraph 7.
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7.
The Member-Broker retains all order tickets in chronological order
containing
the date, time, price and other significant details of the order, in
accordance
with SRC Rule 52.1, paragraph 2.
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8.
The Member-Broker may adopt an alternative method (e.g. tape recorded
with
timing instrument) in capturing the time stamping requirements
prescribed
by the aforementioned sub-section (5) and (6) and by SRC Rule 52.1,
paragraph
7; provided that it conforms with the rules and procedures of the
Exchange
governing such alternative method; provided further, that such
alternative
method and relevant rules and procedures have been approved by the
Commission.
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9.
Procedures for monitoring Member Orders, as set forth in SRC Rule 34.1,
paragraph 1 (G) and (H) shall be complied with.
B.
A dealer or proprietary account when traded though another
Member-Broker
(hereinafter referred to as “Executing Member Broker”) shall be treated
by the Executing Member Broker as another customer.
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C.
Stockholders, officers, directors, associated persons, or any
other
person associated with the Member-Broker or affiliated persons other
than
a Salesman (hereinafter referred to as “Associated Persons” cannot
trade
outside the employing Member-Broker (hereinafter referred to as
“Employing
Member Broker”) unless they obtain the permission of the Employing
Member
Broker and inform such Broker that they have opened such account with
the
Executing Member Broker, and provided further that the Executing Member
Broker agrees to send duplicate account statements to the Associated
Person’s
Executing Member Broker.
If
the account of the Associated Person of the Employing Member Broker is
with a non-Member Broker, such Associated Person shall receive
permission
from that Non-Member Broker for access to that account by the Exchange
and the Employing Member Broker.
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Salesmen
are prohibited from transacting with Member-Brokers other than their
employing
Member Broker.
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D.
Non-Exchange Broker Dealers shall likewise observe the “Customer First”
Policy whenever applicable.
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E.
For purposes of this Rule:chanroblesvirtuallawlibrary
i.
Affiliated person of a Member Broker is any person who (a) controls, is
controlled by, or is under common control with the Member Broker, (b)
has
officers, directors, or associated persons who are also officers,
directors,
or associated persons of the Member Broker, (c) directly or indirectly
controls more than ten percent (10%) of the equity interest in the
Member
Broker, or (d) has more than ten percent (10%) of its equity interest
owned
by the Member Broker and/or associated persons of the Member Broker.
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ii.
A Member Broker effects a securities transaction when it performs any
function
in connection with the processing of that transaction, including, but
not
limited to, (a) transmission of an order for execution, (b) execution
of
the order, (c) clearance and settlement of transaction, and (d)
arranging
for the performance of any such function.
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iii.
Compensation in connection with effecting the transaction refers to
compensation
directly or indirectly received or calculated on a transaction-related
basis for the performance of any function involved in effecting
securities
transactions.
F.
A Member Broker can have a subsidiary or affiliate which is a Member
Dealer,
and/or non Member Broker Dealer, and/or Investment House, provided that
where there are interlocking directors or officers, such fact must be
disclosed
to the Commission and measures instituted to prevent conflict of
interest.
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G.
A Member Broker, and any other Broker or Investment House, with
securities
accounts of Member Brokers, and/or their associated persons, other
employees,
owners, directors and/or officers, including discretionary accounts on
behalf thereof, for transactions executed in accordance with paragraph
1 (A) (ii) (h) of this rule, shall, when receiving and executing such
transactions,
identify such accounts as employee, owner, director, officer or Member
broker accounts, or discretionary accounts on behalf thereof (along
with
the name of the related Member Broker), and require the firm’s
responsible
Associated Person or, in the case of an Investment House a person
responsible
for compliance, to review such accounts on a daily basis.
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H.
No Broker Dealer shall execute for its own account, or the account of
its
customers, listed securities issued by an affiliated company identified
under Section 30.1 of the Code unless the conditions setforth in SRC
Rule
30.1 are complied with.
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I.
For purposes of paragraph 1 (l) (C) of this rule, affiliated company
means
a company in which any director, president, vice president, manager,
treasurer,
comptroller, secretary, any other officer of trust and responsibility,
or other control person is also a stockholder, director, associated
person,
or salesman, or a clerk of any Broker Dealer, or a relative of any of
the
foregoing within the fourth degree of consanguinity or affinity.
2.
Segregation of Functions (Chinese Walls)
A.
Any Broker Dealer which assumes more than one function whether as a
dealer,
adviser, or underwriter, or which engages in market making
transactions,
shall maintain proper segregation of those functions within the firm to
prevent:chanroblesvirtuallawlibrary
i.
the flow of information between the different parts of its organization
which perform each function; and
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ii.
any conflict of interest which may result.
B.
For purposes of this rule, information means matter:chanroblesvirtuallawlibrary
i.
of a specific nature which has not been made public;
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ii.
relating to one or more public companies or securities of a public
company;
and
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iii.
which, if it were made public, would likely affect the market price of
the securities.
C.
A Broker Dealer shall at all times ensure that its trading functions
and
back-office settlement functions and physical setup are properly
segregated
and shall establish written procedures to ensure compliance with this
rule.
SRC
Rule 36.4– Rules and Regulations for Clearance and Settlement of
Securities
Transactions Involving Exchanges and Other Trading Markets
[formerly
SRC Rules 36.4-1, 2, and 3]
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1.
Registration of Transfer Agents
A.
No person shall act as a transfer agent for a security which is
listed
or traded on an Exchange, over-the-counter, or any other trading market
without being registered with the Commission in accordance with the
provisions
of this Rule. Any registered transfer agent existing prior to the
effectivity of these Rules shall, within 45 days from effectivity of
these
Rules, comply with all the requirements provided under this Rule, which
were not provided for in its original registration.
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B.
To apply for registration under this Rule, a transfer agent shall:chanroblesvirtuallawlibrary
i.
be a corporation;
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ii.
have unimpaired paid-up capital of at least One Million Pesos (P
1,000,000.00)
or such amount as the Commission may determine;
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iii.
have an officer who is a certified public accountant; and
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iv.
submit an undertaking that it shall comply with the rules and
regulations,
orders, memorandum circulars and policies promulgated by the
Commission,
and of other rules, procedures, standards and policies set by other
market
participants and duly approved by the Commission, and its own internal
rules and procedures.
C.
An application for registration as a transfer agent, or an amendment to
any such application, shall be filed with the Commission on SEC Form
36-TA,
in accordance with the instructions contained therein.
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D.
If any of the information reported on SEC Form 36-TA becomes
inaccurate,
misleading, or incomplete or requires updating for any reason, such as
changes in operating procedures and/or the list of directors and
officers,
the registrant shall file an amendment within seven (7) days after the
date on which the information in the application became inaccurate,
misleading,
or incomplete.
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E.
After reviewing an application for registration as a transfer agent, or
an amendment thereto, the Commission shall, by order,
i.
grant registration or approve the amendment; or
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ii.
deny registration or the amendment, place limitations on the
activities,
functions or operations of, suspend or revoke registration, if the
Commission
finds, after notice and opportunity for hearing,
a.
that such order is in the public interest;
b.
that the registrant does not meet applicable qualifications;
c.
that the application is incomplete, inaccurate or misleading; or
d.
that the transfer agent has been found to:chanroblesvirtuallawlibrary
(1)
be insolvent or not in sound financial condition;
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(2)
have violated or have not complied with the applicable provisions of
the
Code or the rules and regulations adopted thereunder, or any order of
the
Commission;
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(3)
have engaged in, or be engaged in, or is about to engage in fraudulent
transactions;
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(4)
be in any other way dishonest or not of good repute;
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(5)
have not conducted its business in accordance with law or be engaged in
a business that is illegal or contrary to government rules and
regulations;
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(6)
have an officer, member of the board of directors, or principal
shareholder
who is disqualified to be such an officer, director or principal
shareholder;
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(7)
have a backlog of share certificate transfers which indicates an
inability
of the registrant to fulfill its responsibilities as a transfer agent;
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(8)
have repeatedly or materially failed to comply with its procedures or
those
of a registered clearing agency; or
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(9)
have filed an application for registration or an amendment thereto
which
is incomplete or inaccurate in any material respect or which includes
any
untrue statement of a material fact or omits to state a material fact
required
to be stated therein or necessary to make the application or amendment
not misleading.
F.
A transfer agent can not be the auditor of an issuer for whom it acts
as
transfer agent.
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G.
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.
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H.
Every transfer agent registered pursuant to this Rule shall file the
appropriate
registration renewal form every May 1 to May 31 of each year, surrender
its old license, and pay to the Commission the prescribed annual
renewal
fee.
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.
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I.
Nothing in this Rule shall be construed as precluding the Commission
from
requiring an applicant for registration or a registered transfer agent
to submit other requirements it may deem reasonably necessary to
effectively
regulate and supervise the transfer agent and/or to protect the
interest
of the investing public.
2.
Reports from Transfer Agents
A.
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 120 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.
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B.
Exception Reports to the 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
i.
any delay in the turnaround or processing of an issue, transfer or
replacement
of a security;
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ii.
any discrepancy between its records and those of the registered
clearing
agency, if applicable;
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iii.
any loss of securities reported to it;
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iv.
actual termination of its function as a transfer agent for a particular
security; and
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v.
withdrawal from business of a transfer agent.
C.
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.
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D.
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
i.
the name of the security holder and a description of the security;
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ii.
the date of the complaint or claim and a complete description thereof;
and
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iii.
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.
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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.
E.
Other Reports -Every registered transfer agent shall submit a monthly
report
of the following to be filed on or before the 10th day of the
succeeding
month:chanroblesvirtuallawlibrary
i.
Certification as to the number of shares registered under the name of
PCD;
and
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ii.
Reconciliation of PCD and Transfer Agent balances.
3.
Records Retention by Transfer Agents
A.
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 five (5) years the following books and records relating
to its transfer agent activities:chanroblesvirtuallawlibrary
i.
its rules and procedures;
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ii.
exception reports filed with the Commission pursuant to SRC Rule
36.4, paragraph 2 (B);
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iii.
complaint log as required to be maintained under SRC Rule 36.4,
paragraph
2 (D);
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iv.
reports to the issuers for whom the firm acts as transfer agent as
required
under SRC Rule 36.4, paragraph (2) (C); and
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v.
annual report on SEC Form 36-AR.
B.
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 36.5 (a) – Trust Funds for Broker Dealer Customers
[formerly
SRC Rule 36.4(a)-1]
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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. For purposes of this Rule, the term
“extraordinary
losses and damages” refers only to actual damages.
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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,
or the Commission, when the Exchange fails or does not exercise such
timely
determination, where the Broker Dealer is an Exchange member; or the
Commission,
or 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.
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4.
As a condition of their registration, all Broker Dealers shall be a
member
of or participant in an Accredited Trust Fund.
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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.
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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 balance 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.
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8.
If the Commission or any Exchange is aware of facts which may lead one
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.
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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.
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SRC
Rule 38 – Requirements on Nomination and Election of Independent
Directors
(formerly,
SRC Rule 38.1 – Definition of “Independent Director”)
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1.
This Rule shall apply to companies mentioned under Sec. 38 of the Code
and to companies with secondary licenses that adopted in their Manuals
on Corporate Governance the practice of nominating and electing
independent
director/s in their Boards. Said entities shall be referred to in
this Rule as “covered companies”.
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2.
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
judgment in carrying out his responsibilities as a director in any
covered
company and includes, among others, any person who:chanroblesvirtuallawlibrary
A.
Is not a director or officer of the covered company or of its related
companies
or any of its substantial shareholders except when the same shall be an
independent director of any of the foregoing;
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B.
Does not own more than two percent (2%) of the shares of the covered
company
and/or its related companies or any of its substantial shareholders;
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C.
Is not related to any director, officer or substantial shareholder of
the
covered company, any of its related companies or any of its substantial
shareholders. For this purpose, relatives include spouse, parent,
child,
brother, sister, and the spouse of such child, brother or sister;
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D.
Is not acting as a nominee or representative of any director or
substantial
shareholder of the covered company, and/or any of its related companies
and/or any of its substantial shareholders, pursuant to a Deed of Trust
or under any contract or arrangement;
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E.
Has not been employed in any executive capacity by the covered company,
any of its related companies and/or by any of its substantial
shareholders
within the last five (5) years;
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F.
Is not retained, either personally or through his firm or any similar
entity,
as professional adviser, by that covered company, any of its related
companies
and/or any of its substantial shareholders, within the last five (5)
years;
or
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G.
Has not engaged and does not engage in any transaction with the covered
company and/or with any of its related companies and/or with any of its
substantial shareholders, whether by himself and/or with other persons
and/or through a firm of which he is a partner and/or a company of
which
he is a director or substantial shareholder, other than transactions
which
are conducted at arms length and are immaterial.
3.
No person convicted by final judgment of an offense punishable by
imprisonment
for a period exceeding six (6) years, or a violation of this Code,
committed
within five (5) years prior to the date of his election, shall qualify
as an independent director. This is without prejudice to other
disqualifications
which the covered company’s Manual on Corporate Governance provides.
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4.
Any controversy or issue arising from the selection, nomination or
election
of independent directors shall be resolved by the Commission by
appointing
independent directors from the list of nominees submitted by the
stockholders.
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5.
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
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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.
6.
Qualifications and Disqualifications
A.
An independent director shall have the following qualifications:chanroblesvirtuallawlibrary
(i)
He shall have at least one (1) share of stock of the corporation;
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(ii)
He shall be at least a college graduate or he shall have been engaged
or
exposed to the business of the corporation for at least five (5) years;
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(iii)
He shall possess integrity/probity*; and
(*Based
on leading practices on corporate governance. Explanation shall be
provided
in case of noncompliance)
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(iv)
He shall be assiduous*.
(*Based
on leading practices on corporate governance. Explanation shall be
provided
in case of noncompliance)
B.
No person enumerated under Section II (5) of the Code of Corporate
Governance
shall qualify as an independent director. He shall likewise be
disqualified
during his tenure under the following instances or causes:chanroblesvirtuallawlibrary
(i)
He becomes an officer or employee of the corporation where he is such
member
of the board of directors/trustees, or becomes any of the persons
enumerated
under Section II (5) of the Code on Corporate Governance*;
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(ii)
His beneficial security ownership exceeds two percent (2%) of the
outstanding
capital stock of the company where he is such director*;
(*Based
on leading practices on corporate governance. Explanation shall be
provided
in case of noncompliance)
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(iii)
Fails, without any justifiable cause, to attend at least 50% of the
total
number of Board meetings during his incumbency*;
(*Based
on leading practices on corporate governance. Explanation shall be
provided
in case of noncompliance)
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(iv)
Such other disqualifications which the covered company’s Manual on
Corporate
Governance provides.
7.
Number of Independent Directors
A.
All companies are encouraged to have independent directors. However,
issuers
of registered securities and public companies are required to have at
least
two (2) independent directors or at least twenty percent (20%) of its
board
size, whichever is the lesser. Provided further that said companies may
choose to have more independent directors in their boards than as above
required.
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B.
The Exchange/s are required to have at least three (3) independent
directors.
To effectively carry out the provisions of Section 33.2(g) of the Securities
Regulation Code, the Exchange’s independent director or a nominee
for
such director shall not solicit votes for himself.
8.
Nomination and Election of Independent Director/s
The
following rules shall be applicable to all covered companies:chanroblesvirtuallawlibrary
A.
The Nomination Committee (the “Committee”) shall have at least three
(3)
members, one of whom is an independent director. It shall
promulgate
the guidelines or criteria to govern the conduct of the
nomination.
The same shall be properly disclosed in the company’s information or
proxy
statement or such other reports required to be submitted to the
Commission.
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B.
Nomination of independent director/s shall be conducted by the
Committee
prior to a stockholders’ meeting. All recommendations shall be signed
by
the nominating stockholders together with the acceptance and conformity
by
the would-be nominees.
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C.
The Committee shall pre-screen the qualifications and prepare a final
list
of all candidates and put in place screening policies and parameters to
enable it to effectively review the qualifications of the nominees for
independent director/s.
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D.
After the nomination, the Committee shall prepare a Final List of
Candidates
which shall contain all the information about all the nominees for
independent
directors, as required under Part IV(A) and (C) of Annex “C” of SRC
Rule
12, which list, shall be made available to the Commission and to
all stockholders through the filing and distribution of the Information
Statement, in accordance with SRC Rule 20, or in such other reports the
company is required to submit to the Commission. The name of the
person or group of persons who recommended the nomination of the
independent
director shall be identified in such report including any relationship
with the nominee.
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E.
Only nominees whose names appear on the Final List of Candidates shall
be eligible for election as Independent Director/s. No other
nominations
shall be entertained after the Final List of Candidates shall have been
prepared. No further nominations shall be entertained or allowed on the
floor during the actual annual stockholders’/memberships’ meeting.
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F.
Election of Independent Director/s
i.
Except as those required under this Rule and subject to pertinent
existing
laws, rules and regulations of the Commission, the conduct of the
election
of independent director/s shall be made in accordance with the standard
election procedures of the company or its by-laws.
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ii.
It shall be the responsibility of the Chairman of the Meeting to inform
all stockholders in attendance of the mandatory requirement of electing
independent director/s. He shall ensure that an independent
director/s
are elected during the stockholders’ meeting.
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iii.
Specific slot/s for independent directors shall not be filled-up by
unqualified
nominees.
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iv.
In case of failure of election for independent director/s, the Chairman
of the Meeting shall call a separate election during the same meeting
to
fill up the vacancy.
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v.
The covered companies shall amend its by-laws in accordance with the
foregoing
requirements as soon as practicable.
9.
Termination/Cessation of Independent Directorship
In
case of resignation, disqualification or cessation of independent
directorship
and only after notice has been made with the Commission within five (5)
days from such resignation, disqualification or cessation, the vacancy
shall be filled by the vote of at least a majority of the remaining
directors,
if still constituting a quorum, upon the nomination of the Committee
otherwise,
said vacancies shall be filled by the stockholders in a regular or
special
meeting called for that purpose. An independent director so
elected
to fill a vacancy shall serve only for the unexpired term of his
predecessor
in office.
SRC
Rule 39.1 – Registration, Responsibilities and Oversight of
Self-Regulatory
Organizations
[formerly
SRC Rules 39.1-1, 2 & 6]
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1.
Rules Governing a Self Regulatory Organization which is an Organized
Exchange
A.
All organized Exchanges shall be subject to these procedures and
requirements
set forth in this Rule.
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B.
For purposes of this Rule:chanroblesvirtuallawlibrary
i.
Organized Exchange or Exchange means a registered Exchange, whether or
not registered as an SRO under the Code.
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ii.
Participant refers to any person who has been approved to use the SRO’s
services and facilities but is not a member therein.
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iii.
Securities laws refers to the Code and rules, regulations and orders
issued
by the Commission.
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iv.
SRO refers to a Self Regulatory Organization which is an organized
Exchange.
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v.
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 SRC Rule 40.3, paragraph 3.
C.
SRO Rulemaking
i.
Subject to Commission approval and pursuant to the procedures set forth
in SRC Rule 40.3, 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.
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ii.
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.
D.
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.
E.
Compliance and Surveillance
i.
An SRO shall establish an independent audit, compliance and
surveillance
office separate from the Exchange or within the Exchange, and in such
form
and substance that the Commission, by order, may prescribe.
Such office shall not be subordinated or otherwise controlled in its
activity
by the Exchange Board or its review unit, and shall be responsible for
carrying out the SRO’s enforcement role pursuant to the securities law
and for the disciplining of participants. Such office shall further
submit
to the Commission a copy of its findings within three (3) business days
from completion or at the same time that said office provides a copy to
the Board or a review unit, if said office is an entity separate from
the
Exchange, or to any person or unit outside of the office if said office
is an integral unit within the Exchange, whichever is earlier. Nothing
in this rule shall be understood to preclude the Commission from
requiring
said office to submit a status report or any other kind of report on
any
of the activities that it is performing.
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ii.
The Compliance and Surveillance office, in order to protect the
interest
of investors and the public in general, arrest the further commission
of
violations of the securities law, prevent financial instability and
damage
to the capital market caused by delay, and/or risk manage Broker Dealer
operations effectively, may summarily suspend or impose limitations
upon
the erring Broker Dealer without need of approval from the Exchange
Board
or its review unit. Provided, however, that the Exchange Board shall,
within
five (5) trading days from implementation of such order, convene to
review,
confirm, modify, or reverse the Compliance and Surveillance office’s
action.
Failure by the Exchange Board or its review unit to resolve the summary
order shall be deemed an automatic confirmation of the action taken by
the Compliance and Surveillance office.
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iii.
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. The SRO shall notify
the
Commission within forty eight (48) hours of any instance wherein it
fails
to enforce compliance with the provisions of the securities laws and
the
implementing rules and regulations and the SRO rules, which it believes
is justifiable, and within ten (10) days submit a complete report of
such
an instance.
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iv.
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, paragraph 6.
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v.
An SRO shall monitor market conditions
and
trading activity to detect violations of the securities law and
SRO
rules.
a.
The SRO shall conduct market surveillance of all trading activity on
the
SRO pursuant to SRO rules setting forth surveillance procedures and
guidelines.
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b.
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.
vi.
The Commission may, on its own initiative, monitor the market to ensure
that the SRO is fulfilling its functions and to ensure further that
each
activity or potential problem area in the market is adequately covered
and being reasonably addressed.
F.
Periodic Examinations
i.
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 of members with 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. The submitted calendar
shall
include the manner of selection and prioritization used by the SRO in
formulating
it. The manner of selection and prioritization shall be based on the
historical
and potential risks that each member posed to the market. This calendar
shall be treated as confidential information. Periodic examination of
each
member firm shall be conducted without prior notice to the member firm.
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ii.
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 directing 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, promptly notify the Commission
through
a brief written report and without delay initiate an investigation.
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iii.
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.
G.
Investigations
i.
An SRO shall investigate suspected violations of the securities law and
SRO rules based on complaints, examination/audit findings or unusual
trading
activities or verified referrals from a member, other trading
participant,
SRO other than an Exchange, clearing agency, transfer agent, any
registered
person, or the Commission and take disciplinary action, where
appropriate,
pursuant to SRO rules.
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ii.
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.
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iii.
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.
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iv.
The Commission shall not be precluded from initiating its own
investigation
ahead of, parallel to or following an investigation conducted by an
SRO.
In such an event, the SRO shall coordinate, cooperate, and provide a
copy
to the Commission, upon notice or order, documents, pieces of evidence
or other information related to the case that it may have earlier
gathered
or are available in its database and which it may readily procure.
Unless
specifically ordered by the Commission or by a competent court to
cease,
the SRO shall continue to conduct its own investigation pursuant to its
mandate. In case of conflict between the findings of the
Commission
and the Exchange, the former’s decision shall prevail. For
purposes
of initiating its own investigation, the Commission, through the
Chairperson,
may designate any department, other than the Compliance and Enforcement
Department or form the task force for the purpose of taking the lead in
such investigation.
H.
Discipline of SRO Members and Participants
i.
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.
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ii.
In any disciplinary hearing by the SRO, other than a proceeding brought
pursuant to paragraph (iii) 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.
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iii.
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 (ii) above. The Commission, by
order,
may stay a summary action motu propio 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.
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iv.
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 motu propio 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,
or omission 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.
I.
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
i.
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;
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ii.
Take over the activities of an SRO pursuant to SRC Rule 40.5;
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iii.
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;
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iv.
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
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v.
Take other actions as provided by the Code.
J.
SRO Reporting
An
SRO shall submit the following reports to the Commission:chanroblesvirtuallawlibrary
i.
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;
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ii.
Monthly reports on capital adequacy requirements by members;
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iii.
Quarterly reports on the result of the monitoring of trading of listed
companies and investigations conducted with respect thereto;
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iv.
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;
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v.
Semi-annual report containing information on the number of investor
complaints
received, investigated, nature of claim, status and manner of
disposition;
and
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vi.
Such other information as may, from time to time, be required by the
Commission
from the SRO.
K..
SRO Relationship with Commission.
i.
In order to enhance investor protection and more effectively utilize
existing
resources, the Commission and the 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.
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ii.
The Commission and the SRO shall work closely and try to coordinate
their
media campaigns on the securities industry to generate positive public
opinion and increase investor confidence.
2.
Registration of Associations of Brokers and Dealers and Other Self
Regulatory
Organizations
A.
An application for registration as an Association of Securities Brokers
and Dealer 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.
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B.
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 applicant 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.
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C.
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.
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D.
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.
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E.
Amendments to the registration statement shall be filed, at least one
copy
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.
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F.
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.
3.
Allocation of Regulatory Responsibilities Among Self Regulatory
Organizations
A.
Any two (2) 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.
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B.
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.
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C.
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.
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D.
Upon the effectivity 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 another SRO is responsible under the plan, to the extent of
the
responsibility allocated.
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E.
After the Commission has declared a plan or part thereof effective
pursuant
to paragraph (C) of this rule, or acted pursuant to paragraph (F)
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.
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F.
In the event that a plan declared effective pursuant to paragraph (C)
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 40.3 – Commission Review Procedures
[formerly
SRC Rule 39.1-1]
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1.
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 and/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 the 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.
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2.
Except as provided in paragraph 3 below, within sixty (60) days after
submission
of the proposal or summary of comments required to be filed with the
Commission
pursuant to paragraph 1 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. If the proceeding is not
concluded
within ninety (90) days following its commencement, the proposal shall
be made effective by the SRO.
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3.
Notwithstanding paragraph 2 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
1 and 2 above.
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4.
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 1
above,
which case, the Commission, may upon proper finding, affirm, amend,
disallow
or order the discontinuance of the SRO’s proposal.
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SRC
Rule 40.4 – Commission Directions Regarding Rulemaking
[formerly
SRC Rule 39.1-1]
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1.
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 ensure fair dealing in securities
traded
on the SRO, ensure fair administration of the SRO, conform and
harmonize
SRO rules to the requirements set forth in the securities law, or to
otherwise
further the purposes of the securities law on such matters as:chanroblesvirtuallawlibrary
A.
safeguards in respect of the financial responsibility
of members and adequate provision against the evasion
of financial responsibility through the use of
corporate forms or special partnerships;
B.
supervision of trading practices;
C.
listing or delisting any security;
D.
hours of trading;
E.
manner, method and place of soliciting business;
F.
fictitious accounts;
G.
time and method of making settlements, payments and deliveries and of
closing
accounts;
H.
transparency of securities transactions and prices;
I.
fixing of reasonable rates of fees, interest, listing and other charges
but not rates of commission;
J.
minimum units of trading;
K.
odd-lot purchases and sales;
L.
minimum deposits on margin accounts; and
M.
supervision, auditing and disciplining of members or participants.
2.
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.
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SRC
Rule 40.5 – Commission Powers Over Exchanges, Clearing Agencies and
Self
Regulatory Organizations
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1.
Subject to paragraph 2 through 6 of this rule, the Commission may, when
it is satisfied that it is in the interest of the investing public, or
is appropriate to do so for the protection of investors, and 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
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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 violations 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.
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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 undertake the necessary remedies to correct the same.
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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, by said suspended officer or director.
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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.
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6.
At the end of the 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.
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7.
Immediately after the issuance of a decision to revoke registration, no
new transactions shall be effected, except as necessary to protect
investors.
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SRC
Rule 42 – Registration of Clearing Agencies
[formerly
SRC Rule 40.5-1]
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1.
Registration
A.
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, paragraph 3 on SEC Form 42-SRO; provided, further,
that
any registered clearing agency existing prior to the effectivity of
these
Rules shall, within 45 days from effectivity of these Rules, comply
with
all the requirements provided under this Rule, which were not provided
for in its original registration.
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B.
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 thirtieth (30th) day of the fourth (4th) month after the end
of the fiscal year, a prescribed annual fee.
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C.
After reviewing an application for registration as a clearing agency,
or
an amendment thereto, the Commission shall:chanroblesvirtuallawlibrary
i.
grant registration or approve the amendment;
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ii.
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;
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iii.
deny registration or the amendment if:chanroblesvirtuallawlibrary
a.
the clearing agency does not have the capacity and resources to enforce
compliance with its rules as proposed or amended; or
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b.
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
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c.
the application for registration or an amendment thereto is incomplete,
inaccurate or misleading; or
iv.
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.
D.
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.
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E.
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 One hundred five (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.
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F.
Nothing in this Rule shall be construed as precluding the Commission
from
requiring an applicant for registration or a registered clearing agency
to submit other requirements it may deem reasonably necessary to
effectively
regulate and supervise the clearing agency and/or to protect the
interest
of the investing public.
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 – Margin
[formerly
SRC Rule 48.1-1]
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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 to an account in which the equity is less than Fifty
Thousand
Pesos (P50,000.00).
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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.
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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 twenty four (24) hours after the call is
issued.
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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 Ten Thousand Pesos (P10,000.00), no action need be taken by the
Broker
Dealer.
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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.
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SRC
Rule 49.1 Restrictions on Borrowings by Members, Brokers, and Dealers
[formerly
SRC Rules 49.1-1 and 49.1-2]
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virtual law library
1.
Net Capital Rule
A.
i. Every Broker Dealer at all times shall have and maintain a net
capital
of Five Million Pesos (P5,000,000.00) or five percent (5%) of his
aggregate
indebtedness whichever is higher. However, a Broker Dealer who deals
only
with proprietary shares and who does not keep the shares under its
custody
shall have and maintain a net capital of P2.5 Million Pesos or two and
one-half percent (2.5%) of his aggregate indebtedness, whichever is
higher.
ii.
Every Broker Dealer shall make a computation of net capital on a daily
basis. Such computations, upon request of an Exchange if such
Broker
Dealer is a member, and/or the Commission shall immediately be provided
in written form.
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iii.
Every broker dealer shall file with the Commission its certified
monthly
financial and operational report (FINOP) on or before the 15th of the
following
month. The FINOP shall be certified by the firm’s Associated
Person
and President/Nominee Director and a copy submitted to the Broker
Dealer’s
Audit Committee or in lieu thereof, its Board of Directors.
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iv.
Every Broker Dealer shall immediately cease doing business as a Broker
Dealer, and shall 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.
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v.
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.
B.
No Broker Dealer shall permit its aggregate indebtedness to all other
persons
to exceed 2,000 percent of its net capital.
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C.
Notwithstanding the requirement in paragraphs A & B above, every
Broker
Dealer shall notify the Commission in writing within twenty four (24)
hours,
the occurrence of any of the following events:chanroblesvirtuallawlibrary
i.
The Broker Dealer’s computation shows that its Aggregate Indebtedness
is
in excess of 1,700 percent of its adjusted net capital; and/or
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ii.
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.
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The
Broker Dealer shall also include in its notice to the Commission
the measures it will adopt to comply with the net capital requirement
of
whichever is higher between Five Million Pesos (P5,000,000.00) or
five percent (5%) of aggregate indebtedness (for Broker Dealer in
securities)
or Two Million Five Hundred Thousand Pesos (P2,500.000.00) and two and
one-half percent (2.5%)of aggregated indebtedness (for broker dealer in
proprietary shares having no custody of the shares), whichever is
higher.
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The
Broker Dealer is given ten (10) calendar days within which to effect
its
proposal. Pending actual implementation, the Broker Dealer is required
to notify the Commission on a daily basis of its Net Capital position.
D.
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
i.
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
paragraph 2;
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ii.
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
paragraph
2;
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iii.
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 paragraph 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;
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iv.
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;
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v.
Indebtedness subordinated to the claims of creditors pursuant to a
satisfactory
subordination agreement in conformity with SRC Rule 49.1 paragraph 2;
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vi.
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 paragraph 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;
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vii.
Credit balances in accounts of general partners;
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viii.
Deferred tax liabilities; and
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ix.
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.
E.
The term net capital shall 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 position shall be marked to their market
value:chanroblesvirtuallawlibrary
i.
Adding unrealized profits (or deducting unrealized losses) in the
accounts
of the Broker Dealer.
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ii.
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 paragraph 2 and in accordance with the
following schedule:chanroblesvirtuallawlibrary
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Period from execution
date
Allowable
of
Agreement
Deduction
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Within the first
year
100%
Between the 1st and 2nd
year
75%
Between the 2nd and 3rd
year
50%
During the 3rd
year
25%
Beyond the 3rd
year
0%
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iii.
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.
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iv.
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.
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v.
Deducting fixed assets and assets which cannot be readily converted
into
cash [less any indebtedness excluded in accordance with paragraph D
(iv)]
including, among other things:chanroblesvirtuallawlibrary
a.
Real estate; furniture and fixtures; Exchange memberships/trading
rights;
prepaid rent, insurance and other expenses; goodwill, organization
expenses;
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b.
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
paragraph
2.
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For
the purpose of the above, a loan or any other form of receivables shall
be considered “unsecured” unless the following conditions exist:chanroblesvirtuallawlibrary
(1)
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;
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(2)
the collateral is in the possession or control of the Trading Member;
and
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(3)
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.
c.
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;
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d.
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 an 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;
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e.
All other unsecured receivables; all assets doubtful of collection less
any reserves established therefore; 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;
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f.
One percent (1%) of the market value of securities borrowed
collateralized
by an irrevocable letter of credit;
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g.
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 the Exchange, where the Broker Dealer is a member 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;
vi.
a. 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.
b.
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 therefore;
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c.
For an Exchange member, the 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 (v)(a) above for up to ten (10) business days if it finds
that exceptional circumstances warrant an extension.
vii.
a. Deducting for all securities or evidences of indebtedness [other
than
those described in paragraphs (vi) (b) and (c) 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 percent (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%) of the market value of such excess. No deduction need be made in
the case of:chanroblesvirtuallawlibrary
(1)
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 of
such
Broker Dealer; or
(2)
A security that has been called for redemption and that is redeemable
within
ninety (90) days.
b.
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
(1)
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 paragraph (vii)(a)
above;
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(2)
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 Broker
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%);
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(3)
Where 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 paragraph
(b)(2)
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
paragraph
(a) above.
c.
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
long
or short positions, whichever is greater, 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%
d.
Deducting in the case of unit trusts and other investments in the
proprietary
or other accounts of the Broker Dealer forty percent (40%) of the
market
value of such investments.
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e.
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 paragraph 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 paragraph 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.
viii.
Deducting 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 (D)(v) 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.
E.
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.
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F.
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 SRC Rule
34.1
wherein the latter maintains separately a Dealer account and a special
omnibus account in behalf of his customer with the former.
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G.
i. 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.
For
purposes of determining the market value of all securities used as
collateral
for a receivable or those held in the proprietary account or other
accounts
of a Broker Dealer, said securities shall be considered as having a
ready
market if the total holdings of the company (securities used as
collateral
and those held in proprietary account or other accounts taken together)
can be disposed over the next One hundred twenty (120) calendar days or
any such period which the Commission may later determine, taking into
consideration
the average daily trading volume of that type of security computed over
the last One hundred eighty (180) calendar days or such representative
period acceptable to the Commission, both reckoned from the day of net
capital computation. A haircut of one hundred percent (100%) of
the
market value of the securities will be deducted from the excess which
cannot
be disposed within the hypothetical One hundred twenty (120) calendar
day
period.
ii.
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.
H.
LIMITATIONS ON WITHDRAWAL OF EQUITY CAPITAL
i.
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 paragraph 2 which are scheduled to
occur
within one hundred and eighty (180) days following such withdrawal,
advance
or loan if:chanroblesvirtuallawlibrary
a.
The Broker Dealer’s net capital would be less than one hundred twenty
percent
(120%) of the minimum amount required by paragraph (A) of this rule; or,
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b.
The aggregate indebtedness of the Broker Dealer exceeds one thousand
five
hundred percent (1500%) of its net capital.
ii.
For purposes of paragraph (H)(i) 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.
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iii.
Paragraph (H)(i) 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 (H)(i) above.
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iv.
For the purpose of paragraph (H)(i) 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.
I.
The format for the net capital computation is set forth in “Annex
49.1-1-A”
2.
Satisfactory Subordination Agreements
A.
i. This rule sets forth minimum and non-exclusive requirements for
satisfactory
subordination agreements (hereinafter “subordination agreement”).
The Exchange, Commission, or Broker Dealer may require or include such
other provisions as may be deemed necessary to the extent that such
provisions
do not cause the subordination agreement to fail to meet the minimum
requirements
of this Rule.
The
subordinated agreement shall be approved by the Exchange, if affecting
an Exchange Member, or by the Commission, if affecting a non-Exchange
Member.
Said agreement shall take effect upon such approval.
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ii.
For purposes of SRC Rule 49.1:chanroblesvirtuallawlibrary
a.
A subordination agreement may be either a subordinated loan agreement
or
a secured demand note agreement.
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b.
“Subordinated loan agreement” shall mean a notarized agreement
evidencing
or governing a subordinated borrowing of cash.
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c.
The“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 thirty percent (30%) except for
securities
issued by the Republic of the Philippines. In lieu of the thirty
percent (30%) 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 SRC Rule 49.1, paragraph 1(D)(vi)(c).
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d.
“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.
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e.
(1) Secured demand note agreement shall mean a notarized 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.
(2)
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.
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(3)
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.
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(4)
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.
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(5)
Upon payment by the lender, as distinguished from a reduction by the
lender
which is provided for in “Annex 49.1-2A” paragraph 6(C) or reduction by
the Broker Dealer as provided for in “Annex 49.1-2A” paragraph (b)(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
preferred
or common stock(s) 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.
f.
“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.
B.
Recourse to the Subordination Agreements is viewed as a temporary
relief
to address net capital requirements of Broker Dealers and is not
intended
to replace the permanent infusion of capital by stockholders. Thus,
subordinated
loans shall be for a period of one (1) year and is renewable annually
but
for a period not exceeding two (2) years or for such shorter period as
the Commission deems appropriate, provided however, that a capital
buildup
plan shall be a requirement for the renewal of the subordinated loan.
Advances
or Agreements that have been outstanding for more than three (3) years
would require conversion to capital.
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C.
In order to ensure financial viability of the Broker Dealer, the
Exchange,
for Exchange Broker Dealers, or the Commission, for non-Exchange Broker
Dealers, may impose additional requirements to regulate the resort to
financing
by way of subordination agreements and may exercise discretion in the
approval
of such agreements.
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D.
The Minimum requirements for Subordination Agreements and
Miscellaneous
Provisions and the sample format of the Subordinated Loan Agreement are
set forth in Annex 49.1-2- A and Annex 49.1-2-B, respectively.
SRC
Rule 49.2 – Customer Protection Reserves and Custody of Securities
[formerly
SRC Rule 49.2-1]
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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.
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B.
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 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.
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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;
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ii.
Provides that the lender will be given a schedule of the securities
actually
borrowed at the time of the borrowing of the securities;
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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;
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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 (100%) of
the collateral then held by the lender, the borrowing Broker Dealer
must
provide additional collateral of the type described in paragraph
(iii)(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;
or
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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;
or
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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;
or
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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; or
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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; or
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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; or
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
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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 its 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; or,
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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,
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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.
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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
49.2-A.”
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 as "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 (by
maintaining
separate bank deposit account) and/or qualified securities (by opening
a custody account) in amounts computed in accordance with the formula
attached
hereto as “Annex 49.2-B.”
A
Broker Dealer, in addition to or in lieu of maintaining a Reserve Bank
Account, may, upon proper application with and approval by the
Commission,
deposit qualified securities with duly accredited or recognized
entities
exercising custodianship functions, For this purpose, the Commission
may
prescribe other conditions that shall govern deposits of cash and/or
qualified
securities outside the banking system and with affiliated companies.
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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.
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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 one (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 eight hundred percent
(800%)
of net capital as defined in SRC Rule 49.1and 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 Twenty Five
Million
Pesos (P25,000,000.00), 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 one hundred five percent (105%) amount so
computed
no later than one (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 eight hundred
percent (800%) 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
eight hundred percent (800%) of his net capital.
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iii.
Computations in addition to the computations required in this paragraph
(C) above, may be made as of the close of any other business day, and
the
deposits so computed shall be made no later than one (1) hour after the
opening of banking business on the second following business day.
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iv.
The Broker Dealer shall make and maintain a record of each such
computation
made pursuant to paragraph (C) 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 and Entities with custodianship arrangements
A
Broker Dealer required to maintain the Reserve Bank Account prescribed
by paragraph of this rule shall obtain and preserve in accordance with
SRC Rule 52.1 paragraph 2 a written notification from each bank in
which
the firm has its Reserve Bank Account that the bank and/or entity with
custodianship arrangements (custodian) was informed that all cash
and/or
qualified securities deposited therein are being held by the bank
and/or
custodian 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/or custodian, and the Broker Dealer shall have a
written
contract with the bank and/or custodian 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/or custodian
and
shall be subject to no right, charge, security interest, lien or claim
of any kind in favor of the bank, and/or custodian, or any person
claiming
through the bank and/or custodian.
The
Broker Dealer shall at all times file with the Commission and the
Exchange
a copy of the notifications duly received by the Bank and/or custodian.
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 of this rule. A bank and/or custodian 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,
paragraph
2.
7.
Buy-In of Short Security Differences
A
Broker Dealer shall within ten (10) days after the date of the
examination,
count, verification and comparison of securities pursuant to SRC Rule
52.1,
paragraph 10, preparation of the annual report of financial condition
in
accordance with SRC Rule 52.1, paragraph 5, or for any other purpose,
buy-in
all short security differences which are not resolved during the ten
(10)
day period. This requirement is without prejudice to the independent
determination
by the Commission or the Exchange of the Broker Dealer’s liability
pursuant
to the other provisions of the Code and the Rules
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, 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.
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B.
Upon written application by a Broker Dealer, the Commission, 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
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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, excess margin securities not
reasonably
required to collateralize such customer's indebtedness to the Broker
Dealer.
11.
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)(i) 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.
12.
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 SRC Rule 34.1 hereof) wherein the latter maintains
separately
a Dealer account and a special omnibus account in behalf of his
customer
with the former.
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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
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ii.
Securities sold to, or bought 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.
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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.
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E.
Excess margin securities shall mean margin securities having a market
value
in excess of one hundred forty percent (140%) 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.
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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.
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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.
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H.
Other credit balances shall mean cash liabilities of a Broker Dealer to
customers other than free credit balances.
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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.
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J.
Principal officer shall mean the president, executive vice president,
treasurer,
secretary or any other person performing a similar function with the
Broker
Dealer.
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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.
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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.
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M.
Omnibus account shall mean an account in which a Broker Dealer effects
transactions for its customer through another Broker Dealer.
13.
Information relating to Possession and Control Requirements and the
Formula
for Determination of Reserve Requirements of Broker Dealers under SRC
Rule
49.2 are set forth as Annexes 49.2-A and 49.2-B, respectively.
SRC
Rule 49.3 – Lending and Voting Customers Securities
[formerly
SRC Rule 49.3-1]
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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 – Purchases and Sales in Cash Account
[formerly
SRC Rule 50.1]
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1.
Purchases by a customer in a cash account shall be paid in full within
three (3) business days after the trade date.
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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 in
which
case, notification in writing shall be made with the Exchange and the
Commission.
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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.
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4.
If the amount of money due from a customer in a cash account is less
than
Ten Thousand Pesos (P10,000.00) the Broker Dealer may choose not to
take
the action required by paragraph 2.
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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.
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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.
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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 whatsoever the Broker Dealer has not obtained possession of
the securities from the customer on the next business day after
settlement
date but not beyond ten (10) business days for the customer to deliver
the securities, the Broker Dealer shall immediately thereafter close
the
transaction with the customer by purchasing securities of like kind and
quantity, unless such purchase cannot be effected within said period
for
justifiable reasons in which case, notification in writing shall be
made
with the Exchange and the Commission
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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– Accounts and Records, Reports, Examination of Exchanges,
Members,
and Others
[formerly
SRC Rules 52.1-1, 2, 3, 4, 5, 6, 7, 8, 9, 10, and a new provision on
Aging
of Receivables]
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1.
Books and Records Rule
A.
Every Broker Dealer shall make and keep current the following books and
records relating to its business and shall be maintained in the
principal
office of the Broker Dealer:chanroblesvirtuallawlibrary
i.
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.
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ii.
Ledgers reflecting all assets and liabilities, income and expense and
capital
accounts.
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iii.
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.
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iv.
Ledgers (or other records) reflecting the following:chanroblesvirtuallawlibrary
a.
Securities in transfer;
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b.
Dividends and interest received and paid, including receivable and
payable
balances by security;
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c.
Securities borrowed and securities loaned-shares and monies;
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d.
Monies borrowed and monies loaned (together with a record of the
collateral
therefor and any substitutions in such collateral);
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e.
Securities and monies failed to receive and failed to deliver;
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f.
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
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g.
Repurchase and reverse repurchase agreements.
v.
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 or
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.
vi.
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.
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vii.
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 paragraph 1.
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viii.
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.
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ix.
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.
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x.
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.
xi.
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.
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xii.
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
a.
His name, address, and the starting date of his employment or other
association
with the Broker Dealer;
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b.
His date of birth;
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c.
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;
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d.
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;
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e.
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;
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f.
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;
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g.
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
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h.
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.
xiii.
Logbook on Material Compliance and non-compliance of Broker firms and
the
Compliance Reports maintained and/or submitted by the Associated Person
pursuant to SRC Rule. 30.26 paragraph (6).
B.
Every Broker Dealer shall immediately make available any or all of its
books and records, furnish copies thereof, and prepare and submitted
reports
upon request of the Commission, an Exchange or any other self
regulatory
organization of which it is a member or a 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.
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C.
The explanation for the Books and Records Rule is set forth in “Annex
52.1-A.
2.
Records Retention Rule
A.
Every Broker Dealer shall preserve for a period of not less than five
(5)
years, the first two (2) years in an easily accessible place, all
records
required to be made pursuant to Paragraphs 1 (A) (i), (ii), (iii) and
(iv)
of SRC Rule 52.1 the Books and Records Rule.
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B.
Every Broker Dealer shall preserve for a period of not less than three
(3) years, the first two (2) years in an accessible place:chanroblesvirtuallawlibrary
i.
All records required to be made pursuant to paragraphs (A) (v), (vi),
(vii),
(viii), (ix), (x), (xi), (xii) of the Books and Records Rule, SRC Rule
52.1, paragraph 1;
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ii.
All Check books, bank statements, cancelled checks and cash
reconciliations;
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iii.
All bills receivable or payable (or copies thereof), paid or unpaid,
relating
to the business of such Broker Dealer as such;
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iv.
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;
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v.
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;
vi.
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.
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vii.
All written agreements (or copies thereof) entered into by such Broker
Dealer relating to his business as such, including client agreements.
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viii.
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, paragraph 5:chanroblesvirtuallawlibrary
a.
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;
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b.
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;
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c.
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;
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d.
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;
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e.
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;
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f.
Quantity, price, and valuation of each security underlying the haircut
for undue concentration made in the Computation for Net Capital;
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g.
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;
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h.
Description, settlement date, contract amount, market price, and
valuation
for each aged failed to deliver requiring a charge in the Computation
of
Net Capital;
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i.
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
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j.
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.
ix.
A detailed description of the procedures which the Broker Dealer
utilizes
to comply with requirements set forth in “Annex E”.49.1-1-A
C.
Every Broker Dealer shall preserve for a period of not less than
five (5) 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, including but not limited to customer identification, account
files and business correspondence provided, that if money laundering,
criminal
or administrative cases have been filed in court or an
investigation
is being conducted wherein the customer is involved or impleaded as a
party
to the case or investigation, the file must be retained beyond the five
(5) year period until it is confirmed by final judgment that the case
has
been finally resolved or terminated by the court.
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D.
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.
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E.
Every Broker Dealer shall maintain and preserve in an easily accessible
place all records required under paragraph (A) (xii) of the Books and
Records
Rule, SRC Rule 52.1, paragraph 1 until at least three (3) years after
the
associated person or salesman has terminated his employment and any
other
connection with the Broker Dealer.
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F.
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 the Commission or any Exchange of which it is a member
for
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
copies
of the microfilm for the time required.
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G.
Every Broker Dealer who ceases operation shall preserve for a period of
not less than five
(5)
years, from the date that the Exchange and/or Commission has approved
its
operation to cease, all records required to be maintained pursuant to
the
Books and Records Rule. The Broker Dealer shall inform the Exchange and
the Commission of the names and addresses of at least two (2) person/s
responsible in the safekeeping of all the records, reporting any change
in the person/s responsible, if there is any. For this purpose, the
Broker
Dealer and the named records custodians shall execute and file with the
Commission a notarized undertaking to this effect. If money
laundering,
criminal or administrative cases have been filed in court or an
investigation
is being conducted wherein the customer is involved or impleaded as a
party
to the case or investigation, the file must be retained beyond the five
(5) year period until it is confirmed by final judgment that the case
has
been finally resolved or terminated by the court.
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H.
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.
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I.
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.
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.
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.
5.
Annual Audited Financial Reports of Broker Dealers
A.
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 Commission-accredited independent certified public
accountant
and a statement of management responsibility of said Broker Dealer.
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B.
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 One Hundred Ten (110) days after the close of such
fiscal year.
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C.
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 or Statement of Cash
Flows,
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,
paragraph
1, A Statement of Management’s Responsibility; Information relating to
the Possession or Control Requirements under “Annex 49.2-A” and a
Computation
for Determination of Reserve Requirements under “Annex 49.2-B”, a
Report describing any material inadequacies found to exist or found to
have existed since the date of the previous audit, the Results of
Quarterly
Securities Count Conducted pursuant to SRC Rule 52.1, paragraph 10 as
of
the date of the balance sheet statement in the Annual Audited Financial
Report.
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D.
All supporting papers pertaining to such report or statement shall be
kept
in the possession of the Broker Dealer for at least five (5) years and
shall be made available for examination by the Commission and an
Exchange,
if the Broker Dealer is a member of that Exchange.
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E.
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.
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F.
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.
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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
i.
Inhibit a Broker Dealer from completing securities transactions or
promptly
discharging its responsibilities to customers or to other Broker
Dealers
or creditors;
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ii.
Result in material financial loss;
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iii.
Result in material misstatements of the Broker Dealer’s financial
statements;
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iv.
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.
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G.
The format for the Annual Audited Financial Reports (AAFR) for Broker
Dealer
is set forth in Annex 52.1-B.
6.
Customer Account Information Rule
Every
Broker Dealer shall maintain customer accounts as follows:chanroblesvirtuallawlibrary
A.
For each account, the following information:chanroblesvirtuallawlibrary
i.
Customer's name, residence address (present and permanent) and
residence
telephone;
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ii.
Date and place of birth;
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iii.
Whether customer is an institutional customer;
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iv.
Nationality;
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v.
Signature of the salesman introducing the account and signature of the
partner, officer or manager who accepts the account;
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vi.
If the customer is a corporation, partnership or other legal entity,
the
names of any person authorized to transact business on behalf of the
entity;
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vii.
Specimen signatures; and
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viii.
Option whether confirmation of customer orders would be via courier,
facsimile
or electronically.
B.
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
i.
Customer's tax identification number, Social Security System number or
Government and Insurance System number;
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ii.
Occupation of customer and name, address and telephone number of
employer;
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iii.
Whether the customer is employed by or otherwise associated with
another
Broker Dealer (e.g. officer, director, salesman, shareholder);
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iv.
Whether the customer is an officer or director of a company listed on
an
exchange;
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v.
The customer's investment objective and other related information
concerning
the customer's financial situation and needs;
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vi.
If duplicate confirmations are required to be sent to another person,
the
identity of that person and his relationship to the customer;
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vii.
Source of fund(s); and
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viii.
All other information contained in the prescribed CAIF as set forth in
Annex “.52.1-C.”
C.
For discretionary accounts, the Broker Dealer shall also:chanroblesvirtuallawlibrary
i.
Obtain the signature of each person authorized to exercise discretion
in
the account;
ii.
Record the date such discretion is granted.
D.
For corporate or institutional accounts, 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
i.
Articles of Incorporation/Partnership;
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ii.
Bylaws;
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iii.
Official address or principal business address;
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iv.
Secretary’s Certificate of board resolution authorizing the opening of
the account with the Broker Dealer firm;
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v.
List of directors/partners;
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vi.
List of stockholders owning at least two percent (2%) of the capital
stock;
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vii.
Contact numbers;
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viii.
Beneficial owners, if any;
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ix.
Verification of the authority and identification of the person
purporting
to act on behalf of the client;
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x.
Financial Information;
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xi.
Investment objective; and,
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xii.
All other information contained in the prescribed CAIF as set forth in
Annex “52.1-D.”
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For
purposes of this Rule, the term institutional account shall mean the
account
of:chanroblesvirtuallawlibrary
i.
A bank, insurance company, or registered investment company;
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ii.
Any other entity set forth in Section 10.1(l) of the Code as a
qualified
buyer; or
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iii.
Any other entity (whether a natural person, corporation, partnership,
trust
or otherwise) with total assets of at least = P1,200,000,000; provided,
however, that the Broker Dealer shall obtain from such entity a
declaration,
under oath, confirming ownership of such assets.
E.
If more than one party is named on the account, new account information
shall be obtained for each party on the account.
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F.
If the account is a trust account, a copy of the trust agreement shall
be required. 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.
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G.
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.
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H.
The Broker Dealer shall develop clear customer acceptance policies and
procedures when conducting business relations or accommodating specific
transactions and shall exercise due diligence in implementing its
policies
and procedures. Furthermore, it shall adopt adequate internal
control
measures for verifying and recording the true and full identify of
their
customers. It shall require customers to produce original documents of
identity issued by an official authority, preferably bearing a
photograph
of the customer and where practicable, maintain file copies of
documents
of identity; otherwise, relevant details on the identity documents will
be recorded.
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I.
In the case of corporate clients, the Broker Dealer shall require a
system
of verifying their legal existence and organizational structure, as
well
as the authority and identification of all persons purporting to act on
their behalf and shall exercise due diligence in implementing its
policies
and procedures. It shall endeavor to ensure, prior to
establishing
business relationships, that the corporate entity has not been or is
not
in the process of being dissolved, wound up, liquidated, or voided, or
that its business or operations has not been or is not in the process
of
being, closed, shut down, phased out, or terminated. Dealings
with
shell companies and corporations, being legal entities which have no
business
substance in their own right but through which financial transactions
may
be conducted, should be undertaken with extreme caution.
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J.
In addition to the requirements prescribed in the immediately preceding
paragraphs, in the case of customers who are acting as trustee,
nominee,
agent or in any capacity for and on behalf of another, the Broker
Dealer
shall verify and record the true and full identity of the person(s) on
whose behalf a transaction is being conducted. In case of doubt as to
whether
such persons are being used as dummies in circumvention of existing
laws,
the firm shall immediately make the necessary inquiries to verify the
status
of the business relationship between the parties.
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K.
Anonymous accounts, accounts under fictitious names, and all other
similar
accounts shall be absolutely prohibited.
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L.
Numbered accounts are allowed for trading purposes provided that the
owner
fills up the CAIF with his identity clearly indicated in the form.
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M.
The Broker Dealer cannot create new accounts without a face-to-face
meeting.
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N.
Within One hundred eighty (180) days after the effectivity of these
amendments,
all existing CAIFs accomplished by clients shall be updated or amended
to comply with the new requirements.
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O.
It is the Broker Dealer’s duty to know its clients well and,
accordingly,
it shall be primarily responsible in keeping current all material
information
contained in the CAIF.
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P.
The Broker Dealer, its directors, officers, and associated persons, are
required to report any suspicious client transaction to the Anti-Money
Laundering Council (AMLC), pursuant to the provisions of the Anti-Money
Laundering Act (RA 9160, as amended).
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For
purposes of this section, a “suspicious client transaction” shall mean
any transaction which causes any ordinary person to have a feeling of
apprehension
or mistrust about the transaction considering (a) its unusual nature or
circumstances, or (b) the person or group of persons with whom they are
dealing, and based on the bringing together of all relevant factors
including
knowledge or the person’s or persons’ business or background (as well
as
behavioral factors).
7.
Order Ticket Rule
A.
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.
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B.
All the necessary time recordings shall be disclosed for the
confirmation
to the customer upon his request.
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C.
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 (A) hereof, and comply with SRC Rule 34.1,
paragraph
1.
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D.
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,
paragraph 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, paragraph 1 when placing orders for their
own
account.
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E.
In addition to the information required in paragraphs 7 (A), (B), (C)
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 it is executed, and whether the order was
solicited
or unsolicited.
i.
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.
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ii.
The designation should be entered on real time on the order ticket and
indicated on the confirmation.
F.
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.
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G.
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, paragraph 1 regarding priority of
customer
orders.
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H.
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 and time stamping prints should
always be clear.
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I.
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.
8.
Customer Account Statements
A.
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. In exceptional
cases and only upon written request made by the customer, the
Broker
Dealer may issue quarterly statements in lieu of monthly statements,
such
written request being kept in the firm’s files for SEC’s or the
Exchange’s
audit/investigation purposes.
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B.
A Broker Dealer may issue quarterly statements to customers whose
accounts
have not been traded for a period of a least one (1) year (inactive
accounts).
The Broker Dealer can only be excused from this obligation if, after at
least three (3) attempts, the mails (with registry cards) are returned
by the post office for failure to locate the customers’ whereabouts. In
such cases, the Broker Dealer is required to notify the Exchange of the
nature of these accounts and keep in its files proof that these mails
were
indeed returned by the post office undelivered.
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C.
Notwithstanding the issuance of quarterly statements of account, the
Broker
Dealer is still required to maintain closing balances of customers’
positions
every month end and these balances must always be reflected and easily
identifiable in the company’s books and records. Moreover, they should
be available for inspection by the Exchange and/or the Commission at
any
time.
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D.
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.
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E.
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.
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F.
A Broker Dealer maintaining accounts of clients which have not been
traded
for three (3) years or more (dormant accounts) shall be required to
surrender
or turn over to the Commission these clients’ cash and security
positions
for safekeeping. The Commission shall hold them for a period of
ten
(10) years or such other period as may be prescribed by laws in trust
for
future claimants and, after such period, shall be disposed of pursuant
to escheat proceedings in favor of the Philippines government.
9.
Customer Complaint Rule
A.
Every Broker Dealer shall keep and preserve in each of its offices
either
(i) a separate file of all complaints of customers received by that
office
and the action taken by the Broker Dealer, or (ii) a separate record of
such complaints, properly indexed and referenced to the files
containing
the correspondence connected with such complaint.
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B.
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 properly indexed and referenced to the files containing
the correspondence connected with such complaint.
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C.
Complaint shall mean any written statement and/or a transcript/written
summary of the oral/verbal statements 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.
10.
Monthly Securities Counts by Brokers Dealers
A.
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.
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B.
Any Broker Dealer who is subject to the provisions of this rule shall
at
least once a month:chanroblesvirtuallawlibrary
i.
Physically examine and count all securities held;
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ii.
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;
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iii.
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;
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iv.
Compare the results of the count and verification with its records; and
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v.
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 10 (C) 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.
C.
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 month.
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D.
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.
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E.
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.
11.
Monthly Aging of Customers Receivable
A.
Every broker dealer shall file with the Commission its Monthly Aging
Schedule
of Customers Receivable on or before the 15th of the following month.
The
Aging Schedule, which shall be filed with the Financial and Operations
Report (FINOP), shall be certified by the firm’s Associated Person and
President/Nominee Director and also submitted to the Broker Dealer’s
Audit
Committee or in lieu thereof, its Board of Directors.
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B.
Unless a different format is prescribed by the Commission, the Aging
Schedule
shall indicate the monetary and securities collateral values of the
Customers
Receivable as of month end broken down as follows:chanroblesvirtuallawlibrary
Current
--Due in three (3) days
Less
than thirty (30) days
More
than thirty (30) up to three hundred sixty five (365) days or one year
More
than three hundred sixty five (365) days or one year up to three (3)
years
More
than three (3) years
C.
Consistent with the requirements of SRC Rule 50, detailed explanation
shall
be provided by the Broker Dealer for those customer accounts which
remain
outstanding for more than three (3) days.
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D.
Every Broker Dealer shall establish appropriate Allowances for Doubtful
Accounts and the basis for such computation of the Allowance shall be
properly
disclosed in the Report. The Commission or the Exchange shall have the
prerogative to determine the reasonableness of such receivable
valuation
standard taking into consideration generally accepted accounting
principles
and industry practices.
SRC
Rule 55.1 – Settlement Offers
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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).
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2.
An offer of settlement shall state that it is being made pursuant to
Section
55 of the Code and SRC 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.
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3.
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.
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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
prejudgment
by such enforcement officer based on the views expressed.
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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.
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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;
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ii.
the filing of proposed findings of fact and conclusions of law;
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iii.
proceedings before, and an initial decision by, the appropriate office
or division of the Commission so delegated;
iv.
all post-hearing procedures; and
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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;
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ii.
Any right to claim bias or prejudgment 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.
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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
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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.
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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.
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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.
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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.
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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.
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6.
A request for reconsideration shall be in writing and include
additional
factors for the Commission En Banc to consider.
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7.
The Commission En Banc may reconsider such determination only once and
its administrative decision shall not be subject to judicial review.
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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.
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SRC
Rule 68 – Special Accounting Rules
Rule
68 has already been amended in February 2003.
SRC
Rule 72.1 – General Rules and Regulations for Filing of SEC Forms with
the Securities and Exchange Commission
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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, three (3) copies of the
complete
filing, including exhibits and all other papers and documents filed as
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 (1) 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 three (3) copies (original and two (2) conformed) are for
Commission
use only, including one (1) copy for the public reference room.
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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.
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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 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.
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B.
All filings, and, insofar as practicable, all papers and documents
filed
as 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.
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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.
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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 through the last page of that
document
and any exhibit or attachment 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.
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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.
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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 that 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; or,
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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.
6.
Place of Filing
All
filings subject to the provisions of this Rule shall be filed with the
Commission by personal delivery, or such other mode as the Commission
may
prescribe to facilitate submissions.
7.
Preparation of Filings Generally
A.
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.
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B.
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.
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C.
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 document 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).
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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.
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iii.
The prospectus shall contain the information called for by all of items
of Part I of the applicable form. 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 the next
paragraph.
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iv.
Where any item 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.
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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 deemed
to cover such additional securities resulting from the split of, or the
stock dividend on, the registered securities. If prior to completion of
the distribution of the securities covered by a registration statement,
all the securities of a class which includes the registered securities
are combined by a reverse split into a lesser amount of securities of
the
same class, the amount of undistributed securities of such class deemed
to be covered by the registration statement shall be proportionately
reduced.
If paragraph 6 (B) (i) of this rule is not applicable, the registration
statement shall be amended prior to the offering of such additional or
lesser amount of securities to reflect the change in the amount of
securities
registered.
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iii.
Where a registration statement relates to securities to be offered
pursuant
to an employee benefit plan, including interests in such plan that
constitute
separate securities required to be registered under the Code, such
registration
statement shall be deemed to register an indeterminate amount of such
plan
interests.
9.
Additional Information
In
addition to the information expressly required to be included in a
registration
statement or report, there shall be added such further material
information,
if any, as may be necessary to make the required statements, in the
light
of the circumstances under which they are made not misleading.
10.
Amendments
All
amendments shall be filed under cover of the form amended, marked with
the letter "A" to designate the document as an amendment, e.g.,
"17-A/A-1",
“17-A/A-2” and in compliance with pertinent requirements applicable to
statements and reports. Amendments filed pursuant to this paragraph
shall
set forth the complete text of each item as amended. Amendments
shall
be numbered sequentially and be filed separately for each statement or
report amended.
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Amendments
to a registration statement may be filed either before or after
registration
becomes effective pursuant to SRC Rule 14.
11.
Disclaimer of Control
If
the existence of control of the registrant is open to reasonable doubt
in any instance, the registrant may disclaim the existence of
such.
In such case, however, the registrant shall state the material facts
pertinent
thereto.
12.
Incorporation by Reference
Except
as otherwise provided in SRC Rule 12.2 paragraph (2), information may
be
incorporated by reference in answer, or partial answer, to any item
required
in a filing governed by the provisions of this Rule.
13.
Incomplete Reports
All
reports shall comply with the full disclosure requirements of the
Rules.
Any report which shall be found to be materially incomplete shall be
considered
or deemed not filed.
SRC
Rule 72.2 – Procedure for Filing Request for Exemptive Relief under
Sec.
72.1 of the Code
[new
provision]
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1.
Any person may seek relief from any provision of the Code and the rules
adopted thereunder by filing a letter-request which shall state the
following:chanroblesvirtuallawlibrary
a.
the specific rule or order, requirement or prohibition from which
relief
is being sought;
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b.
the legal basis or justification for the exemption; and
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c.
the name, address, and telephone number/s of the applicant.
2.
The letter-request shall be filed with the appropriate Operating
Department
which has jurisdiction over the issue subject of the request. The
applicant
shall pay the corresponding filing fee in the amount of Five Thousand
Pesos
(P5,000) or such other amount as may be prescribed by the Commission.
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3.
The Operating Department shall review the letter-request. It may, if
deemed
necessary, conduct a hearing on such request. Thereafter, it
shall
make the appropriate recommendation to the Commission En Banc.
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4.
The Commission shall issue the Order either granting or denying the
request.
The same shall become final and executory upon due notice to the
applicant.
The Commission may also opt to publish the Order in the Commission’s
website
or in any other manner it may deem expedient.
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SRC
Rule 76– Repealing Clause
[new
provision]
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All
rules and regulations, circulars, orders, memoranda, or any part
thereof
and the rules and regulations promulgated by persons required to be
registered
under the SRC or any part thereof, in conflict with or contrary to
these
Rules or any portion hereof, are hereby repealed or modified
accordingly.
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