Academic Year 2022 - 2023 First Semester BUSINESS LAW AND REGULATIONS ONE PERSON CORPORATIONS General Provisions What is One-Person Corporation (OPC)? ONE PERSON CORPORATIONS General Provisions What is One-Person Corporation (OPC)? A One Person Corporation is a corporation with a single stockholder ONE PERSON CORPORATIONS General Provisions Who can be a single stockholder of OPC? ONE PERSON CORPORATIONS General Provisions Who can be a single stockholder of OPC? Only a natural person, trust, or an estate may form a One Person Corporation. ONE PERSON CORPORATIONS General Provisions Who are from incorporating an OPC? ONE PERSON CORPORATIONS General Provisions Who are from incorporating an OPC? Banks and quasi-banks, pre-need, trust, insurance, public and publicly-listed companies, and non-chartered government-owned and -controlled corporations may not incorporate as One Person Corporations: Natural person who is licensed to exercise a profession may not organize as a One Person Corporation for the purpose of exercising such profession except as otherwise provided under special laws. ONE PERSON CORPORATIONS General Provisions Minimum Authorized Capital Stock - None Additional matters in the Articles of Incorporation: (a) If the single stockholder is a trust or an estate, the name, nationality, and residence of the trustee, administrator, executor, guardian, conservator, custodian, or other person exercising fiduciary duties together with the proof of such authority to act on behalf of the trust or estate; and (b) Name, nationality, residence of the nominee and alternate nominee, and the extent, coverage and limitation of the authority. ONE PERSON CORPORATIONS General Provisions Is By-laws required? What suffix must be put in the corporate name? ONE PERSON CORPORATIONS General Provisions Is By-laws required? No What suffix must be put in the corporate name? OPC ONE PERSON CORPORATIONS General Provisions Who are the corporate officers and director? ONE PERSON CORPORATIONS General Provisions Who are the corporate officers and director? The single stockholder shall be the sole director and president of the One Person Corporation. Within fifteen (15) days from the issuance of its certificate of incorporation, the One Person Corporation shall appoint a treasurer, corporate secretary, and other officers as it may deem necessary, and notify the Commission thereof within five (5) days from appointment. ONE PERSON CORPORATIONS General Provisions May the single stockholder be appointed as the corporate secretary? May the single stockholder be appointed as the treasurer? ONE PERSON CORPORATIONS General Provisions May the single stockholder be appointed as the corporate secretary? No May the single stockholder be appointed as the treasurer? Yes, provided that he/she shall give a bond to the SEC in such a sum as may be required and to undertake in writing to faithfully administer the funds to, and to disburse and invest the same according to the articles of incorporation The bond shall be renewed every two (2) years or as often as may be required. ONE PERSON CORPORATIONS General Provisions What are the special functions of a corporate secretary? ONE PERSON CORPORATIONS General Provisions What are the special functions of a corporate secretary? (a) Be responsible for maintaining the minutes book and/or records of the corporation; (b) Notify the nominee or alternate nominee of the death or incapacity of the single stockholder, which notice shall be given no later than five (5) days from such occurrence; (c) Notify the Commission of the death of the single stockholder within five (5) days from such occurrence and stating in such notice the names, residence addresses, and contact details of all known legal heirs; and (d) Call the nominee or alternate nominee and the known legal heirs to a meeting and advise the legal heirs with regard to, among others, the election of a new director, amendment of the articles of incorporation, and other ancillary and/or consequential matters. ONE PERSON CORPORATIONS General Provisions Who is a nominee? alternate nominee? ONE PERSON CORPORATIONS General Provisions Who is a nominee? alternate nominee? The single stockholder shall designate a nominee and an alternate nominee who shall, in the event of the single stockholder’s death or incapacity, take the place of the single stockholder as director and shall manage the corporation’s affairs. The written consent of the nominee and alternate nominee shall be attached to the application for incorporation. Such consent may be withdrawn in writing any time before the death or incapacity of the single stockholder. ONE PERSON CORPORATIONS General Provisions What is the term of office of nominee/alternate nominee? ONE PERSON CORPORATIONS General Provisions What is the term of office of nominee/alternate nominee? When the incapacity of the single stockholder is temporary, the nominee shall sit as director and manage the affairs of the One Person Corporation until the stockholder, by self determination, regains the capacity to assume such duties. In case of death or permanent incapacity of the single stockholder, the nominee shall sit as director and manage the affairs of the One Person Corporation until the legal heirs of the single stockholder have been lawfully determined, and the heirs have designated one of them or have agreed that the estate shall be the single stockholder of the One Person Corporation. ONE PERSON CORPORATIONS General Provisions What is the term of office of nominee/alternate nominee? The alternate nominee shall sit as director and manage the One Person Corporation in case of the nominee’s inability, incapacity, death, or refusal to discharge the functions as director and manager of the corporation, and only for the same term and under the same conditions applicable to the nominee. The single stockholder may, at any time, change its nominee and alternate nominee by submitting to the Commission the names of the new nominees and their corresponding written consent. For this purpose, the articles of incorporation need not be amended. ONE PERSON CORPORATIONS General Provisions Reportorial Requirements: A One Person Corporation shall maintain a minutes book which shall contain all actions, decisions, and resolutions taken by the One Person Corporation. When action is needed on any matter, it shall be sufficient to prepare a written resolution, signed and dated by the single stockholder, and recorded in the minutes book of the One Person Corporation. The date of recording in the minutes book shall be deemed to be the date of the meeting. ONE PERSON CORPORATIONS General Provisions Reportorial Requirements: (a) Annual financial statements audited by an independent certified public accountant: If the total assets or total liabilities of the corporation are less than Six Hundred Thousand Pesos (P600,000.00), the financial statements shall be certified under oath by the corporation’s treasurer and president. (b) A report containing explanations or comments by the president on every qualification, reservation, or adverse remark or disclaimer made by the auditor in the latter’s report; ONE PERSON CORPORATIONS General Provisions Reportorial Requirements: (c) A disclosure of all self-dealings and related party transactions entered into between the One Person Corporation and the single stockholder; and (d) Other reports as the Commission may require. For purposes of this provision, the fiscal year of a One Person Corporation shall be that set forth in its articles of incorporation or, in the absence thereof, the calendar year. ONE PERSON CORPORATIONS General Provisions What is the extent of liability of single stockholder? ONE PERSON CORPORATIONS General Provisions What is the extent of liability of single stockholder? Limited Liability only A sole shareholder claiming limited liability has the burden of affirmatively showing that the corporation was adequately financed. Where the single stockholder cannot prove that the property of the One Person Corporation is independent of the stockholder’s personal property, the stockholder shall be jointly and severally liable for the debts and other liabilities of the One Person Corporation. The principles of piercing the corporate veil applies with equal force to One Person Corporations as with other corporations ONE PERSON CORPORATIONS General Provisions Conversion from ordinary stock corporation to OPC ONE PERSON CORPORATIONS General Provisions Conversion from ordinary stock corporation to OPC When a single stockholder acquires all the stocks of an ordinary stock corporation, the latter may apply for conversion into a One Person Corporation, subject to the submission of such documents as the Commission may require. If the application for conversion is approved, the Commission shall issue a certificate of filing of amended articles of incorporation reflecting the conversion. The One Person Corporation shall legally responsible for all the latter’s outstanding liabilities as of the date of conversion. ONE PERSON CORPORATIONS General Provisions Conversion from OPC to ordinary stock corporation ONE PERSON CORPORATIONS General Provisions Conversion from OPC to ordinary stock corporation A One Person Corporation may be converted into an ordinary stock corporation after due notice to the Commission of such fact and of the circumstances leading to the conversion, and after compliance with all other requirements for stock corporations under this Code and applicable rules. Such notice shall be filed with the Commission within sixty (60) days from the occurrence of the circumstances leading to the conversion into an ordinary stock corporation. ONE PERSON CORPORATIONS General Provisions Conversion from OPC to ordinary stock corporation In case of death of the single stockholder, the nominee or alternate nominee shall transfer the shares to the duly designated legal heir or estate within seven (7) days from receipt of either an affidavit of heirship or selfadjudication executed by a sole heir, or any other legal document declaring the legal heirs of the single stockholder and notify the Commission of the transfer. Within sixty (60) days from the transfer of the shares, the legal heirs shall notify the Commission of their decision to either wind up and dissolve or convert it into an ordinary stock corporation. DISSOLUTION General Provisions DISSOLUTION General Provisions DISSOLUTION General Provisions LIQUIDATION General Provisions What is the period for liquidation? LIQUIDATION General Provisions What is the period for liquidation? Remain as a body corporate for three (3) years after the effective date of dissolution. The 3-year period is only for the purpose of winding up the affairs of the corporation and not for the purpose of continuing the business for which it was established. LIQUIDATION General Provisions What are the transactions allowed during liquidation? LIQUIDATION General Provisions What are the transactions allowed during liquidation? At any time during said three (3) years, the corporation is authorized and empowered to: 1. prosecute and defend suits by or against it 2. settle and close its affairs 3. dispose of and convey its property, 4. distribute its assets, Upon the winding up of corporate affairs, any asset distributable to any creditor or stockholder or member who is unknown or cannot be found shall be escheated in favor of the national government. FOREIGN CORPORATIONS General Provisions What is a foreign corporation? FOREIGN CORPORATIONS General Provisions What is a foreign corporation? A foreign corporation is one formed, organized or existing under laws other than those of the Philippines’ and whose laws allow Filipino citizens and corporations to do business in its own country or State. FOREIGN CORPORATIONS General Provisions When is a foreign corporation allowed to transact business in the Philippines? FOREIGN CORPORATIONS General Provisions When is a foreign corporation allowed to transact business in the Philippines? It shall have the right to transact business in the Philippines after obtaining a license for that purpose in accordance with this Code and a certificate of authority from the appropriate government agency. FOREIGN CORPORATIONS General Provisions Who is a resident agent? FOREIGN CORPORATIONS General Provisions Who is a resident agent? One designated by the foreign corporation upon whom summons and other legal processes may be served foreign corporation is allowed to do business in the Philippines only through a resident agent. As a condition to the issuance of the license for a foreign corporation to transact business in the Philippines, such corporation shall file with the Commission a written power of attorney designating a person on whom summons and other legal processes may be served FOREIGN CORPORATIONS General Provisions Who May be a Resident Agent? FOREIGN CORPORATIONS General Provisions Who May be a Resident Agent? A resident agent may be either an individual residing in the Philippines or a domestic corporation lawfully transacting business in the Philippines: An individual resident agent must be of good moral character and of sound financial standing. In, case of a domestic corporation it must likewise be of sound financial standing and must show proof that it is in good standing as certified by the Commission. FOREIGN CORPORATIONS General Provisions What constitutes “doing business”? FOREIGN CORPORATIONS General Provisions What constitutes “doing business”? Under the Foreign Investment Act, doing business would include: 1. Soliciting orders, contracts from clients 2. Appointing representative or distributor domiciled in the Philippines under the control and supervision of the foreign corporation 3. Opening branches in the Philippines. 4. Participating in the management, supervision or control of any domestic corporation, business, firm or entity in the Philippines. 5. Any act that imply continuity of commercial dealings or the exercise of functions normally incident to the progressive prosecution of commercial gain FOREIGN CORPORATIONS General Provisions What constitutes “doing business”? Doing business does not include: 1. Mere investment as shareholder without control 2. Having a nominee director or officer to represent its interest in such corporation 3. Appointing a representative or distributor in the Philippines which transact business in its own name or for its own account. FOREIGN CORPORATIONS General Provisions What is the effect of doing business without a license? General Rule: FOREIGN CORPORATIONS General Provisions What is the effect of doing business without a license? General Rule: No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws. FOREIGN CORPORATIONS General Provisions What is the effect of doing business without a license? Exceptions: FOREIGN CORPORATIONS General Provisions What is the effect of doing business without a license? Exceptions: 1. The transaction is an isolated transaction 2. To protect its trademark, patents, and other incorporeal rights. 3. Defending suit against the foreign corporation 4. The other party is estopped because the complaining party transact business to the foreign corporation knowing that it has no license to do business. SECURITIES REGULATIONS CODE General Provisions What is a security? SECURITIES REGULATIONS CODE General Provisions What is a security? “Securities” are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instrument, whether written or electronic in character. SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? General Rule: SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? General Rule: As a general rule, securities shall not be sold or offered for sale or distribution within the Philippines, without registering such securities with the SEC. SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt securities: SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt securities: (a) Any security issued or guaranteed by the Government of the Philippines, or by any political subdivision or agency thereof, or by any person controlled or supervised by, and acting as an instrumentality of said Government. (b) Any security issued or guaranteed by the government of any country with which the Philippines maintains diplomatic relations, or by any state, province or political subdivision thereof on the basis of reciprocity: Provided, That the Commission may require compliance with the form and content of disclosures the Commission may prescribe. SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt securities: (c) Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body. (d) Any security or its derivatives the sale or transfer of which, by law, is under the supervision and regulation of the Office of the Insurance Commission, Housing and Land Use Regulatory Board, or the Bureau of Internal Revenue. (e) Any security issued by a bank except its own shares of stock. SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt transactions: SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt transactions: (a) At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy. (b) By or for the account of a pledge holder, or mortgagee or any other similar lien holder selling or offering for sale or delivery in the ordinary course of business and not for the purpose of avoiding the provisions of this Code, to liquidate a bona fide debt, a security pledged in good faith as security for such debt. SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt transactions: (c) An isolated transaction in which any security is sold, offered for sale, subscription or delivery by the owner thereof, or by his representative for the owner’s account (d) The distribution by a corporation, actively engaged in the business authorized by its articles of incorporation, of securities to its stockholders or other security holders as a stock dividend or other distribution out of surplus. SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt transactions: (e) The sale of capital stock of a corporation to its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale of such capital stock. (f) The issuance of bonds or notes secured by mortgage upon real estate or tangible personal property, where the entire mortgage together with all the bonds or notes secured thereby are sold to a single purchaser at a single sale. SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt transactions: (g) The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion entitling the holder of the security surrendered in exchange to make such conversion (h) Subscriptions for shares of the capital stock of a corporation prior to the incorporation thereof or in pursuance of an increase in its authorized capital stock under the Corporation Code, when no expense is incurred, or no commission, compensation or remuneration is paid or given SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt transactions: (i) Subscriptions for shares of the capital stock of a corporation prior to the incorporation thereof or in pursuance of an increase in its authorized capital stock under the Corporation Code, when no expense is incurred, or no commission, compensation or remuneration is paid or given (j) The exchange of securities by the issuer with its existing security holders exclusively, where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange SECURITIES REGULATIONS CODE General Provisions Are securities required to be registered with SEC? Exempt transactions: (k) The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during any twelve-month period. (l) The sale of securities to any number of the following qualified buyers (ex: Banks, investment houses, etc.) SECURITIES REGULATIONS CODE General Provisions What is a prospectus? SECURITIES REGULATIONS CODE General Provisions What is a prospectus? “Prospectus” is the document made by or on behalf of an issuer, underwriter or dealer to sell or offer securities for sale to the public through a registration statement filed with the Commission. The information required for the registration of any kind, and all securities, shall include, among others, the effect of the securities issue on ownership, on the mix of ownership, especially foreign and local ownership. SECURITIES REGULATIONS CODE General Provisions What are the grounds for revocation or rejection of registration of securities? (a) The issuer: SECURITIES REGULATIONS CODE General Provisions What are the grounds for revocation or rejection of registration of securities? (a) The issuer: 1. Has been judicially declared insolvent; 2. Has violated any of the provisions of this Code, the rules promulgated pursuant thereto, or any order of the Commission of which the issuer has notice in connection with the offering for which a registration statement has been filed; 3. Has been or is engaged or is about to engage in fraudulent transactions; 4. Has made any false or misleading representation of material facts in any prospectus concerning the issuer or its securities; Has failed to comply with any requirement that the Commission may impose as a condition for registration of the security for which the registration statement has been filed; or SECURITIES REGULATIONS CODE General Provisions What are the grounds for revocation or rejection of registration of securities? (b) The registration statement is on its face incomplete or inaccurate in any material respect or includes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading; or (c) The issuer, any officer, director or controlling person of the issuer, or person performing similar functions, or any underwriter has been convicted, by a competent judicial or administrative body, upon plea of guilty, or otherwise, of an offense involving moral turpitude and/or fraud or is enjoined or restrained by the Commission or other competent judicial or administrative body for violations of securities, commodities, and other related laws. (d) Failure of the issuer to permit an examination to be made by the Commission SECURITIES REGULATIONS CODE General Provisions What are the grounds for suspension of registered of securities? SECURITIES REGULATIONS CODE General Provisions What are the grounds for suspension of registered of securities? 1) If, at any time, the information contained in the registration statement filed is or has become misleading, incorrect, inadequate or incomplete in any material respect, or 2) the sale or offering for sale of the security registered thereunder may work or tend to work a fraud. SECURITIES REGULATIONS CODE Protection of Shareholder Interests What is tender offer? SECURITIES REGULATIONS CODE Protection of Shareholder Interests What is tender offer? A tender offer is a public bid for stockholders to sell their stock. SECURITIES REGULATIONS CODE Protection of Shareholder Interests What are required to make a tender offer? SECURITIES REGULATIONS CODE Protection of Shareholder Interests What are required to make a tender offer? 1. Any person or group of persons acting in concert who intends to acquire at least fifteen per cent (15%) of any class of any equity security of a listed corporation 2. Any person or group of persons acting in concert who intends to acquire at least fifteen per cent (15%) of any class of any equity security of any class of any equity security of a corporation with assets of at least Fifty Million Pesos (P50,000,000.00) and having two hundred (200) or more stockholders with at least one hundred (100) shares each 3. Any person who intends to acquire at least thirty per cent (30%) of such equity over a period of twelve (12) months. SECURITIES REGULATIONS CODE Protection of Shareholder Interests What is Proxy Solicitation? SECURITIES REGULATIONS CODE Protection of Shareholder Interests What is Proxy Solicitation? No broker or dealer shall give any proxy, consent or authorization, in respect of any security carried for the account of a customer, to a person other than the customer, without the express written authorization of such customer. A broker or dealer who holds or acquires the proxy for at least ten per centum (10%) or such percentage as the Commission may prescribe of the outstanding share of the issuer, shall submit a report identifying the beneficial owner within ten (10) days after such acquisition, for its own account or customer, to the issuer of the security, to the Exchange where the security is traded and to the Commission. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: 1. To create a false or misleading appearance of active trading in any listed security traded in an Exchange or any other trading market: Wash sales Matched Orders By performing similar act where there is no change in beneficial ownership. Wash Sales and Matched Orders are not in themselves illegal. But they are considered fraudulent whenever they are resorted to in order to create a false or misleading appearance of active trading. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: 2. To effect, alone or with others, a series of 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 a controlling, controlled, or commonly controlled company by others; ii. Depresses their price to induce the sale of a security, whether of the same or a different class, of the same issuer or of a controlling, controlled, or commonly controlled company by others; or 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. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: (3) 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 purchase or sale of such security. (4) 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. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: (5) 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. (6) No person shall use or employ, in connection with the purchase or sale of any security any manipulative or deceptive device or contrivance. (7) 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 or for the protection of investors. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Marking the close - SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Marking the close - occurs when a trader holds a significant position in a thinly traded symbol and enters orders crossing the spread at or near the close of normal trading hours, in an attempt to cause the session to close at a price favoring the held position. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Painting the tape - SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Painting the tape - a form of market manipulation whereby market players attempt to influence the price of a security by buying and selling it among themselves to create the appearance of substantial trading activity. The goal of painting the tape is to create the illusion of an increased interest in a stock to trick investors into buying shares, which would drive the price higher. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Squeezing the float - SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Squeezing the float - refers to taking advantage of a shortage of securities in the market by controlling the demand side and exploiting market congestion during such shortages in a way to create artificial prices. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Hype and Dump - SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Hype and Dump - Also called Pump-and-dump is a manipulative scheme that attempts to boost the price of a stock or security through fake recommendations. These recommendations are based on false, misleading, or greatly exaggerated statements. The perpetrators of a pump-and-dump scheme already have an established position in the company's stock and will sell their positions after the hype has led to a higher share price. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Boiler Room Operations - SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Boiler Room Operations - refers to an outfit using high-pressure sales tactics to sell stocks to clients who are cold called or called randomly, most likely after being picked out of a phone directory. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Short sale - SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Prohibited Practices: Short sale - Selling the security which the vendor does not own and borrowed only from another. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Fraudulent Transactions SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Fraudulent Transactions (a) Employ any device, scheme, or artifice to defraud; (b) 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 (c) Engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices What is Insider Trading? SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices What is Insider Trading? Trading a security of the issuer by an insider while in possession of material information with respect to the issuer or the security that is not generally available to the public SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Who is an insider? SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices Who is an insider? 1. the issuer; 2. a director or officer (or person performing similar functions) of, or a person controlling the issuer; 3. a person whose relationship or former relationship to the issuer gives or gave him access to material information about the issuer or the security that is not generally available to the public; 4. a government employee, or 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 5. a person who learns such information by a communication from any of the foregoing insiders. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices What is a “material non-public information” ? SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices What is a “material non-public information” ? (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 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. SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices A purchase or sale of a security of the issuer made by an insider 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 non-public 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 the market to absorb such information SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices When is a transaction not considered an insider trading? SECURITIES REGULATIONS CODE Manipulation of Security Prices; Devices and Practices When is a transaction not considered an insider trading? (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.
