Advanced Securities Regulation
11 March 2015
1. Registration of securities
1.1.
Registration Statement
SUMMARY of certain procedural aspects of the registration of securities
under the SRC: [got this from a SRC Annotation]
 Filing of Registration Statement (SEC Form 12-1) - The issuer of the
securities (and no one else) must file with the SEC’s main office a
sworn registration statement using SEC Form 12-1, including (i) a
preliminary prospectus; (ii) a duly verified resolution of the issuer’s
board of directors authorizing the issuance and registration of the
securities; (iii) the written consent of any expert named as having
certified any part of the registration statement or any document used in
connection therewith; and (iv) in case the offering includes shares of
existing shareholders, a written certification of such shareholders as to
the accuracy of any part of the registration statement contributed by
such shareholders. The registration statement must be signed by the
issuer’s executive officer, principal operating officer, principal financial
officer, comptroller, principal accounting officer, and corporate
secretary (or persons performing similar functions) See Form 12-1
If the securities subject of the registration statement are intended to be
on an Exchange, a copy of the registration statement and all other
pertinent documents (including amendments thereto) must be filed
with that Exchange. Two copies of the listing application must also be
filed with the SEC. See SRC Rule 8.1

Payment of Filing Fee – the issuer pays to the SEC A filing fee of not
more than 1/10 of 1% of the maximum aggregate price at which the
securities are to be offered to the public. as set out in Sec. Form 12-1,
the filing and other fees are as follows:
Maximum
aggregate
securities to be offered
Not more than P500M.
price
of Amount of Filing Fee
0.10% of the maximum aggregate
price of the securities to be offered.
More than P500M but not more than P500,000 plus 0.75% of the excess
P750M.
over P500M.
More than P750m but not more than P687,500 plus 0.05% of the excess
P1B.
over P750M.
More than P1B.
P812,500 plus 0.025% of the excess
over P1B.

Publication of Notice – a notice of the filing of the registration
statement must be immediately published by the issuer, at its own
expense, once a week for two consecutive weeks, in two newspapers
of general circulation. The notice must state that the filed registration
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1.2.
statement (together with its attachments) is open to inspection to the
SEC during business hours, and copies thereof may be given to
interested parties at reasonable charge (SRC Subsection 12.5(b)).
Declaration of Effectivity – if the SEC finds an unamended registration
statement and its attachments to be complete and compliant with the
SEC requirements, the SEC will enter an order declaring the
registration statement, subject to such terms and conditions as the
SEC may impose for the protection of the investors. The SEC is to
decide within 45 days from the date of filing of the RS, or such later
date to which the issuer has consented. (SRC Subsection 12.6)
Issuer’s Oath – upon the effectivity of the RS, the issuer must state
under oath in every prospectus that all registration requirements have
been satisfied and all information in the registration statement and the
prospectus are to be true and correct. (SRC Subsection 12.7)
Sale of Securities – the sale of the securities must be commenced
within two business days from the date of effectivity of the registration
statement and continued until the end of the offering period or until the
sale is terminated by action of the issuer. However, exemption from
this requirement may be granted to the registrant “upon sufficient
justification that compliance therewith will defeat its offering
objectives”. (SRC Rule 8.1)
Notice of offering completion or termination – within three business
days from the completion or termination of the offering, a written notice
thereof (with an indication of the number of securities sold) must be
filed by the registrant with the SEC (SRC Rule 8.1 (1.D))
Shelf Registration – if there are unsold but registered securities and
they are offered after the completion or termination of the offering, an
updated registration statement must be filed with the SEC prior to their
offering or sale (SRC Rule 8.1 (2))
Prospectus
a) Information in Rule 12.1 and SEC Form 12.2
SRC Rule 12.1 – Requirements for Filings Pursuant to the Securities Regulation
Code and the Corporation Code of the Philippines [formerly, SRC Rule 12]
1. This Rule sets forth the requirements applicable to the contents of an issuer’s nonfinancial statement portions of the following:
A. Registration statements for the sale and/or distribution of securities pursuant to the
provisions of Sections 8 and 12 of the Code and SRC Rule 8.1 thereunder. Registration
Statements under Section 12 of the Code shall be filed on SEC Form 121;
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;
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
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.
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.
4. Information required to be disclosed under this Rule is set forth in “Annex C”
5. Definitions of terms used in the forms described in paragraph 1 of this Rule are set forth in
“Annex B”.
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.
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.
C. The conditions for registration of commercial papers are the following:
i. Filing of a registration statement under SEC Form 12-1, in accordance with SRC
Rules 8.1 and 12.1.
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.
iii. Except for issuance amounting to not more than twenty five percent (25%) of the
issuer’s networth or where there is an irrevocable committed credit line with a bank
covering one hundred percent (100%) of the proposed issuance, a commercial paper
issue shall be rated by a rating agency accredited by the Commission, in accordance
with the following rules:
a. Confidentiality of information
All information received by a credit rating agency (CRA) from an issuer shall
be kept confidential, except for those which:
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.
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.
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.
3) The credit rating agency need not get the approval of the issuer to
downgrade its rating on the issuer or an issue.
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:
1) nature and provisions of the debt obligation;
2) likelihood of default by an issuer;
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;
4) economic risk;
5) industry risk;
6) market position of the issuer;
7) business diversification of the issuer;
8) management and strategy;
9) financial risks;
10) capital structure/leverage;
11) financial flexibility, and
12) compliance with leading practices and principles on corporate
governance.
e. Application for accreditation
To apply for accreditation, a credit rating agency shall:
1) Be a stock corporation.
2) Have a minimum paid-up capital of at least Ten Million Pesos
(P10,000,000.00).
3) Submit to the Commission the following:
i. list of shareholders and their corporate affiliations;
ii. list of other business activities, if any;
iii. copies of the company’s Articles of Incorporation and By-Laws;
iv. a statement pertaining to ownership structure and possible conflict/s of
interest;
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;
vii. disclosure of affiliations, training, assistance or support it receives from
international rating agencies, if any;
viii. rating scales, criteria, measurements, symbols and the like, which it has in
use;
ix. operating procedures, rating policies, rating criteria and other rationale
used in arriving at a rating;
x. copy of model written agreement with issuers; and
xi. Manual on Corporate Governance.
4) An applicant may request confidentiality of the foregoing information except
its operating procedures, rating policies and rating criteria.
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.
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.
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.
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.
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.
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.
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. Noncompliance therewith shall be a sufficient ground, after notice and hearing, for the revocation
or suspension of said registration.
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.
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.
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.
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.
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.
b. “Warrant Instrument” – means the written document or deed containing the terms
and conditions of the issue and exercise of a Warrant, which terms and conditions
shall include:
1. the maximum underlying shares that can be purchased upon exercise;
2. the exercise period;
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.
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.
e. “Beneficiary Securities” – means the shares of stock and other securities of the
Issuer which form the basis of the entitlement in a Warrant.
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.
b. The registration of the Warrants shall include its underlying shares.
c. The issuer shall disclose in its registration statement the terms and
conditions of the warrant plan including computational data relative
thereto.
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.
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”.
c. In case of Non-detachable Warrants, the right granted under the
Warrant shall be described in the stock transfer or instrument
evidencing the Beneficial Securities. A Warrant Certificate or the stock
certificate or instrument evidencing the Beneficial Securities where the
non-detachable Warrant is described shall also state the following
(whether on its face or on its reverse side):
1) The warrant certificate number;
2) The par or issue value, class and number of the
corresponding underlying shares;
3) The exercise price, or the formula for computing the same,
or adjustments thereto;
4) The exercise period and the expiry date of the Warrant;
5) The procedure for the exercise;
6) The summary of the provisions contained in the Warrant
Instrument; and
7) Exchange ratio or the number of underlying shares which
may be purchased by each Warrantholder.
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.
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.
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:
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.
ii. The registration of the Options shall include its underlying shares.
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.
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.
v. In considering registration of stock Options, the Commission shall be guided by the
following:
a. Stocks granted to stockholders proportionately with their shareholdings may
be allowed.
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,
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.
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.
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.
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.
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.
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
Shares/Certificates
requirements
for
Proprietary
and
Non-Proprietary
A. The registrant shall clearly indicate in its Articles of Incorporation, By-Laws and
prospectus the following:
i. A description of the nature and type of the shares/certificates, rights and privileges
of the holders thereof particularly their right over the facilities of the Club;
ii. The certificates or shares shall be issued within sixty (60) days from the date of full
payment of the same;
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.
C. The Club shall:
i. Not collect membership dues unless the project is fifty percent (50%) usable as
indicated in the prospectus, unless the Club’s by-laws provide a higher percentage of
usability;
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;
iii. Notify club members of any increase in fees upon the Board’s approval of the said
increase; and
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.
E. The following documents shall be submitted with the registration statement as exhibits
thereof:
i. Copy of Subscription Agreement containing the required undertaking under
paragraph (B) above;
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;
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
iv. Copy of the Environmental Compliance Certificate from the Department of
Environment and Natural Resources covering the location of the project.
(SEC Form 12-1, See Attachment)
b) Information in Annex “C” (SRC Rule 12.1): Non-financial Disclosure
Requirement
(i)
Part I – Business
(ii)
Part II – Securities of Registrant
(iii)
Part III – Financial Information
(iv)
Part IV – Management and certain security holders
(v)
Part V – Corporate Governance
(vi)
Part VI – Registration Statement and Prospectus Provisions
(vii) Part VII – Exhibits
(Annex C See Attachment)
c) Warning – Rule 8.1(3)(D)
SRC Rule 8.1. – Requirement to File Registration Statement (RS)
D. A preliminary prospectus, which has been filed with the
registration statement required by Sections 8 and 12 of the Code,
may be circulated to potential investors prior to the effectiveness of
the registration statement if the following requirements have been
met:
i.
it meets all the requirements for a prospectus contained in
paragraph B hereof above;
ii.
iii.
it contains the following statement in bold face print, at least 12
point type prominently displayed:
A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS BEEN FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, BUT HAS NOT YET BEEN
DECLARED EFFECTIVE.
NO OFFER TO BUY THE
SECURITIES CAN BE ACCEPTED AND NO PART OF THE
PURCHASE PRICE CAN BE RECEIVED UNTIL THE
REGISTRATION STATEMENT HAS BECOME EFFECTIVE
THEREBY, AND ANY SUCH OFFER MAY BE WITHDRAWN OR
REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY
KIND, AT ANY TIME PRIOR TO THE NOTICE OF ITS
ACCEPTANCE. AN INDICATION OF INTEREST IN RESPONSE
HERETO INVOLVES NO OBLIGATION OR COMMITMENT OF
ANY KIND. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR BE CONSIDERED A SOLICITATION OF AN
OFFER TO BUY.
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;
d) Minimum public ownership rule
(MPO, See Attachment)
e) Taxation of sale of listed shares – Sec. 127, NIRC
SEC. 127. Tax on Sale, Barter or Exchange of Shares of Stock Listed
and Traded through the Local Stock Exchange or through Initial
Public Offering. –
(A) Tax on Sale, Barter or Exchange of Shares of Stock Listed and
Traded through the Local Stock Exchange. - There shall be levied,
assessed and collected on every sale, barter, exchange, or other
disposition of shares of stock listed and traded through the local stock
exchange other than the sale by a dealer in securities, a tax at the rate of
one-half of one percent (1/2 of 1%) of the gross selling price or gross
value in money of the shares of stock sold, bartered, exchanged or
otherwise disposed which shall be paid by the seller or transferor.
(B) Tax on Shares of Stock Sold or Exchanged Through Initial Public
Offering. - There shall be levied, assessed and collected on every sale,
barter, exchange or other disposition through initial public offering of
shares of stock in closely held corporations, as defined herein, a tax at the
rates provided hereunder based on the gross selling price or gross value
in money of the shares of stock sold, bartered, exchanged or otherwise
disposed in accordance with the proportion of shares of stock sold,
bartered, exchanged or otherwise disposed to the total outstanding shares
of stock after the listing in the local stock exchange:
Up to twenty-five percent (25%) 4%
Over twenty-five percent (25%) but not over thirty-three and one third
percent (33 1/3%) 2%
Over thirty-three and one third percent (33 1/3%) 1%
The tax herein imposed shall be paid by the issuing corporation in primary
offering or by the seller in secondary offering.
For purposes of this Section, the term 'closely held corporation' means
any corporation at least fifty percent (50%) in value of outstanding capital
stock or at least fifty percent (505) of the total combined voting power of all
classes of stock entitled to vote is owned directly or indirectly by or for not
more than twenty (20) individuals.
For purposes of determining whether the corporation is a closely held
corporation, insofar as such determination is based on stock ownership,
the following rules shall be applied:
(1) Stock Not Owned by Individuals. - Stock owned directly or indirectly
by or for a corporation, partnership, estate or trust shall be considered as
being owned proportionately by its shareholders, partners or beneficiaries.
(2) Family and Partnership Ownerships. - An individual shall be
considered as owning the stock owned, directly or indirectly, by or for his
family, or by or for his partner. For purposes of the paragraph, the 'family
of an individual' includes only his brothers and sisters (whether by whole
or half-blood), spouse, ancestors and lineal descendants.
(3) Option. - If any person has an option acquire stock, such stock shall
be considered as owned by such person. For purposes of this paragraph,
an option to acquire such an option and each one of a series of options
shall be considered as an option to acquire such stock.
(4) Constructive Ownership as Actual Ownership. - Stock
constructively owned by reason of the application of paragraph (1) or (3)
hereof shall, for purposes of applying paragraph (1) or (2), be treated as
actually owned by such person; but stock constructively owned by the
individual by reason of the application of paragraph (2) hereof shall not be
treated as owned by him for purposes of again applying such paragraph in
order to make another the constructive owner of such stock.
(C) Return on Capital Gains Realized from Sale of Shares of Stocks. –
(1) Return on Capital Gains Realized from Sale of Shares of Stock
Listed and Traded in the Local Stock Exchange. - It shall be the duty of
every stock broker who effected the sale subject to the tax imposed herein
to collect the tax and remit the same to the Bureau of Internal Revenue
within five (5) banking days from the date of collection thereof and to
submit on Mondays of each week to the secretary of the stock exchange,
of which he is a member, a true and complete return which shall contain a
declaration of all the transactions effected through him during the
preceding week and of taxes collected by him and turned over to the
Bureau Of Internal Revenue.
(2) Return on Public Offerings of Share Stock. - In case of primary
offering, the corporate issuer shall file the return and pay the
corresponding tax within thirty (30) days from the date of listing of the
shares of stock in the local stock exchange. In the case of secondary
offering, the provision of Subsection (C)(1) of this Section shall apply as to
the time and manner of the payment of the tax.
(D) Common Provisions. - any gain derived from the sale, barter,
exchange or other disposition of shares of stock under this Section shall
be exempt from the tax imposed in Sections 24(C), 27(D)(2), 28(A)(8)(c),
and 28(B)(5)(c) of this Code and from the regular individual or corporate
income tax. Tax paid under this Section shall not be deductible for income
tax purposes.
Read: Philippine Stock Exchange v Court of Appeals, 281 SCRA 232 (1997)
2. Disclosure requirements/reports
2.1.
Structured reports - SRC Rule 17.1(1)(A)(i)(ii)
SRC Rule 17.1 – Reportorial Requirements
(formerly, SRC Rule 17 - Requirements to File Annual, Quarterly,
Current, Predecessor and Successor Reports)
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:
Annual Report (17A)
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.
Quarterly Report (17Q)
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.
2.2.
Unstructured reports – SRC Rule 17.1(1)(A)(iii) (Relate to what is material
information)
Current Report (17C) Rule 17.1 (1)(A)(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:
a. promptly to the public through the news media;
b. if the issuer is listed on an Exchange, to that Exchange within ten (10)
minutes after occurrence of the event and prior to its release to the public
through the news media, copy furnished the Commission;
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.
2.3.
What is material information
a) SRC Rule 3.1(I)
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.
b) SRC Sec. 27.2
Section 27. Insider’s Duty to Disclose When Trading.
27.2. For purposes of this Section, information is "material nonpublic" if: (a) It
has not been generally disclosed to the public and would likely affect the
market price of the security after being disseminated to the public and the
lapse of a reasonable time for the market to absorb the information; or (b)
would be considered by a reasonable person important under the
circumstances in determining his course of action whether to buy, sell or hold
a security.
c) PSE Disclosure Rules
(i)
Sec. 4.3 – standard and test
(ii)
Sec. 4.4 – events mandating prompt disclosure
(iii)
Sec. 13.1 – transactions of directors and principal officers
(PSE Disclosure Rules, See Attachment)
Read: Basic v Levinson, 485 U.S. 224 (1988)
SEC v. Interport Resources, et al., 567 SCRA 354 (2008)
2.4.
Report of 5% beneficial owner – SRC Sec. 18
Section 18. Reports by five per centum (5%) Holders of Equity Securities. –
18.1. In every case in which an issuer satisfies the requirements of
Subsection 17.2 hereof any person who acquires directly or indirectly the
beneficial ownership of more than five of per centum (5%) of such class or in
excess of such lesser per centum as the Commission by rule may prescribe,
shall, within ten (10) days after such acquisition or such reasonable time as
fixed by the Commission, submit to the issuer of the securities, to the
Exchange where the security is traded, and to the Commission a sworn
statement containing the following information and such order information as
the Commission may require in the public interest or for the protection of
investors.
(a) The personal background, identity, residence, and citizenship of, and the
nature of such beneficial ownership by, such person and all other person by
whom or on whose behalf the purchases are effected; in the event the
beneficial owner is a juridical person, the of business of the beneficial owner
shall also be reported;
(b) If the purpose of the purchases or prospective purchases is to acquire
control of the business of the issuer of the securities, any plans or proposals
which such persons may have that will effect a major change in its business or
corporate structure;
(c) The number of shares of such security which are beneficially owned, and
the number of shares concerning which there is a right to acquire, directly or
indirectly, by; (i) such person, and (ii) each associate of such person, giving
the background, identity, residence, and citizenship of each such associate;
and
(d) Information as to any contracts, arrangements, or understanding with any
person with respect to any securities of the issuer including but not limited to
transfer, joint ventures, loan or option arrangements, puts or call guarantees
or division of losses or profits, or proxies naming the persons with whom such
contracts, arrangements, or understanding have been entered into, and giving
the details thereof.
18.2. If any change occurs in the facts set forth in the statements, an
amendment shall be transmitted to the issuer, the Exchange and the
Commission.
18.3. The Commission, may permit any person to file in lieu of the statement
required by subsection 17.1 hereof, a notice stating the name of such person,
the shares of any equity securities subject to Subsection 17.1 which are
owned by him, the date of their acquisition and such other information as the
commission may specify, if it appears to the commission that such securities
were acquired by such person in the ordinary course of his business and were
not acquired for the purpose of and do not have the effect of changing or
influencing the control of the issuer nor in connection with any transaction
having such purpose or effect.
2.5.
Report of principal shareholders, directors, officers – SRC Sec. 23.1
Section 23. Transactions of Directors officers and Principal Stockholders. –
23.1. Every person who is directly or indirectly the beneficial owner of more
than ten per centum (10%) of any class of any equity security which satisfies
the requirements of subsection 17.2, or who is a director or an officer of the
issuer of such security, shall file, at the time either such requirement is first
satisfied or after ten days after he becomes such a beneficial owner, director,
or officer, a statement form the Commission and, if such security is listed for
trading on an exchange, also with the exchange of the amount of all the equity
security of such issuer of which he is the beneficial owner, and within ten days
after the close of each calendar month thereafter, if there has been a change
in such ownership at the close of the calendar month and such changes in his
ownership as have occurred during such calendar month.
a) Initial Statement of Beneficial Ownership (23-A)
(SEC Form 23-A, See Attachment)
b) Statement of Change in Beneficial Ownership (23-B)
(SEC Form 23-B, See Attachment)
SRC Rule 23 – Reports to be Filed by Directors, Officers and Principal
Stockholders
1. Every person who is directly or indirectly the beneficial owner of 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;
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;
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
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
3. Protection of shareholder interests
3.1.
Tender offers – SRC Sec. 19
Section 19. Tender Offers. – Any person or group of persons acting in concert
who intends to acquire at least 15% of any class of any equity security of a listed
corporation of any class of any equity security of a corporation with assets of at
least fifty million pesos (50,000,000.00) and having two hundred(200) or more
stockholders at least one hundred shares each or who intends to acquire at least
thirty percent (30%) of such equity over a period of twelve months(12) shall make
a tender offer to stockholders by filling with the Commission a declaration to that
effect; and furnish the issuer, a statement containing such of the information
required in Section 17 of this Code as the Commission may prescribe. Such
person or group of persons shall publish all request or invitations or tender offer
or requesting such tender offers subsequent to the initial solicitation or request
shall contain such information as the Commission may prescribe, and shall be
filed with the Commission and sent to the issuer not alter than the time copies of
such materials are first published or sent or given to security holders.
(a) Any solicitation or recommendation to the holders of such a security to accept
or reject a tender offer or request or invitation for tenders shall be made in
accordance with such rules and regulations as may be prescribe.
(b) Securities deposited pursuant to a tender offer or request or invitation for
tenders may be withdrawn by or on behalf of the depositor at any time throughout
the period that tender offer remains open and if the securities deposited have not
been previously accepted for payment, and at any time after sixty (60) days from
the date of the original tender offer to request or invitation, except as the
Commission may otherwise prescribe.
(c) Where the securities offered exceed that which person or group of persons is
bound or willing to take up and pay for, the securities that are subject of the
tender offers shall be taken up us nearly as may be pro data, disregarding
fractions, according to the number of securities deposited to each depositor. The
provision of this subject shall also apply to securities deposited within ten (10)
days after notice of increase in the consideration offered to security holders, as
described in paragraph (e) of this subsection, is first published or sent or given to
security holders.
(d) Where any person varies the terms of a tender offer or request or invitation for
tenders before the expiration thereof by increasing the consideration offered to
holders of such securities, such person shall pay the increased consideration to
each security holder whose securities are taken up and paid for whether or not
such securities have been taken up by such person before the variation of the
tender offer or request or invitation.
19.2. It shall be lawful for any person to make any untrue statement of a material
fact or omit to state any material fact necessary in order to make the statements
made in the light of the circumstances under which they are made, not misleading, or to engaged to any fraudulent, deceptive or manipulative acts or
practices, in connection with any tender offer or request or invitation for tenders,
or any solicitation for any security holders in opposition to or in favor of any such
favor of any such offer, request, or invitation. The Commission shall, for the
purposes of this subsection, define and prescribe means reasonably designed to
prevent, such acts and practices as are fraudulent, deceptive and manipulative.
a) Definitions – SRC Rule 19.1 (I); (J)
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.
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.
b) Mandatory tender offers – SRC Rule 19.2 (A) to (D), inclusive
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.
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.
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.
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.
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.
Read: CEMCO v National Life, 529
3.2.
Proxy solicitation – SRC Sec. 20
Section 20. Proxy solicitations. - 20.1. Proxies must be issued and proxy
solicitation must be made in accordance with rules and regulations to be issued
by the Commission;
20.2. Proxies must be in writing, signed by the stockholder or his duly authorized
representative and file before the scheduled meeting with the corporate secretary.
20.3. Unless otherwise provided in the proxy, it shall be valid only for the meeting
for which it is intended. No proxy shall be valid only for the meting for which it is
intended. No proxy shall be valid and effective for a period longer than five (5)
years at one time.
20.4. No broker or dealer shall give any proxy, consent or any authorization, in
respect of any security carried for the account of the customer, to a person other
than the customer, without written authorization of such customer.
20.5. A broker or dealer who holds or acquire the proxy for at least ten percent
(10%) or such percentage as the commission may prescribe of the outstanding
share of such issuer, shall submit a report identifying the beneficial owner of ten
days after such acquisition, for its own account or customer, to the issuer of
security, to the exchange where the security is traded and to the Commission.
a) What solicitation includes/does not include – SRC Rule 20(B)(i)(ii)
SRC Rule 20 – Disclosures to Stockholders Prior to Meeting
B. Solicitation
i. The terms solicit and solicitation shall include:
a. any request for a proxy or authorization;
b. any request to execute or not to execute, or to revoke, a proxy or
authorization; or
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:
a. the performance by any person of ministerial acts on behalf of a person
soliciting a proxy; or
b. any solicitation made otherwise than on behalf of the registrant where the
total number of persons solicited is not more than nineteen (19).
b) Obligation of registrant: Information Statement – SRC Rule 20(3)(B)
3. Obligations of a Registrant Proposing to Hold a Stockholders’ Meeting
B. The proxy form shall be prepared in accordance with paragraph (5) hereof.
c) Filing requirements – SRC Rule 20(3)(C)
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.
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.
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.
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) Information required – SRC Rule 20(4)(A)(i) to (viii), inclusive
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:
i. Consolidated audited financial statements and interim unaudited financial
statements (if applicable), as required by SRC Rule 68, as amended;
ii. Information concerning disagreements with accountants on accounting and
financial disclosure required by Part III(B) of “Annex C”;
iii. A management’s discussion and analysis or plan of operation required by
Part III(A) of “Annex C”;
iv. A brief description of the general nature and scope of the business of the
registrant and its subsidiaries;
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;
vi. The market price of and dividends on the registrant’s common shares
required by Part II (A) of “Annex C”;
vii. Discussion on compliance with leading practices on corporate governance
as required by Part V of Annex “C”; and
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.
e) Proxy form – SRC Rule 20(5)(A),(B), (C), (E)
5. Requirements as to Form of Proxy and Delivery of Information to
Security Holders
A. The form of proxy shall:
i. indicate in bold-face type on whose behalf the solicitation is made;
ii. provide a specifically designated blank space for dating the proxy card;
iii. identify clearly and impartially each separate matter intended to be acted
upon;
iv. be in writing, signed by the stockholder or his duly authorized
representative; and
v. be filed with the Corporate Secretary before the scheduled meeting.
B. 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.
C. A proxy form which provides for the election of directors shall set forth the
names of persons nominated for election as directors. Such form of proxy
shall clearly provide any of the following means for security holders to
withhold authority to vote for each nominee:
i. a box opposite the name of each nominee which may be marked to indicate
that authority to vote for such nominee is withheld;
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
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.
E. A proxy may confer discretionary authority to vote with respect to any of the
following:
i. Matters that are to be presented at the meeting but which, at a reasonable
time before the solicitation, are not known to the persons making the
solicitation; provided, however, that a specific statement to that effect is made
in the information statement or proxy form;
ii. Approval of the minutes of the prior meeting;
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
iv. Matters incident to the conduct of the meeting.
f) Solicitation of votes other than by registrant – SRC Rule 20(8)(A),(B)
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.
B. Notwithstanding the provisions of paragraph 3 of this Rule, a solicitation
subject to this Rule may be made without furnishing the security holders with
a written information statement on SEC Form 20-IS, provided that:
i. The following information shall be set forth in the communication which shall
be attached and distributed with the proxy form prepared in accordance with
paragraph (5) of this Rule:
a. The name of the solicitor and person who shall shoulder the
expenses, and the mode of solicitation;
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;
c. A discussion of the reason/s for the solicitation of votes against the
proposed action/s by the registrant;
d. A brief description of any substantial interest, direct or indirect, by
security holdings or otherwise, of each solicitor or participant to the
solicitation, in any matter to be acted upon at the meeting and include
with respect to each solicitor the following information, or a fair and
accurate summary thereof:
1. Name and business address of the solicitor;
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;
3. Amount of each class of securities of the registrant which the
solicitor owns beneficially, directly or indirectly;
4. Amount of each class of securities of the registrant which the
solicitor owns of record but not beneficially;
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;
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
7. Amount of each class of securities of any parent or
subsidiary of the registrant which the solicitor owns beneficially,
directly or indirectly.
3.3.
Short swing profits – SRC Sec. 23.2
Section 23. Transactions of Directors officers and Principal Stockholders.
23.2. For the purpose of preventing the unfair use of information which may have been
obtained by such beneficial owner, director or officer by reason of his relationship to the
issuer, any profit realized by him from any purchase or sale, or any sale or purchase, of
any equity security of such issuer within any period of less than (6) months unless such
security was acquired in good faith in connection with a debt previously contracted, shall
inure to and be recoverable by the issuer, irrespective of any intention of holding the
security purchased or of not repurchasing the security sold for a period exceeding six (6)
months. Suit to recover such profit may be instituted before the Regional Trial Court by
the issuer, or by the owner of any security of the issuer in the name and in behalf of the
issuer if the issuer shall fail or refuse to bring such suit within sixty (60) days after request
or shall fail diligently to prosecute the same thereafter, but not such shall be brought
more than two years after the date such profit was realized. This Subsection shall not be
construed to cover any transaction were such beneficial owner was not such both time of
the owner or the sale, or the sale of purchase, of the security involved, or any transaction
or transactions which the Commission by rules and regulations may exempt as not
comprehended within the purpose of this subsection.
3.4.
Fraud, manipulation – SRC Sec. 24.1; SRC Sec. 24.2 (what is a short sale?
Stop loss order?)
Section 24. Manipulation of Security Prices; Devices and Practices. –
24.1 It shall be unlawful for any person acting for himself or through a dealer or broker,
directly or indirectly:
(a) To create a false or misleading appearance of active trading in any listed security
traded in an Exchange of any other trading market (hereafter referred to purposes of this
Chapter as "Exchange"):
(i) By effecting any transaction in such security which involves no change in the
beneficial ownership thereof;
(ii) By entering an order or orders for the purchase or sale of such security with the
knowledge that a simultaneous order or orders of substantially the same size, time
and price, for the sale or purchase of any such security, has or will be entered by or
for the same or different parties; or
(iii) By performing similar act where there is no change in beneficial ownership.
(b) To affect, alone or with others, a securities or transactions in securities that: (I) Raises
their price to induce the purchase of a security, whether of the same or a different class
of the same issuer or of controlling, controlled, or commonly controlled company by
others; or (iii) Creates active trading to induce such a purchase or sale through
manipulative devices such as marking the close, painting the tape, squeezing the float,
hype and dump, boiler room operations and such other similar devices.
(c) To circulate or disseminate information that the price of any security listed in an
Exchange will or is likely to rise or fall because of manipulative market operations of any
one or more persons conducted for the purpose of raising or depressing the price of the
security for the purpose of inducing the purpose of sale of such security.
(d) To make false or misleading statement with respect to any material fact, which he
knew or had reasonable ground to believe was so false or misleading, for the purpose of
inducing the purchase or sale of any security listed or traded in an Exchange.
(e) To effect, either alone or others, any series of transactions for the purchase and/or
sale of any security traded in an Exchange for the purpose of pegging, fixing or stabilizing
the price of such security; unless otherwise allowed by this Code or by rules of the
Commission.
24.2. No person shall use or employ, in connection with the purchase or sale of any
security any manipulative or deceptive device or contrivance. Neither shall any short sale
be effected nor any stop-loss order be executed in connection with the purchase or sale
of any security except in accordance with such rules and regulations as the Commission
may prescribe as necessary or appropriate in the public interest for the protection of
investors.
3.5.
Fraudulent transactions – SRC Sec. 26.1 to 26.3
Section 26. Fraudulent Transactions. – It shall be unlawful for any person, directly or
indirectly, in connection with the purchase or sale of any securities to:
26.1. Employ any device, scheme, or artifice to defraud;
26.2. Obtain money or property by means of any untrue statement of a material fact of
any omission 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
26.3. Engage in any act, transaction, practice or course of business which operates or
would operate as a fraud or deceit upon any person.
Read: SEC v CA., 246 SCRA 738 (1995)
3.6. Insider trading
a) Who is an insider – SRC Sec. 3.8
3.8. "Insider" means (a) the issuer; (b) a director or officer (or any person performing
similar functions) of, or a person controlling the issuer; gives or gave him access to
material information about the issuer or the security that is not generally available to
the public; (d) A government employee, director, or officer of an exchange, clearing
agency and/or self-regulatory organization who has access to material information
about an issuer or a security that is not generally available to the public; or (e) a
person who learns such information by a communication from any forgoing insiders.
b) What constitutes material information – see 2.3 above
c) Insider’s duty to disclose when trading – SRC Sec. 27.1, 27.3; 27.4
Section 27. Insider’s Duty to Disclose When Trading. – 27.1. It shall be unlawful for
an insider to sell or buy a security of the issuer, while in possession of material
information with respect to the issuer or the security that is not generally available to
the public, unless: (a) The insider proves that the information was not gained from
such relationship; or (b) If the other party selling to or buying from the insider (or his
agent) is identified, the insider proves: (I) that he disclosed the information to the
other party, or (ii) that he had reason to believe that the other party otherwise is also
in possession of the information. A purchase or sale of a security of the issuer made
by an insider defined in Subsection 3.8, or such insider’s spouse or relatives by
affinity or consanguinity within the second degree, legitimate or common-law, shall be
presumed to have been effected while in possession of material nonpublic
information if transacted after such information came into existence but prior to
dissemination of such information to the public and the lapse of a reasonable time for
market to absorb such information: Provided, however, That this presumption shall be
rebutted upon a showing by the purchaser or seller that he was aware of the material
nonpublic information at the time of the purchase or sale.
27.2. For purposes of this Section, information is "material nonpublic" if: (a) It has not
been generally disclosed to the public and would likely affect the market price of the
security after being disseminated to the public and the lapse of a reasonable time for
the market to absorb the information; or (b) would be considered by a reasonable
person important under the circumstances in determining his course of action
whether to buy, sell or hold a security.
27.3. It shall be unlawful for any insider to communicate material nonpublic
information about the issuer or the security to any person who, by virtue of the
communication, becomes an insider as defined in Subsection 3.8, where the insider
communicating the information knows or has reason to believe that such person will
likely buy or sell a security of the issuer whole in possession of such information.
27.4. (a) It shall be unlawful where a tender offer has commenced or is about to
commence for:
(i) Any person (other than the tender offeror) who is in possession of material
nonpublic information relating to such tender offer, to buy or sell the securities
of the issuer that are sought or to be sought by such tender offer if such
person knows or has reason to believe that the information is nonpublic and
has been acquired directly or indirectly from the tender offeror, those acting on
its behalf, the issuer of the securities sought or to be sought by such tender
offer, or any insider of such issuer; and
(ii) Any tender offeror, those acting on its behalf, the issuer of the securities
sought or to be sought by such tender offer, and any insider of such issuer to
communicate material nonpublic information relating to the tender offer to any
other person where such communication is likely to result in a violation of
Subsection 27.4 (a)(I).
(b) For purposes of this subsection the term "securities of the issuer sought or to be
sought by such tender offer" shall include any securities convertible or exchangeable
into such securities or any options or rights in any of the foregoing securities.
Read: SEC v. Interport Resources, et al., 567 SCRA 354 (2008) Chiarelli v
U.S., 445 U.S. 222 (1980) n the Matter of Cady, Roberts & Co., File No. 88925 (US SEC), 8 November 1961 SEC v Texas Gulf, 401 F2d 83 (2nd
Circuit, 1968)
4. Independent directors – SRC Sec. 38
Section 38. Independent Directors. – Any corporation with a class of equity securities
listed for trading 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 of two
hundred (200) of which are holding at least one hundred (100) shares of a class of its
equity securities or which has sold a class of equity securities to the public pursuant
to an effective registration statement in compliance with Section 12 hereof shall have
at least two (2) independent directors or such independent directors shall constitute
at least twenty percent (20%) of the members of such board whichever is the lesser.
For this purpose, an "independent director" shall mean a person other than an officer
or employee of the corporation, its parent or subsidiaries, or any other individual
having a relationship with the corporation, which would interfere with the exercise of
independent judgement in carrying out the responsibilities of a director.
4.1. Definition; who may not be independent directors – SRC Rule 38(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 judgement in carrying out
his responsibilities as a director in any corporation that meets the requirements of
Section 17.2 of the Code and includes, among others, any person who:
a. Is not a director or officer of the corporation or of its related companies or any
of its substantial shareholders (other than as an independent director of any of
the foregoing);
b. Is not a substantial shareholder of the corporation or of its related companies
or any of its substantial shareholders;
c. Is not a relative of any director, officer or substantial shareholder of the
corporation, any of its related companies or any of its substantial
shareholders. For this purpose, relatives includes spouse, parent, child,
brother, sister, and the spouse of such child, brother or sister;
d. Is not acting as a nominee or representative of any director or substantial
shareholder of the corporation, any of its related companies or any of its
substantial shareholders;
e. Has not been employed in any executive capacity by that public company,
any of its related companies or by any of its substantial shareholders within
the last five (5) years;
f.
Is not retained as professional adviser by that public company, any of its
related companies or any of its substantial shareholders within the last five (5)
years;
g. Is not retained as professional adviser, by that public company, any of its
related companies or by any of its substantial shareholders, either personally
or through his firm; or
h. Has not engaged and does not engage in any transaction with
the corporation or with any of its related companies or with any of its
substantial shareholders, whether by himself or with other persons or through
a firm of which he is a partner or a company of which he is a director or
substantial shareholder, other than transactions which are conducted at arms
length and are immaterial.
4.2. Term of independent director - SEC Memo Circular 9, series of 2011
4.3. Guidelines for Nomination of Independent Directors – SEC Memo Circular
No. 16, series of 2002
SEC MEMORANDUM CIRCULAR NO. 16
Series of 2002
GUIDELINES ON THE NOMINATION AND ELECTION
OF INDEPENDENT DIRECTORS
To properly guide the companies in the nomination and election of independent directors and
to have uniform procedures on the same, the Commission hereby prescribes the following
guidelines:
I.
COVERAGE
This Circular shall be applicable to public companies and those subject to secondary
licenses from the Commission, as follows:
A. Issuers of registered securities to the public whether or not listed in the Philippine
Stock Exchange (PSE);
B. Public companies or those with assets of at least Fifty Million Pesos (P50,000,000.00)
or such other amount as the Commission shall prescribe, and having Two hundred
(200) or more holders each holding at least One hundred (100) shares of a class of
its equity securities;
C. Finance companies;
D. Investment houses;
E. Brokers and dealers of securities;
F. Investment companies;
G. Pre-need companies;
H. Subsidiaries or branches of foreign corporations which operate in the Philippines and
are listed in the PSE;
I.
II.
Stock and other securities exchange/s.
DEFINITION
A. 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
corporation that meets the requirements of Section 17.2 of the Securities Regulation
Code and includes, among others, any person who:
i.
ii.
iii.
iv.
v.
vi.
Is not a director or officer or substantial stockholder of the corporation or of its related
companies or any of its substantial shareholders (other than as an independent
director of any of the foregoing);
Is not a relative of any director, officer or substantial shareholder of the corporation,
any of its related companies or any of its substantial shareholders. For this purpose,
relatives includes spouse, parent, child, brother, sister, and the spouse of such child,
brother or sister;
Is not acting as a nominee or representative of a substantial shareholder of the
corporation, any of its related companies or any of its substantial shareholders;
Has not been employed in any executive capacity by that public company, any of its
related companies or by any of its substantial shareholders within the last five (5)
years;
Is not retained as professional adviser by that public company, any of its related
companies or any of its substantial shareholders within the last five (5) years, either
personally of through his firm;
Has not engaged and does not engage in any transaction with the corporation or with
any of its related companies or with any of its substantial shareholders, whether by
himself or with other persons or through a firm of which he is a partner or a company
of which he is a director or substantial shareholder, other than transactions which are
conducted at arms length and are immaterial or insignificant.
B. When used in relation to a company subject to the requirements above:
i.
ii.
Related company means another company which is: (a) its holding company, (b) its
subsidiary, or (c) a subsidiary of its holding company; and
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.
C. An independent director shall have the following qualifications:
i.
ii.
iii.
iv.
He shall have at least one (1) share of stock of the corporation;
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;
He shall possess integrity/probity; and
He shall be assiduous.
D. 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:
i.
ii.
iii.
iv.
III.
(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
letter (A) hereof;
(ii) His beneficial security ownership exceeds 10% of the outstanding capital stock of
the company where he is such director;
(iii) Fails, without any justifiable cause, to attend at least 50% of the total number of
Board meetings during his incumbency unless such absences are due to grave
illness or death of an immediate family.
(iv) Such other disqualifications which the company's Manual on Corporate
Governance provides.
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 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.
B. The Exchange/s are required to have at least three (3) independent directors and an
independent director-President. To effectively carry out the provisions of Section
33.2(g) of the Securities Regulation Code, the independent directors must not be
allowed to solicit votes for himself or for others or be subject to election by the
stockholders until the shares are listed, or Exchange's outstanding capital stock are
no longer majority owned by the brokers.
IV.
NOMINATION AND ELECTION OF INDEPENDENT DIRECTOR/S
The following rules shall be applicable to all covered companies:
A. The Nomination 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. The members of the Nomination Committee of the Exchange shall be
cleared by the Commission.
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.
C. It 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.
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 or Proxy Statement, in accordance with SRC
Rule 17.1(b) or SRC Rule 20, respectively, 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.
E. Only nominees whose names appear on the Final List of Candidates shall be eligible
for election as Independent Director/s. No other nomination shall be entertained after
the Final List of Candidates shall have been prepared. No further nomination shall be
entertained
or
allowed
on
the
floor
during
the
actual
annual
stockholders'/memberships' meeting.
F. Election of Independent Director/s
i.
ii.
iii.
iv.
v.
Except as those required under this Circular 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.
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.
Specific slot/s for independent directors shall not be filled-up by unqualified
nominees.
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.
The covered companies shall amend its by-laws in accordance with the foregoing
requirements as soon as practicable.
V. 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 Nomination
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.
VI. EFFECTIVITY
This Memorandum Circular shall take effect after fifteen (15) days from publication in a
newspaper of general circulation.
November 28, 2002. Mandaluyong City, Philippines.
5. Corporate Governance
5.1. OECD Corporate Governance Principles
5.2. Revised Corporate Governance Code, SEC Memo Circular 6, series of 2009
5.3. ASEAN Corporate Governance Scorecard 3
6. Uncertificated securities – SRC Sec. 42, 44
Section 42. Registration of Clearing Agencies. - 42.1. Any clearing agency may be
registered as such with the Commission under the terms and conditions hereinafter provided
in this Section, by filing an application for registration in such form and containing such
information and supporting documents as the Commission by rule shall prescribe, including
the following:
(a) An undertaking to comply and enforce compliance by its participants with the
provisions of this Code, and any amendments thereto, and the implementing rules or
regulations made or to be made thereunder, and the clearing agency’s rules;
(b) The organizational charts of the Exchange, its rules of procedure, and list of its
officers and participants;
(c) Copies of the clearing agency’s rules.
42.2. No registration of a clearing agency shall be granted unless the rules of the clearing
agency include provision for:
(a) The expulsions, suspension, or disciplining of a participant for violations of this
Code, or any other Act administered by the Commission, the rules, regulations, and
orders thereunder, or the clearing agency’s rules;
(b) A fair procedure for the disciplining of participants, the denial of participation rights
to any person seeking to be a participant, and the prohibition or limitation of any
person from access to services offered by the clearing agency;
(c) The equitable allocation of reasonable dues, fees, and other charges among
participants;
(d) Prevention of fraudulent and manipulative acts and practices, promotion of just
and equitable principles of trade, and, in general, protection of investors and the
public interest;
(e) The transparent, prompt and accurate clearance and settlement of transactions in
securities handled by the clearing agency; and
(f) The establishment and oversight of a fund to guarantee the prompt and accurate
clearance and settlement of transaction executed on an exchange, including a
requirement that members each contribute an amount based on their and a relevant
percentage of the daily exposure of the (4) largest trading brokers which adequately
reflects trading risks undertaken or pursuant to another formula set forth in
Commission rules or regulations or order, upon application: Provided, however, That
a clearing agency engaged in the business of securities depository shall be exempt
from this requirement.
42.3. In the case of an application filed pursuant to this section, the Commission shall grant
registration if it is finds That the requirements of this code and the rules and regulations
thereunder with respect to the applicant have been satisfied, and shall deny registration if it
does not make such finding.
42.4. Upon appropriate application in accordance with the rules and regulations of the
Commission and upon such terms as the Commission may deem necessary for the
protection of investors, a clearing agency may withdraw its registration or suspend its
operation or resume the same.
Section 43. Uncertificated Securities. – Notwithstanding Section 63 of the Corporation Code
of the Philippines: 43.1. A corporation whose securities are registered pursuant to this Code
or listed on securities exchange may:
(a) If so resolved by its Board of Directors and agreed by a shareholder, investor or
securities intermediary, issue shares to, or record the transfer of some or all its
shares into the name of said shareholders, investors or, securities intermediary in the
form of uncertified securities. The use of uncertified securities in these circumstances
shall be without prejudice to the rights of the securities intermediary subsequently to
require the corporation to issue a certificate in respect of any shares recorded in its
name; and
(b) If so provided in its articles of incorporation and by-laws, issue all of the shares of
a particular class in the form of Uncertificated securities and subject to a condition
that investors may not require the corporation to issue a certificate in respect of any
shares recorded in their name.
43.2. The Commission by rule may allow other corporations to provide in their articles of
incorporation and by-laws for the use of uncertificated securities.
43.3. Transfers of securities, including an uncertificated securities, may be validly made and
consummated by appropriate book-entries in the securities intermediaries, or in the stock
and transfer book held by the corporation or the stock transfer agent and such bookkeeping
entries shall be binding on the parties to the transfer. A transfer under this subsection has
the effect of the delivery of a security in bearer form or duly indorsed in blank representing
the quantity or amount of security or right transferred, including the unrestricted negotiability
of that security by reason of such delivery. However, transfer of uncertificated shares shall
only be valid, so far as the corporation is concerned, when a transfer is recorded in the
books of the corporation so as to show the names of the parties to the transfer and the
number of shares transferred.
However, nothing in this Code shall compliance by banking and other institutions under the
supervision of the Bangko Sentral ng Pilipinas and their stockholders with the applicable
ceilings on shareholding prescribed under pertinent banking laws and regulations.
Section 44. Evidentiary Value of Clearing Agency Record. – The official records and book
entries of a clearing agency shall constitute the best evidence of such transactions between
clearing agency shall constitute the best between clearing agency and its participants’ or
members’ clients to prove their rights, title and entitlement with respect to the book-entry
security holdings of the participants or members held on behalf of the clients. However, the
corporation shall not be bound by the foregoing transactions unless the corporate secretary
is duly notified in such manner as the Commission may provide.
7. Margin and credit – Sec. 43 (refer to previous section, I put sec 48 na lang)
Section 48. Margin Requirements. – 48.1. For the purpose of preventing the excessive use
of credit for the purchase or carrying of securities, the Commission, in accordance with the
credit and monetary policies that may be promulgated from time to time by the Monetary
Board of the Bangko Sentral ng Pilipinas, shall prescribed rules and regulations with respect
to the amount of credit that may be extended on any security. For the extension of credit,
such rules and regulations shall be based upon the following standard:
An amount not greater than the whichever is the higher of –
(a) Sixty-five per centum (65%) of the current market price of the security, or
(b) One hundred per centum (100%) of the lowest market price of the security during
the preceding thirty-six (36) calendar months, but not more than seventy-five per
centum (75%) of the current market price.
However, the Monetary Board may increase or decrease the above percentages, in order to
achieve the objectives of the Government with due regard for promotion of the economy and
prevention of the use of excessive credit.
Such rules and regulations may make appropriate provision with respect to the carrying of
undermargined accounts for limited periods and under specified conditions; the withdrawal of
funds or securities; the transfer of accounts from one lender to another; special or different
margin requirements for delayed deliveries, short sales, arbitrage transactions, and
securities to which letter (b) of the second paragraph of this subsection does not apply; the
methods to be used in calculating loans, and margins and market prices; and similar
administrative adjustments and details.
48.2. No member of an Exchange or broker or dealer shall, directly or indirectly, extend or
maintain credit is extended and maintain credit or arrange for the extension or maintenance
of credit to or for any customer:
(a) On any security unless such credit is extended and maintained in accordance with
the rules and regulations which the Commission shall prescribe under this Section
including rules setting credit in relation to net capital of such member, broker or
dealer; and
(b) Without collateral or any collateral other than securities, except (I) to maintain a
credit initially extended in conformity with rules and regulations of the Commission
and (ii) in cases where the extension or maintenance of credit is not for the purpose
of purchasing or carrying securities or of evading or circumventing the provisions of
paragraph (a) of this subsection.
48.3 Any person not subject to Subsection 48.2 hereof shall extend or maintain credit or
arrange for the extension or maintenance of credit for the purpose of purchasing or carrying
any security, only in accordance with such rules and regulations as the Commission shall
prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in
securities in circumvention of the other provisions of this Section.. Such rules and regulations
may impose upon all loans made for the purpose of purchasing or carrying securities
limitations similar to those imposed upon members, brokers, or dealers by Subsection 48.2
and the rules and regulations thereunder. This subsection and the rules and regulations
thereunder shall not apply:
(a) To a credit extension made by a person not in the ordinary course of business; (b)
to a loan to a dealer to aid in the financing of the distribution of securities to
customers not through the medium of an Exchange; or (c) To such other credit
extension as the Commission shall exempt from the operation of this subsection and
the rules and regulations thereunder upon specified terms and conditions for stated
period.
Section 49. Restrictions on Borrowings by Members, Brokers, and Dealers. – It shall be
unlawful for any registered broker or dealer, or member of an Exchange, directly or indirectly;
49.1. To permit in the ordinary course of business as a broker or dealer his aggregate
indebtedness including customers’ credit balances, to exceed such percentage of the net
capital (exclusive of fixed assets and value of Exchange membership) employed in the
business, but not exceeding in any case to thousand percentum (2,000%), as the
Commission may be rules and regulations prescribe as necessary or appropriate in the
public interest or for the protection of investors.
49.2. To pledge, mortgage, or otherwise encumber or arrange for the pledge, mortgage, or
encumbrance of any security carried for the account of any customer under circumstances:
(a) That will permit the commingling of his securities, without his written consent, with the
securities of any customer; (b) That will permit such securities to be commingled with the
securities of any person other than a bona fide customer; or (c) that will permit such
securities to be pledged, mortgaged or encumbered, or subjected to any lien or claim of the
pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of
such securities. However, the Commission, having due regard to the protection of investors,
may, by rules and regulations, allow certain transactions that may otherwise be prohibited
under this subsection.
49.3. To lend or arrange for the lending of any security carried for the account of any
customer without the written consent of such customer or in contravention of such rules and
regulations as the Commission shall prescribe.
Section 50. Enforcement of Margin Requirement and Restrictions on Borrowing. – To
prevent indirect violations of the margin requirements under Section 48, the broker or dealer
shall require the customer in non-margin transactions to pay the price of the security
purchased for his account within such period as the Commission may prescribe, which shall
in no case exceed the prescribed settlement date. Otherwise, the broker shall sell the
security purchased starting on the next trading day but not beyond ten (10) trading days
following the last day for the customer to pay such purchase price, unless such sale cannot
be effected within said period for justifiable reasons. The sale shall be without prejudice to
the right of the broker or dealer to recover any deficiency from the customer. To prevent
indirect violation of the restrictions on borrowing under Section 49, the broker shall, unless
otherwise directed by the customer, pay the net sales price of the securities sold for a
customer within the same period as above prescribed by the Commission: Provided, That
the customer shall be required to deliver the instruments evidencing the securities as a
condition for such payment upon demand by the broker.
8. Liabilities
8.1. SRC Sec. 51
8.2. SRC Sec. 52
8.3. Investigation and prosecution - SRC Sec. 53
Section 51. Liabilities of Controlling Persons, Aider and Abettor and Other Secondary
Liability. 51.1. Every person who, by or through stock ownership, agency, or otherwise, or in
connection with an agreement or understanding with one or more other persons, controls
any person liable under this Code or the rules or regulations of the Commission thereunder,
shall also be liable jointly and severally with and to the same extent as such controlled
persons to any person to whom such controlled person is liable, unless the controlling
person proves that, despite the exercise of due diligence on his part, he has no knowledge of
the existence of the facts by reason of which the liability of the controlled person is alleged to
exist.
51.2. It shall be unlawful for any person, directly, or indirectly, to do any act or thing which it
would be unlawful for such person to do under the provisions of this Code or any rule or
regulation thereunder.
51.2. It shall be unlawful for any director or officer of, or any owner of any securities issued
by, any issuer required to file any document, report or other information under this Code or
any rule or regulation of the Commission thereunder, without just cause, to hinder, delay or
obstruct the making or filing of any such document, report, or information.
51.3. It shall be unlawful for any person to aid, abet, counsel, command, induce or procure
any violation of this Code, or any rule, regulation or order of the Commission thereunder.
52.4. Every person who substantially assists the act or omission of any person primarily
liable under Sections 57, 58, 59 and 60 of this Code, with knowledge or in reckless disregard
that such act or omission is wrongful, shall be jointly and severally liable as an aider and
abettor for damages resulting from the conduct of the person primarily liable: Provided,
however, That an aider and abettor shall be liable only to the extent of his relative
contribution in causing such damages in comparison to that of the person primarily liable, or
the extent to which the aider and abettor was unjustly enriched thereby, whichever is greater.
Section 52. Accounts and Records, Reports, Examination of Exchanges, members, and
Others. – 52.1. Every registered Exchange, broker or dealer, transfer agent, clearing agency,
securities association, and other self-regulatory organization, and every other person
required to register under this Code, shall make, keep and preserve for such periods,
records, furnish such copies thereof, and make such reports, as the Commission by its rules
and regulations may prescribe. Such accounts, correspondence, memoranda, papers,
books, and other records shall be subject at any time to such reasonable periodic, special or
other examinations by representatives of the Commission as the Commission may deem
necessary or appropriate in the public interest of for the protection of investors.
52.2. Any brother, dealer or other person extending credit, who is subject to the rules and
regulations prescribed by the Commission pursuant to this Code, shall make such reports to
the Commission as may be necessary or appropriate to enable it to perform the functions
conferred upon it by this Code.
52.3. For purposes of this Section, the term "records refers to accounts, correspondence,
memoranda, tapes, discs, papers, books and other documents or transcribed information of
any type, whether written or electronic in character.
Section 53. Investigations, Injunctions and Prosecution of Offenses. 53.1. The Commission
may, in its discretion, make such investigations as it deems necessary to determine whether
any person has violated or is about to violate any provision of this Code, any rule, regulation
or order thereunder, or any rule of an Exchange, registered securities association, clearing
agency, other self-regulatory organization, and may require or permit any person to file with it
a statement in writing, under oath or otherwise, as the Commission shall determine, as to all
facts and circumstances concerning the matter to be investigated. The Commission may
publish information concerning any such violations, and to investigate any fact, condition,
practice or matter which it may deem necessary or proper to aid in the enforcement of the
provisions of this Code, in the prescribing of rules and regulations thereunder, or in securing
information to serve as a basis for recommending further legislation concerning the matters
to which this Code relates: Provided, however, That any person requested or subpoenaed to
produce documents or testify in any investigation shall simultaneously be notified in writing of
the purpose of such investigation: Provided, further, That all criminal complaints for violations
of this Code, and the implementing rules and regulations enforced or administered by the
Commission shall be referred to the Department of Justice for preliminary investigation and
prosecution before the proper court: Provided, furthermore, That in instances where the law
allows independent civil or criminal proceedings of violations arising from the same act, the
Commission shall take appropriate action to implement the same: provided, finally, That the
investigation, prosecution, and trial of such cases shall be given priority.
53.2. For the purpose of any such investigation, or any other proceeding under this Code,
the Commission or any officer designated by it is empowered to administer oaths and
affirmations, subpoena witnesses, compel attendance, take evidence, require the production
of any book, paper, correspondence, memorandum, or other record which the Commission
deems relevant or material to the inquiry, and to perform such other acts necessary in the
conduct of such investigation or proceedings.
53.3. Whenever it shall appear to the Commission that any person has engaged or is about
to engage in any act or practice constituting a violation of any provision of this Code, any
rule, regulation or order thereunder, or any rule of an Exchange, registered securities
association, clearing agency or other self-regulatory organization, it may issue an order to
such person to desist from committing such act or practice: Provided, however, That the
Commission shall not charge any person with violation of the rules of an Exchange or other
self-regulatory organization unless it appears to the Commission that such Exchange or
other self-regulatory organization is unable or unwilling to take action against such person.
After finding that such person has engaged in any such act or practice and that there is a
reasonable likelihood of continuing, further or future violations by such person, the
Commission may issue ex-parte a cease and desist order for a maximum period of ten (10)
days, enjoining the violation and compelling compliance with such provision. The
Commission may transmit such evidence as may be available concerning any violation of
any provision of this Code, or any rule, regulation or order thereunder, to the Department of
Justice, which may institute the appropriate criminal proceedings under this Code.
53.4. Any person who, within his power but without cause, fails or refuses to comply with any
lawful order, decision or subpoena issued by the Commission under Subsection 53.2 or
Subsection 53.3 or Section 64 of this Code, shall after due notice and hearing, be guilty of
contempt of the Commission. Such person shall be fined in such reasonable amount as the
Commission may determine, or when such failure or refusal is a clear and open defiance of
the Commission’s order, decision or subpoena, shall be detained under an arrest order
issued by the Commission, until such order, decision or subpoena is complied with.
7. Civil liabilities
7.1. SRC Sec. 56 – false RS
Section 56. Civil Liabilities on Account of False Registration Statement. 56.1. Any person
acquiring a security, the registration statement of which or any part thereof contains on its
effectivity an untrue statement of a material fact or omits to state a material fact required to
be stated therein or necessary to make such statements not misleading, and who suffers
damage, may sue and recover damages from the following enumerated persons, unless it is
proved that at the time of such acquisition he knew of such untrue statement or omission:
(a) The issuer and every person who signed the registration statement:
(b) Every person who was a director of, or any other person performing similar
functions, or a partner in, the issuer at the time of the filing of the registration
statement or any part, supplement or amendment thereof with respect to which his
liability is asserted;
(c) Every person who is named in the registration statement as being or about to
become a director of, or a person performing similar functions, or a partner in, the
issuer and whose written consent thereto is filed with the registration statement;
(d) Every auditor or auditing firm named as having certified any financial statements
used in connection with the registration statement or prospectus.
(e) Every person who, with his written consent, which shall be filed with the
registration statement, has been named as having prepared or certified any part of
the registration statement, or as having prepared or certified any report or valuation
which is used in connection with the registration statement, with respect to the
statement, report, or valuation, which purports to have been prepared or certified by
him.
(f) Every selling shareholder who contributed to and certified as to the accuracy of a
portion of the registration statement, with respect to that portion of the registration
statement which purports to have been contributed by him.
(g) Every underwriter with respect to such security.
56.2. If the person who acquired the security did so after the issuer has made generally
available to its security holders an income statement covering a period of at least twelve (12)
months beginning from the effective date of the registration statement, then the right of
recovery under this subsection shall be conditioned on proof that such person acquired the
security relying upon such untrue statement in the registration statement or relying upon the
registration statement and not knowing of such income statement, but such reliance may be
established without proof of the reading of the registration statement by such person.
7.2. SRC Sec. 57 – Prospectus, communications, reports
Section 57. Civil Liabilities Arising in Connection With Prospectus, Communications and
Reports. 57.1. Any person who:
(a) Offers to sell or sells a security in violation of Chapter III, or
(b) Offers to sell or sells a security, whether or not exempted by the provisions of this
Code, by the use of any means or instruments of transportation or communication, by
means of a prospectus or other written or oral communication, which includes an
untrue statement of a material fact or omits to state a material fact necessary in order
to make the statements, in the light of the circumstances under which they were
made, not misleading (the purchaser not knowing of such untruth or omission), and
who shall fail in the burden of proof that he did not know, and in the exercise of
reasonable care could not have known, of such untruth or omission, shall be liable to
the person purchasing such security from him, who may sue to recover the
consideration paid for such security with interest thereon, less the amount of any
income received thereon, upon the tender of such security, or for damages if he no
longer owns the security.
57.2. Any person who shall make or cause to be made any statement in any report, or
document filed pursuant to this Code or any rule or regulation thereunder, which statement
as at the time and in the light of the circumstances under which it was made false or
misleading with respect to any material fact, shall be liable to any person who, not knowing
that such statement was false or misleading, and relying upon such statement shall have
purchased or sold a security at a price which was affected by such statement, for damages
caused by such reliance, unless the person sued shall prove that he acted in good faith and
had no knowledge that such statement was false or misleading.
7.3. SRC Sec. 58 – Securities transactions
Section 58. Civil Liability of Fraud in Connection with Securities Transactions. – Any person
who engages in any act or transaction in violation of Sections 19.2, 20 or 26, or any rule or
regulation of the Commission thereunder, shall be liable to any other person who purchases
or sells any security, grants or refuses to grant any proxy, consent or authorization, or
accepts or declines an invitation for tender of a security, as the case may be, for the
damages sustained by such other person as a result of such act or transaction.
7.4. SRC Sec. 59 – Manipulation of prices
Section 59. Civil Liability for Manipulation of Security Prices. – Any person who willfully
participates in any act or transaction in violation of Section 24 shall be liable to any person
who shall purchase or sell any security at a price which was affected by such act or
transaction, and the person so injured may sue to recover the damages sustained as a result
of such act or transaction.
7.5. SRC Sec. 61 – Insider trading
Section 61. Civil Liability on Account of Insider Trading. – 61.1. Any insider who violates
Subsection 27.1 and any person in the case of a tender offer who violates Subsection 27.4
(a)(I), or any rule or regulation thereunder, by purchasing or selling a security while in
possession of material information not generally available to the public, shall be liable in a
suit brought by any investor who, contemporaneously with the purchase or sale of securities
that is the subject of the violation, purchased or sold securities of the same class unless such
insider, or such person in the case of a tender offer, proves that such investor knew the
information or would have purchased or sold at the same price regardless of disclosure of
the information to him.
61.2. An insider who violates Subsection 27.3 or any person in the case of a tender offer who
violates Subsection 27.4 (a), or any rule or regulation thereunder, by communicating material
nonpublic information, shall be jointly and severally liable under Subsection 61.1 with, and to
the same extent as, the insider, or person in the case of a tender offer, to whom the
communication was directed and who is liable under Subsection 61.1 by reason of his
purchase or sale of a security.
7.6. SRC Sec. 63 - Amount of damages
Section 63. Amount of Damages to be Awarded. – 63.1. All suits to recover damages
pursuant to Sections 56, 57, 58, 59, 60 and 61 shall be brought before the Regional Trial
Court, which shall have exclusive jurisdiction to hear and decide such suits. The Court is
hereby authorized to award damages in an amount not exceeding triple the amount of the
transaction plus actual damages.
Exemplary damages may also be awarded in cases of bad faith, fraud, malevolence or
wantonness in the violation of this Code or the rules and regulations promulgated
thereunder.
The Court is also authorized to award attorney’s fees not exceeding thirty percentum (30%)
of the award.
63.2. The persons specified in Sections 56, 57, 58, 59, 60 and 61 hereof shall be jointly and
severally liable for the payment of damages. However, any person who becomes liable for
the payment of such damages may recover contribution from any other person who, if sued
separately, would have been liable to make the same payment, unless the former was guilty
of fraudulent representation and the latter was not.
63.3. Notwithstanding any provision of law to the contrary, all persons, including the issuer,
held liable under the provisions of Sections 56, 57, 58, 59, 60 and 61 shall contribute equally
to the total liability adjudged herein. In no case shall the principal stockholders, directors and
other officers of the issuer or persons occupying similar positions therein, recover their
contribution to the liability from the issuer. However, the right of the issuer to recover from
the guilty parties the amount it has contributed under this Section shall not be prejudiced.
8. Period to file – SRC 62
Section 62. Limitation of Actions. – 62.1. No action shall be maintained to enforce any
liability created under Section 56 or 57 of this Code unless brought within two (2) years after
the discovery of the untrue statement or the omission, or, if the action is to enforce a liability
created under Subsection 57.1 (a), unless, brought within two (2) yeas after the violation
upon which it is based. In no event shall an such action be brought to enforce a liability
created under Section 56 or Subsection 57.1 (a) more than five (5) years after the security
was bona fide offered to the public, or under Subsection 57.1 (b0 more than five (5) years
after the sale.
62.2. No action shall be maintained to enforce any liability created under any other provision
of this Code unless brought within two (20 years after the discovery of the facts constituting
the cause of action and within five (5) years after such cause of action accrued.
9. Amount of award – SRC Sec. 63
Section 63. Amount of Damages to be Awarded. – 63.1. All suits to recover damages
pursuant to Sections 56, 57, 58, 59, 60 and 61 shall be brought before the Regional Trial
Court, which shall have exclusive jurisdiction to hear and decide such suits. The Court is
hereby authorized to award damages in an amount not exceeding triple the amount of the
transaction plus actual damages.
Exemplary damages may also be awarded in cases of bad faith, fraud, malevolence or
wantonness in the violation of this Code or the rules and regulations promulgated
thereunder.
The Court is also authorized to award attorney’s fees not exceeding thirty percentum (30%)
of the award.
63.2. The persons specified in Sections 56, 57, 58, 59, 60 and 61 hereof shall be jointly and
severally liable for the payment of damages. However, any person who becomes liable for
the payment of such damages may recover contribution from any other person who, if sued
separately, would have been liable to make the same payment, unless the former was guilty
of fraudulent representation and the latter was not.
63.3. Notwithstanding any provision of law to the contrary, all persons, including the issuer,
held liable under the provisions of Sections 56, 57, 58, 59, 60 and 61 shall contribute equally
to the total liability adjudged herein. In no case shall the principal stockholders, directors and
other officers of the issuer or persons occupying similar positions therein, recover their
contribution to the liability from the issuer. However, the right of the issuer to recover from
the guilty parties the amount it has contributed under this Section shall not be prejudiced.
10. Jurisdiction of the SEC
10.1. SRC Sec. 5
Section 5. Powers and Functions of the Commission.– 5.1. The commission shall act with
transparency and shall have the powers and functions provided by this code, Presidential
Decree No. 902-A, the Corporation Code, the Investment Houses law, the Financing
Company Act and other existing laws. Pursuant thereto the Commission shall have, among
others, the following powers and functions:
(a) Have jurisdiction and supervision over all corporations, partnership or associations
who are the grantees of primary franchises and/or a license or a permit issued by the
Government;
(b) Formulate policies and recommendations on issues concerning the securities
market, advise Congress and other government agencies on all aspect of the
securities market and propose legislation and amendments thereto;
(c) Approve, reject, suspend, revoke or require amendments to registration
statements, and registration and licensing applications;
(d) Regulate, investigate or supervise the activities of persons to ensure compliance;
(e) Supervise, monitor, suspend or take over the activities of exchanges, clearing
agencies and other SROs;
(f) Impose sanctions for the violation of laws and rules, regulations and orders, and
issued pursuant thereto;
(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue
opinions and provide guidance on and supervise compliance with such rules,
regulation and orders;
(h) Enlist the aid and support of and/or deputized any and all enforcement agencies
of the Government, civil or military as well as any private institution, corporation, firm,
association or person in the implementation of its powers and function under its
Code;
(i) Issue cease and desist orders to prevent fraud or injury to the investing public;
(j) Punish for the contempt of the Commission, both direct and indirect, in accordance
with the pertinent provisions of and penalties prescribed by the Rules of Court;
(k) Compel the officers of any registered corporation or association to call meetings of
stockholders or members thereof under its supervision;
(l) Issue subpoena duces tecum and summon witnesses to appear in any
proceedings of the Commission and in appropriate cases, order the examination,
search and seizure of all documents, papers, files and records, tax returns and books
of accounts of any entity or person under investigation as may be necessary for the
proper disposition of the cases before it, subject to the provisions of existing laws;
(m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of
registration of corporations, partnership or associations, upon any of the grounds
provided by law; and
(n) Exercise such other powers as may be provided by law as well as those which
may be implied from, or which are necessary or incidental to the carrying out of, the
express powers granted the Commission to achieve the objectives and purposes of
these laws.
5.2. The Commission’s jurisdiction over all cases enumerated under section 5 of Presidential
Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the
appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its
authority may designate the Regional Trial Court branches that shall exercise jurisdiction
over the cases. The Commission shall retain jurisdiction over pending cases involving intracorporate disputes submitted for final resolution which should be resolved within one (1) year
from the enactment of this Code. The Commission shall retain jurisdiction over pending
suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed.
10.2. Sec. 6, PD 902-A as amended (PDs 1653, 1758 and 1799)
Section 6. In order to effectively exercise such jurisdiction, the Commission shall possess
the following powers:
a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in
all cases in which it has jurisdiction, and in which cases the pertinent provisions of the
Rules of Court shall apply;
b) To punish for contempt of the Commission, both direct and indirect, in accordance
with the pertinent provisions of, and penalties prescribed by, the Rules of Court;
c) To compel the officers of any corporation or association registered by it to call
meetings of stockholders or members thereof under its supervision;
d) To pass upon the validity of the issuance and use of proxies and voting trust
agreements for absent stockholders or members;
e) To issue subpoena duces tecum and summon witnesses to appear in any
proceedings of the Commission and in appropriate cases order search and seizure or
cause the search and seizure of all documents, papers, files and records as well as
books of accounts of any entity or person under investigation as may be necessary
for the proper disposition of the cases before it;
f) To impose fines and/or penalties for violation of this Decree or any other laws being
implemented by the Commission, the pertinent rules and regulations, its orders,
decisions and/or rulings;
g) To authorize the establishment and operation of stock exchanges, commodity
exchanges and such other similar organization and to supervise and regulate the
same; including the authority to determine their number, size and location, in the light
of national or regional requirements for such activities with the view to promote,
conserve or rationalize investment;
h) To pass upon, refuse or deny, after consultation with the Board of Investments,
Department of Industry, National Economic and Development Authority or any other
appropriate government agency, the application for registration of any corporation,
partnership or association or any form of organization falling within its jurisdiction, if
their establishment, organization or operation will not be consistent with the declared
national economic policies.
i) To suspend, or revoke, after proper notice and hearing, the franchise or certificate
of registration of corporations, partnerships or associations, upon any of the grounds
provided by law, including the following:
1. Fraud in procuring its certificate of registration;
2. Serious misrepresentation as to what the corporation can do or is doing to
the great prejudice of or damage to the general public;
3. Refusal to comply or defiance of any lawful order of the Commission
restraining commission of acts which would amount to a grave violation of its
franchise;
4. Continuous in operation for a period of at least five (5) years;
5. Failure to file by-laws within the required period;
6. Failure to file required reports in appropriate forms as determined by the
Commission within the prescribed period;
j) To exercise such other powers as implied, necessary or incidental to the carrying
out the express powers granted to the Commission or to achieve the objectives and
purposes of this Decree.
In the exercise of the foregoing authority and jurisdiction of the Commission, hearings shall
be conducted by the Commission or by a Commissioner or by such other bodies, boards,
committees and/or any officer as may be created or designated by the Commission for the
purpose. The decision, ruling or order of any such Commissioner, bodies, boards,
committees and/or officer may be appealed to the Commission sitting en banc within thirty
(30) days after receipt by the appellant of notice of such decision, ruling or order. The
Commission shall promulgate rules of procedures to govern the proceedings, hearings and
appeals of cases falling within its jurisdiction.
The aggrieved party may appeal the order, decision or ruling of the Commission sitting en
banc to the Supreme Court by petition for petition for review in accordance with the pertinent
provisions of the Rules of Court.
Read : Baviera v. Paglinawan, 515 SCRA 170 (2007) GSIS v. Court of
Appeals 585 SCRA 679 (2009) PASTRA v. Court of Appeals, 536 SCRA 61
(2007) Speed Distribution, Inc. v Court of Appeals, 425 SCRA 691 (2004)