THE SECURITIES REGULATION CODE certificates, voting trust certificates or

similar instruments
Be it enacted by the Senate and the House of
Representative of the Philippines in the (f) Proprietary or nonproprietary
Congress assembled: membership certificates in
corporations; and
CHAPTER I
TITLE AND DEFINITIONS (g) Other instruments as may in the
future be determined by the
Section 1. Title. - This shall be known as "The Commission.
Securities Regulation Code"
3.2. "Issuer" is the originator, maker, obligor, or
Section 2. Declaration of State Policy. – The creator of the security.
State shall establish a socially conscious, free
market that regulates itself, encourage the 3.3. "Broker" is a person engaged in the
widest participation of ownership in business of buying and selling securities for the
enterprises, enhance the democratization of account of others.
wealth, promote the development of the capital
market, protect investors, ensure full and fair 3.4. "Dealer" means many person who buys
disclosure about securities, minimize if not sells securities for his/her own account in the
totally eliminate insider trading and other ordinary course of business.
fraudulent or manipulative devices and
practices which create distortions in the free 3.5. "Associated person of a broker or dealer"
market. To achieve these ends, this Securities is an employee therefor whom, directly
Regulation Code is hereby enacted. exercises control of supervisory authority, but
does not include a salesman, or an agent or a
Section 3. Definition of Terms. - 3.1. person whose functions are solely clerical or
"Securities" are shares, participation or ministerial.
interests in a corporation or in a commercial
enterprise or profit-making venture and 3.6. "Clearing Agency" is any person who acts
evidenced by a certificate, contract, as intermediary in making deliveries upon
instruments, whether written or electronic in payment effect settlement in securities
character. It includes: transactions.

(a) Shares of stocks, bonds, 3.7. "Exchange" is an organized market place

debentures, notes evidences of or facility that brings together buyers and
indebtedness, asset-backed securities; sellers and executes trade of securities and/or
commodities.
(b) Investment contracts, certificates of
interest or participation in a profit 3.8. "Insider" means (a) the issuer; (b) a
sharing agreement, certifies of deposit director or officer (or any person performing
for a future subscription; similar functions) of, or a person controlling the
issuer; gives or gave him access to material
(c) Fractional undivided interests in oil, information about the issuer or the security that
gas or other mineral rights; is not generally available to the public; (d) A
government employee, director, or officer of an
(d) Derivatives like option and exchange, clearing agency and/or self-
warrants; regulatory organization who has access to
material information about an issuer or a
(e) Certificates of assignments, security that is not generally available to the
certificates of participation, trust public; or (e) a person who learns such

Page 1 of 42
information by a communication from any been appointed and qualified. A Commissioner
forgoing insiders. appointed to fill a vacancy occurring prior to the
expiration of the term for which his/her
3.9. "Pre-need plans" are contracts which predecessor was appointed, shall serve only
provide for the performance of future services for the unexpired portion of their terms under
of or the payment of future monetary Presidential Decree No. 902-A. Unless the
considerations at the time actual need, for context indicates otherwise, the term
which plan holders pay in cash or installment at "Commissioner" includes the Chairperson.
stated prices, with or without interest or
insurance coverage and includes life, pension, 4.2. The Commissioners must be natural-born
education, interment, and other plans which the citizens of the Philippines, at least forty (40)
Commission may from time to time approve. years of age for the Chairperson and at least
thirty-five (35) years of age for the
3.10. "Promoter" is a person who, acting alone Commissioners, of good moral character, or
or with others, takes initiative in founding and unquestionable integrity, of known probity and
organizing the business or enterprise of the patriotism, and with recognized competence in
issuer and receives consideration therefor. social and economic disciplines: Provided,
That the majority of Commissioners, including
3.11. "Prospectus" is the document made by or the Chairperson, shall be members of the
an behalf of an issuer, underwriter or dealer to Philippine Bar.
sell or offer securities for sale to the public
through registration statement filed with the 4.3. The chairperson is chief executive officer
Commission. of the Commission. The Chairperson shall
execute and administer the policies, decisions,
3.12. "Registration statement" is the application orders and resolutions approved by the
for the registration of securities required to be Commission and shall have the general
filed with the Commission. executive direction and supervision of the work
and operation of the Commission and it’s
members, bodies, boards, offices, personnel
3.13. "Salesman" is a natural person,
and all its administrative business.
employed as such as an agent, by a dealer,
issuer or broker to buy and sell securities.
4.4. The salary of the Chairperson and the
Commissioners shall be fixed by the President
3.14. "Uncertificated security" is a security
of the Philippines based on the objective
evidenced by electronic or similar records.
classification system, at a sum comparable to
the members of the Monetary Board and
3.15. "Underwriter" is a person who guarantees commensurate importance and responsibilities
on a firm commitment and/or declared best attached to the position.
effort basis the distribution and sale of
securities of any kind by another company.
4.5. The Commission shall hold meetings at
least once a week for the conduct of business
CHAPTER II or as often as may be necessary upon the call
SECURITIES AND EXCHANGE of the Chairperson or upon the request of (3)
COMMISSION Commissioners. The notice of the meeting
shall be given to all Commissioners and the
Section 4. Administrative Agency. – 4.1. This presence of three (3) Commissioners shall
Code shall be administered by the Security and constitute a quorum. In the absence of the
Exchange Commission (hereinafter referred to Chairperson, the most senior Commissioner
as the "Commission") as a Collegial body, shall act as presiding officer of the meeting.
composed of a chairperson and (4)
Commissioners, appointed by the President for 4.6. The Commission may, for purposes of
a term of (7) seven years each and who shall efficiency, delegate any of its functions to any
serves as such until their successor shall have

Page 2 of 42
department of office of the Commission, an (f) Impose sanctions for the violation of
individual Commissioner or staff member of the laws and rules, regulations and orders,
Commission except its review or appellate and issued pursuant thereto;
authority and its power to adopt, alter and
supplement any rule or regulation. (g) Prepare, approve, amend or repeal
rules, regulations and orders, and issue
The commission may review upon its own opinions and provide guidance on and
initiative or upon the petition of any interested supervise compliance with such rules,
party any action of any department or office, regulation and orders;
individual Commissioner, or staff member of
the Commission. (h) Enlist the aid and support of and/or
deputized any and all enforcement
Section 5. Powers and Functions of the agencies of the Government, civil or
Commission.– 5.1. The commission shall act military as well as any private
with transparency and shall have the powers institution, corporation, firm,
and functions provided by this code, association or person in the
Presidential Decree No. 902-A, the implementation of its powers and
Corporation Code, the Investment Houses law, function under its Code;
the Financing Company Act and other existing
laws. Pursuant thereto the Commission shall (i) Issue cease and desist orders to
have, among others, the following powers and prevent fraud or injury to the investing
functions: public;

(a) Have jurisdiction and supervision (j) Punish for the contempt of the
over all corporations, partnership or Commission, both direct and indirect, in
associations who are the grantees of accordance with the pertinent
primary franchises and/or a license or provisions of and penalties prescribed
a permit issued by the Government; by the Rules of Court;

(b) Formulate policies and (k) Compel the officers of any

recommendations on issues registered corporation or association to
concerning the securities market, call meetings of stockholders or
advise Congress and other members thereof under its supervision;
government agencies on all aspect of
the securities market and propose (l) Issue subpoena duces tecum and
legislation and amendments thereto; summon witnesses to appear in any
proceedings of the Commission and in
(c) Approve, reject, suspend, revoke or appropriate cases, order the
require amendments to registration examination, search and seizure of all
statements, and registration and documents, papers, files and records,
licensing applications; tax returns and books of accounts of
any entity or person under investigation
(d) Regulate, investigate or supervise as may be necessary for the proper
the activities of persons to ensure disposition of the cases before it,
compliance; subject to the provisions of existing
laws;
(e) Supervise, monitor, suspend or take
over the activities of exchanges, (m) Suspend, or revoke, after proper
clearing agencies and other SROs; notice and hearing the franchise or
certificate of registration of
corporations, partnership or

Page 3 of 42
 associations, upon any of the grounds should it ultimately be determined by the
provided by law; and Commission that he/she is not entitled to be
indemnified as provided in this subsection.
(n) Exercise such other powers as may
be provided by law as well as those 6.2. The Commissioners, officers and
which may be implied from, or which employees of the Commission who willfully
are necessary or incidental to the violate this Code or who are guilty of
carrying out of, the express powers negligence, abuse or acts of malfeasance or
granted the Commission to achieve the fail to exercise extraordinary diligence in the
objectives and purposes of these laws. performance of their duties shall be held liable
for any loss or injury suffered by the
5.2. The Commission’s jurisdiction over all Commission or other institutions such as a
cases enumerated under section 5 of result of such violation, negligence, abuse, or
Presidential Decree No. 902-A is hereby malfeasance, or failure to exercise
transferred to the Courts of general jurisdiction extraordinary diligence. Similar responsibility
or the appropriate Regional Trial shall apply to the Commissioners, officers and
Court: Provided, That the Supreme Court in the employees of the Commission for (1) the
exercise of its authority may designate the disclosure of any information, discussion or
Regional Trial Court branches that shall resolution of the Commission of a confidential
exercise jurisdiction over the cases. The nature, or about the confidential operations of
Commission shall retain jurisdiction over the Commission unless the disclosure is in
pending cases involving intra-corporate connection with the performance of official
disputes submitted for final resolution which functions with the Commission or prior
should be resolved within one (1) year from the authorization of the Commissioners; or (2) the
enactment of this Code. The Commission shall use of such information for personal gain or to
retain jurisdiction over pending suspension of the detriment of the government, the
payment/rehabilitation cases filed as of 30 Commission or third parties: Provided,
June 2000 until finally disposed. however, That any data or information required
to be submitted to the President and/or
Section 6. Indemnification and Congress or its appropriate committee, or to be
Responsibilities of Commissioners.– 6.1. The published under the provisions of this Code
Commission shall indemnify each shall not be considered confidential.
Commissioner and other officials of the
Commission, including personnel performing Section 7. Reorganization. – 7.1. To achieve
supervision and examination functions for all the goals of this Code, consistent with the Civil
cost and expenses reasonably incurred by Service laws, the Commission is hereby
such persons in connection with any civil or authorized to provide for its reorganization, to
criminal actions, suits or proceedings to be streamline its structure and operations,
liable for gross negligence or misconduct. In upgrade its human resource component and
the event of settlement or compromise, enable it to more efficiently and effectively
indemnification shall be provided only in perform its functions and exercise its power
connection with such matters covered by the under this Code.
settlement as to which the Commission is
advised by external counsel that the persons to 7.2. All positions of the Commissions shall be
be indemnified did not commit any gross governed by a compensation and position
negligence or misconduct. The costs and classification system and qualification
expenses incurred in defending the standards approved by the Commission based
aforementioned action, suit or proceeding may on comprehensive job analysis and audit of
be paid by the Commission in advance of the actual duties and personal responsibilities. The
final disposition of such action, suit or compensation plan shall be comparable with
proceeding upon receipt of an undertaking by the prevailing compensation plan in the Bangko
or on behalf of the Commissioner, officer or Sentral ng Pilipinas and other government
employee to repay the amount advanced financial institutions and shall be subject to

Page 4 of 42
periodic review by the Commission no more Section 9. Exempt Securities. – 9.1. The
than once every two (2) years without prejudice requirement of registration under Subsection
to yearly merit review or increases based on 8.1 shall not as a general rule apply to any of
productivity and efficiency. The Commission the following classes of securities:
shall, therefore, be exempt from laws, rules,
and regulations on compensation, position (a) Any security issued or guaranteed
classification and qualifications standards. The by the Government of the Philippines,
Commission shall, however, endeavor to make or by any political subdivision or
its system conform as closely as possible with agency thereof, or by any person
the principles under the Compensation and controlled or supervised by, and acting
Position Classification Act of 1989 (Republic as an instrumentality of said
Act. 6758, as amended). Government.

CHAPTER III (b) Any security issued or guaranteed

REGISTRATION OF SECURITIES by the government of any country with
which the Philippines maintains
Section 8. Requirement of Registration of diplomatic relations, or by any state,
Securities.– 8.1. Securities shall not be sold or province or political subdivision thereof
offered for sale or distribution within the on the basis of reciprocity: Provided,
Philippines, without a registration statement That the Commission may require
duly filed with and approved by the compliance with the form and content
Commission. Prior to such sale, information on for disclosures the Commission may
the securities, in such form and with such prescribe.
substance as the Commission may prescribe,
shall be made available to each prospective (c) Certificates issued by a receiver or
purchaser. by a trustee in bankruptcy duly
approved by the proper adjudicatory
8.2. The Commission may conditionally body.
approve the registration statement under such
terms as it may deem necessary. (d) Any security or its derivatives the
sale or transfer of which, by law, is
8.3. The Commission may specify the terms under the supervision and regulation of
and conditions under which any written the Office of the Insurance
communication, including any summary Commission, Housing and Land Use
prospectus, shall be deemed not to constitute Rule Regulatory Board, or the Bureau
an offer for sale under this Section. of Internal Revenue.

8.4. A record of the registration of securities (e) Any security issued by a bank
shall be kept in Register Securities in which except its own shares of stock.
shall be recorded orders entered by the
Commission with respect such securities. Such 9.2. The Commission may, by rule or regulation
register and all documents or information with after public hearing, add to the foregoing any
the respect to the securities registered therein class of securities if it finds that the
shall be open to public inspection at reasonable enforcement of this Code with respect to such
hours on business days. securities is not necessary in the public interest
and for the protection of investors.
8.5. The Commission may audit the financial
statements, assets and other information of Section 10. Exempt Transactions. – 10.1. The
firm applying for registration of its securities requirement of registration under Subsection
whenever it deems the same necessary to 8.1 shall not apply to the sale of any security in
insure full disclosure or to protect the interest any of the following transactions:
of the investors and the public in general.

Page 5 of 42
 (a) At any judicial sale, or sale by an (g) The issue and delivery of any
executor, administrator, guardian or security in exchange for any other
receiver or trustee in insolvency or security of the same issuer pursuant to
bankruptcy. a right of conversion entitling the holder
of the security surrendered in
(b) By or for the account of a pledge exchange to make such
holder, or mortgagee or any of a pledge conversion: Provided, That the security
lien holder selling of offering for sale or so surrendered has been registered
delivery in the ordinary course of under this Code or was, when sold,
business and not for the purpose of exempt from the provision of this Code,
avoiding the provision of this Code, to and that the security issued and
liquidate a bonafide debt, a security delivered in exchange, if sold at the
pledged in good faith as security for conversion price, would at the time of
such debt. such conversion fall within the class of
securities entitled to registration under
(c) An isolated transaction in which any this Code. Upon such conversion the
security is sold, offered for sale, par value of the security surrendered in
subscription or delivery by the owner such exchange shall be deemed the
therefore, or by his representative for price at which the securities issued and
the owner’s account, such sale or offer delivered in such exchange are sold.
for sale or offer for sale, subscription or
delivery not being made in the course (h) Broker’s transaction, executed
of repeated and successive transaction upon customer’s orders, on any
of a like character by such owner, or on registered Exchange or other trading
his account by such representative and market.
such owner or representative not being
the underwriter of such security. (i) Subscriptions for shares of the
capitals stocks of a corporation prior to
(d) The distribution by a corporation the incorporation thereof or in
actively engaged in the business pursuance of an increase in its
authorized by its articles of authorized capital stocks under the
incorporation, of securities to its Corporation Code, when no expense is
stockholders or other security holders incurred, or no commission,
as a stock dividend or other distribution compensation or remuneration is paid
out of surplus. or given in connection with the sale or
disposition of such securities, and only
(e) The sale of capital stock of a when the purpose for soliciting, giving
corporation to its own stockholders or taking of such subscription is to
exclusively, where no commission or comply with the requirements of such
other remuneration is paid or given law as to the percentage of the capital
directly or indirectly in connection with stock of a corporation which should be
the sale of such capital stock. subscribed before it can be registered
and duly incorporated, or its
authorized, capital increase.
(f) The issuance of bonds or notes
secured by mortgage upon real estate
or tangible personal property, when the (j) The exchange of securities by the
entire mortgage together with all the issuer with the existing security holders
bonds or notes secured thereby are exclusively, where no commission or
sold to a single purchaser at a single other remuneration is paid or given
sale. directly or indirectly for soliciting such
exchange.

Page 6 of 42
 (k) The sale of securities by an issuer percent (1%) of the maximum value aggregate
to fewer than twenty (20) persons in the price or issued value of the securities.
Philippines during any twelve-month
period. Section 11. Commodity Futures Contracts. -
No person shall offer, sell or enter into
(l) The sale of securities to any number commodity futures contracts except in
of the following qualified buyers: accordance with the rules, regulations and
orders the Commission may prescribe in the
(i) Bank; public interest. The Commission shall
promulgate rules and regulations involving
(ii) Registered investment commodity futures contracts to protect
house; investors to ensure the development of a fair
and transparent commodities market.
(iii) Insurance company;
Section 12. Procedure of Registration
Securities. - 12.1. All securities required to be
(iv) Pension fund or retirement
registered under Subsection 8. I shall be
plan maintained by the
registered through the filing by the issuer in the
Government of the Philippines
main office of the Commission, of a sworn
or any political subdivision
registration statement with the respect to such
thereof or manage by a bank or
securities, in such form and containing such
other persons authorized by
information and document as the Commission
the Bangko Sentral to engage
prescribe. The registration statement shall
in trust functions;
include any prospectus required or permitted to
be delivered under Subsections 8.2, 8.3, and
(v) Investment company or; 8.4.

(vi) Such other person as the 12.2. In promulgating rules governing the
Commission may rule by content of any registration statement (including
determine as qualified buyers, any prospectus made a part thereof or annex
on the basis of such factors as thereto), the Commission may require the
financial sophistication, net registration statement to contain such
worth, knowledge, and information or documents as it may, by rule,
experience in financial and prescribe. It may dispense with any such
business matters, or amount of requirements, or may require additional
assets under management. information or documents, including written
information from an expert, depending on the
10.2. The Commission may exempt other necessity thereof or their applicability to the
transactions, if it finds that the requirements of class of securities sought to be registered.
registration under this Code is not necessary in
the public interest or for the protection of the 12.3. The information required for the
investors such as by the reason of the small registration of any kind, and all securities, shall
amount involved or the limited character of the include, among others, the effect of the
public offering. securities issue on ownership, on the mix of
ownership, especially foreign and local
10.3. Any person applying for an exemption ownership.
under this Section, shall file with the
Commission a notice identifying the exemption 12.4. The registration statement shall be
relied upon on such form and at such time as signed by the issuer’s executive officer, its
the Commission by the rule may prescribe and principal operating officer, its principal financial
with such notice shall pay to the Commission officer, its comptroller, its principal accounting
fee equivalent to one-tenth (1/10) of one officer, its corporate secretary, or persons

Page 7 of 42
performing similar functions accompanied by a with all the other papers and documents
duly verified resolution of the board of directors attached thereto, is on its face complete and
of the issuer corporation. The written consent that the requirements have been complied with.
of the expert named as having certified any part The Commission may impose such terms and
of the registration statement or any document conditions as may be necessary or appropriate
used in connection therewith shall also be filed. for the protection of the investors.
Where the registration statement shares to be
sold by selling shareholders, a written 12.7. Upon affectivity of the registration
certification by such selling shareholders as to statement, the issuer shall state under oath in
the accuracy of any part of the registration every prospectus that all registration
statement contributed to by such selling requirements have been met and that all
shareholders shall be filed. information are true and correct as represented
by the issuer or the one making the statement.
12.5. (a) Upon filing of the registration Any untrue statement of fact or omission to
statement, the issuer shall pay to the state a material fact required to be stated
Commission a fee of not more than one-tenth herein or necessary to make the statement
(1/10) of one per centum (1%) of the maximum therein not misleading shall constitute fraud.
aggregate price at which such securities are
proposed to be offered. The Commission shall Section 13. Rejection and Revocation of
prescribe by the rule diminishing fees in inverse Registration of Securities. – 13.1. The
proportion the value of the aggregate price of Commission may reject a registration
the offering. statement and refuse registration of the
security there-under, or revoke the affectivity of
(b) Notice of the filing of the registration a registration statement and the registration of
statement shall be immediately the security there-under after the due notice
published by the issuer, at its own and hearing by issuing an order to such effect,
expense, in two (2) newspapers of setting forth its finding in respect thereto, if it
general circulation in the Philippines, finds that:
once a week for two (2) consecutive
weeks, or in such other manner as the (a) The issuer:
Commission by the rule shall prescribe,
reciting that a registration statement for (i) Has been judicially declared
the sale of such securities has been insolvent;
filed, and that aforesaid registration
statement, as well as the papers
(ii) Has violated any of the
attached thereto are open to inspection
provision of this Code, the rules
at the Commission during business
promulgate pursuant thereto,
hours, and copies thereof, photostatic
or any order of the Commission
or otherwise, shall be furnished to
of which the issuer has notice
interested parties at such reasonable
in connection with the offering
charge as the Commission may
for which a registration
prescribe.
statement has been filed
12.6. Within forty-five (45) days after the date
(iii) Has been or is engaged or
of filing of the registration statement, or by such
is about to engage in fraudulent
later date to which the issuer has consented,
transactions;
the Commission shall declare the registration
statement effective or rejected, unless the
applicant is allowed to amend the registration (iv) Has made any false or
statement as provided in Section 14 hereof. misleading representation of
The Commission shall enter an order declaring material facts in any
the registration statement to be effective if it prospectus concerning the
finds that the registration statement together issuer or its securities;

Page 8 of 42
 (v) Has failed to comply with although binding upon the persons notified
any requirements that the thereof, shall be deemed confidential, and shall
Commission may impose as a not be published. Upon the issuance of the
condition for registration of the suspension order, no further offer or sale of
security for which the such security shall be made until the same is
registration statement has lifted or set aside by the Commission.
been filed; or Otherwise, such sale shall be void.

(b) The registration statement is on its 13.5. Notice of issuance of such order shall be
face incomplete or inaccurate in any given to the issuer and every dealer and broker
material respect or includes any untrue who shall have notified the Commission of an
statements of a material fact required intention to sell such security.
to be stated therein or necessary to
make the statement therein not 13.6. A registration statement may be
misleading; or withdrawn by the issuer only with the consent
of the Commission.
(c) The issuer, any officer, director or
controlling person performing similar Section 14. Amendment to the Registration
functions, or any under writer has been Statement. – 14.1. If a registration statement is
convicted, by a competent judicial or on its face incomplete or inaccurate in any
administrative body, upon plea of material respect, the Commission shall issue
guilty, or otherwise, of an offense an order directing the amendment of the
involving moral turpitude and /or fraud registration statement. Upon compliance with
or is enjoined or restrained by the such order, the amended registration
Commission or other competent or statement shall become effective in
administrative body for violations of accordance with the procedure mentioned in
securities, commodities, and other Subsection 12.6 hereof.
related laws.
14.2. An amendment filed prior to the effective
For the purposes of this subsection, the term date of the registration statement shall
"competent judicial or administrative body" recommence the forty-five (45) day period
shall include a foreign court of competent within which the Commission shall act on a
jurisdiction as provided for under Rules of registration statement. An amendment filed
Court. after the effective date of the registration
statement shall become effective only upon
13.2. The Commission may compel the such date as determined by the Commission.
production of all the books and papers of such
issuer, and may administer oaths to, and 14.3. If any change occurs in the facts set forth
examine the officers of such the issuer or any in a registration statement, the issuer shall file
other person connected therewith as to its an amendment thereto setting forth the
business and affairs. change.

13.3. If any issuer shall refuse to permit an 14.4. If, at any time, the Commission finds that
examination to be made by the Commission, its the registration statement contains any false
refusal shall be ground for the refusal or statement or omits to state any fact required to
revocation of the registration of its securities. be stated therein or necessary to make the
statements therein not misleading, the
13.4. If the Commission deems its necessary, Commission may conduct an examination,
it may issue an order suspending the offer and and, after due notice and hearing, issue an
sale of the securities pending any investigation. order suspending the affectivity registration
The order shall state the grounds for taking statement. If the statement is duly amended,
such action, but such order of suspension the suspension order may be lifted.

Page 9 of 42
14.5. In making such examination the published, unless it shall appear that the order
Commission or any officer or officers of suspension has been violated after notice. If,
designated by it may administer oaths and however, the Commission finds that the sale of
affirmations and shall have access to, and may the security will neither be fraudulent nor result
demand the production of, any books, records in fraud, it shall forthwith issue an order
or documents relevant to the examination. revoking the order of suspension, and such
Failure of the issuer, underwriter, or any other security shall be restored to its status as a
person to cooperate, or his obstruction or registered security as of the date of such order
refusal to undergo an examination, shall be a of suspension.
ground for the issuance of a suspension order.
CHAPTER IV
Section 15. Suspension of Registration. - REGULATION OF PRE-NEED PLANS
15.1. If at any time, the information contained
in the registration statement filed is or has Section 16. Pre-Need Plans. – No person
become misleading, incorrect, inadequate or shall sell or offer for sale to the public any pre-
incomplete in any material respect, or the sale need plan except in accordance with rules and
or offering for sale of the security registered regulations which the Commission shall
thereunder may work or tend to work a fraud, prescribe. Such rules shall regulate the sale of
the Commission may require from the issuer pre-need plans by, among other things,
such further information as may in its requiring the registration of pre-need plans,
judgement be necessary to enable the licensing persons involved in the sale of pre-
Commission to ascertain whether the need plans, requiring disclosures to
registration of such security should be revoked prospective plan holders, prescribing
on any ground specified in this Code. The advertising guidelines, providing for uniform
Commission may also suspend the right to sell accounting system, reports and recording
and offer for the sale such security pending keeping with respect to such plans, imposing
further investigation, by entering an order capital, bonding and other financial
specifying the grounds for such action, and by responsibility, and establishing trust funds for
notifying the issuer, underwriter, dealer or the payment of benefits under such plans.
broker known as participating in such offering.
CHAPTER V
15.2. The refusal to furnish information REPORTORIAL REQUIREMENTS
required by the Commission may be a ground
for the issuance of an order of suspension Section 17. Periodic and Other Reports of
pursuant to Subsection 15.1. Upon the Issuer. 17.1. Every issuer satisfying the
issuance of any such order and notification to requirements in Subsection 17.2 hereof shall
the issuer, underwriter, dealer or broken know file with the Commission:
as participating in such offering, no further offer
or sale of any such security shall be made until
(a) Within one hundred thirty-five (135)
the same is lifted or set aside by the
days, after the end of the issuer’s fiscal
Commission. Otherwise such sale shall be
year, or such other time as the
void.
Commission may prescribe, an annual
report which shall include, among
15.3. Upon issuance of an order of suspension, others, a balance sheet, profit and loss
the Commission shall conduct a hearing. If the statement and statement of cash flows,
Commission determines that the sale of any for such last fiscal year, certified public
security should be revoked is shall issue an accountant, an a management
order prohibiting sale of such security. discussion and analysis of results of
operation; and
15.4. Until the issuance of a final order, the
suspension of the right to sell, though binding (b) Such other periodical reports for
upon the persons notified there of, shall be interim fiscal periods and current
deemed confidential, and shall not be

Page 10 of 42
 reports on significant developments of Commission shall prescribe, and shall be in lieu
the issuer as the Commission may of any periodical or current reports or financial
prescribe as necessary to keep current statements otherwise required to be filed under
information on the operation of the the Commission shall prescribe.
business and financial condition of the
issuer. 17.5. Every issuer which has a class of equity
securities satisfying any of the requirements in
17.2. The reportorial requirements of Subsection 17.2 shall furnish to each holder of
Subsection 17.1 shall apply to the following: such equity security an annual report in such
form and containing such information as the
(a) An issuer which has sold a class of Commission shall prescribe.
its securities pursuant to a registration
under section 12 hereof: Provided 17.6. Within such period as the Commission
however, That the obligation of such may prescribe preceding the annual meeting of
issuer to file reports shall be the holders of any equity security of a class
suspended for any fiscal year after the entitled to vote at such meeting , the issuer
year such registration became effective shall transmit to such holders an annual report
if such issuer, as of the first day of any in conformity with subsection 17.5.
such fiscal year, has less than one
hundred (100) holder of such class Section 18. Reports by five per centum (5%)
securities or such other number as the Holders of Equity Securities. – 18.1. In every
Commission shall prescribe and it case in which an issuer satisfies the
notifies the Commission of such; requirements of Subsection 17.2 hereof any
person who acquires directly or indirectly the
(b) An issuer with a class of securities beneficial ownership of more than five of per
listed for trading on an Exchange; and centum (5%) of such class or in excess of such
lesser per centum as the Commission by rule
(c) An issuer with assets of at least Fifty may prescribe, shall, within ten (10) days after
million pesos (50,000,000.00) or such such acquisition or such reasonable time as
other amount as the Commission shall fixed by the Commission, submit to the issuer
prescribe, and having two hundred of the securities, to the Exchange where the
(200) or more holder each holding at security is traded, and to the Commission a
least one hundred (100) share of a sworn statement containing the following
class of its equity securities: Provided, information and such order information as the
however, That the obligation of such Commission may require in the public interest
issuer to file report shall be terminate or for the protection of investors.
ninety (90) days after notification to the
Commission by the issuer that the (a) The personal background, identity,
number of its holders holding at least residence, and citizenship of, and the
one hundred (100) share reduced to nature of such beneficial ownership by,
less than one hundred (100). such person and all other person by
whom or on whose behalf the
17.3. Every issuer of a security listed for trading purchases are effected; in the event the
on an Exchange a copy of any report filed with beneficial owner is a juridical person,
the Commission under Subsection 17.1. the of business of the beneficial owner
hereof. shall also be reported;

17.4. All reports (including financial (b) If the purpose of the purchases or
statements) required to be filed with the prospective purchases is to acquire
Commission pursuant to Subsection 17.1 control of the business of the issuer of
hereof shall be in such form, contain such the securities, any plans or proposals
information and be filed at such times as the which such persons may have that will

Page 11 of 42
 effect a major change in its business or to acquire at least 15% of any class of any
corporate structure; equity security of a listed corporation of any
class of any equity security of a corporation
(c) The number of shares of such with assets of at least fifty million pesos
security which are beneficially owned, (50,000,000.00) and having two hundred(200)
and the number of shares concerning or more stockholders at least one hundred
which there is a right to acquire, directly shares each or who intends to acquire at least
or indirectly, by; (i) such person, and (ii) thirty percent(30%) of such equity over a period
each associate of such person, giving of twelve months(12) shall make a tender offer
the background, identity, residence, to stockholders by filling with the Commission
and citizenship of each such associate; a declaration to that effect; and furnish the
and issuer, a statement containing such of the
information required in Section 17 of this Code
(d) Information as to any contracts, as the Commission may prescribe. Such
arrangements, or understanding with person or group of persons shall publish all
any person with respect to any request or invitations or tender offer or
securities of the issuer including but not requesting such tender offers subsequent to
limited to transfer, joint ventures, loan the initial solicitation or request shall contain
or option arrangements, puts or call such information as the Commission may
guarantees or division of losses or prescribe, and shall be filed with the
profits, or proxies naming the persons Commission and sent to the issuer not alter
with whom such contracts, than the time copies of such materials are first
arrangements, or understanding have published or sent or given to security holders.
been entered into, and giving the
details thereof. (a) Any solicitation or recommendation
to the holders of such a security to
18.2. If any change occurs in the facts set forth accept or reject a tender offer or
in the statements, an amendment shall be request or invitation for tenders shall be
transmitted to the issuer, the Exchange and the made in accordance with such rules
Commission. and regulations as may be prescribe.

18.3. The Commission, may permit any person (b) Securities deposited pursuant to a
to file in lieu of the statement required by tender offer or request or invitation for
subsection 17.1 hereof, a notice stating the tenders may be withdrawn by or on
name of such person, the shares of any equity behalf of the depositor at any time
securities subject to Subsection 17.1 which are throughout the period that tender offer
owned by him, the date of their acquisition and remains open and if the securities
such other information as the commission may deposited have not been previously
specify, if it appears to the commission that accepted for payment, and at any time
such securities were acquired by such person after sixty (60) days from the date of the
in the ordinary course of his business and were original tender offer to request or
not acquired for the purpose of and do not have invitation, except as the Commission
the effect of changing or influencing the control may otherwise prescribe.
of the issuer nor in connection with any
transaction having such purpose or effect. (c) Where the securities offered exceed
that which person or group of persons
CHAPTER VI is bound or willing to take up and pay
PROTECTION OF SHAREHOLDERS for, the securities that are subject of the
INTERESTS tender offers shall be taken up us
nearly as may be pro data,
disregarding fractions, according to the
Section 19. Tender Offers. – Any person or
number of securities deposited to each
group of persons acting in concert who intends
depositor. The provision of this subject

Page 12 of 42
 shall also apply to securities deposited be valid and effective for a period longer than
within ten (10) days after notice of five (5) years at one time.
increase in the consideration offered to
security holders, as described in 20.4. No broker or dealer shall give any proxy,
paragraph (e) of this subsection, is first consent or any authorization, in respect of any
published or sent or given to security security carried for the account of the
holders. customer, to a person other than the customer,
without written authorization of such customer.
(d) Where any person varies the terms
of a tender offer or request or invitation 20.5. A broker or dealer who holds or acquire
for tenders before the expiration the proxy for at least ten percent (10%) or such
thereof by increasing the consideration percentage as the commission may prescribe
offered to holders of such securities, of the outstanding share of such issuer, shall
such person shall pay the increased submit a report identifying the beneficial owner
consideration to each security holder of ten days after such acquisition, for its own
whose securities are taken up and paid account or customer, to the issuer of security,
for whether or not such securities have to the exchange where the security is traded
been taken up by such person before and to the Commission.
the variation of the tender offer or
request or invitation. Section 21. Fees of Tender Offers and Certain
Proxy Solicitations. – At the time of filling with
19.2. It shall be lawful for any person to make the Commission of any statement required
any untrue statement of a material fact or omit under Section 19 for any tender offer or Section
to state any material fact necessary in order to 72.2 for issuer purchases, or Section 20 for
make the statements made in the light of the proxy or consent solicitation, The Commission
circumstances under which they are made, not may require that the person making such filing
mis-leading, or to engaged to any fraudulent, pay a fee of not more than one-tenth
deceptive or manipulative acts or practices, in (1/10)(1%) of;
connection with any tender offer or request or
invitation for tenders, or any solicitation for any 21.1. The propose aggregate purchase price in
security holders in opposition to or in favor of the case of a transaction under Section 20 or
any such favor of any such offer, request, or 72.2; or
invitation. The Commission shall, for the
purposes of this subsection, define and
21.2. The proposed payment in cash, and ion
prescribe means reasonably designed to
value of any securities or property to be
prevent, such acts and practices as are
transferred in the acquisition, merger or
fraudulent, deceptive and manipulative.
consolidating, or the cash and value of any
securities proposed to be received upon the
Section 20. Proxy solicitations. - 20.1. Proxies sale disposition of such assets in the case of a
must be issued and proxy solicitation must be solicitation under Section 20. The Commission
made in accordance with rules and regulations shall prescribe by rule diminishing fees in
to be issued by the Commission; inverse proportion to the value of the aggregate
price of the offering.
20.2. Proxies must be in writing, signed by the
stockholder or his duly authorized Section 22. Internal Record Keeping and
representative and file before the scheduled Accounting Control. - Every issuer which has a
meeting with the corporate secretary. class of securities that satisfies the
requirements of Subsection 17.2 shall:
20.3. Unless otherwise provided in the proxy, it
shall be valid only for the meeting for which it is 22.1. Device and maintain a system of internal
intended. No proxy shall be valid only for the accounting controls sufficient to provide
meting for which it is intended. No proxy shall reasonable assurance that: (a) Transactions

Page 13 of 42
and access to assets are pursuant to within sixty (60) days after request or shall fail
management authorization; (b) Financial diligently to prosecute the same thereafter, but
statements are provided in conformity with not such shall be brought more than two years
generally accepted accounting principles that after the date such profit was realized. This
are adopted by the Accounting standards Subsection shall not be construed to cover any
council and the rules promulgated by the transaction were such beneficial owner was not
Commission with the regard to the preparation such both time of the owner or the sale, or the
of the financial statements; and (c) Recorded sale of purchase, of the security involved, or
assets are compared with existing assets at any transaction or transactions which the
reasonable intervals and differences are Commission by rules and regulations may
reconciled. exempt as not comprehended within the
purpose of this subsection.
Section 23. Transactions of Directors officers
and Principal Stockholders. – 23.1. Every 23.3. It shall be unlawful for any such beneficial
person who is directly or indirectly the owner, director or officer, directly or indirectly,
beneficial owner of more than ten per centum to sell any equity security of such issuer if the
(10%) of any class of any equity security which person selling the principal: (a) Does not own
satisfies the requirements of subsection 17.2, the security sold: or (b) If owning the security,
or who is a director or an officer of the issuer of does not deliver not deliver it against such sale
such security, shall file, at the time either such within 20 days thereafter, or does not within five
requirement is first satisfied or after ten days days after such sale deposit in the mails or the
after he becomes such a beneficial owner, unusual channels of transportation; but no
director, or officer, a statement form the person shall be deemed to have violated this
Commission and, if such security is listed for subsection if he proves not withstanding the
trading on an exchange, also with the exercise of good faith he was unable to make
exchange of the amount of all the equity such delivery in such time, or that to do so
security of such issuer of which he is the would cause undue inconvenience or expense.
beneficial owner, and within ten days after the
close of each calendar month thereafter, if 23.4. The provisions of subsection 23.2 shall
there has been a change in such ownership at not apply to any purchase and sale, or sale and
the close of the calendar month and such purchase, and the provisions of Subsection
changes in his ownership as have occurred 23.3 shall not apply to any sale, of an equity
during such calendar month. security not then or thereafter held by him and
an investment account, by a dealer in the
23.2. For the purpose of preventing the unfair ordinary course of his business and incident to
use of information which may have been the establishment or maintenance by him of a
obtained by such beneficial owner, director or primary or secondary market, otherwise than
officer by reason of his relationship to the on an Exchange, for such security. The
issuer, any profit realized by him from any Commission may, by such rules and
purchase or sale, or any sale or purchase, of regulations as it deems necessary or
any equity security of such issuer within any appropriate in the public interest, define and
period of less than (6) months unless such prescribe terms and conditions with respect to
security was acquired in good faith in securities held in an investment account and
connection with a debt previously contracted, transactions made in the ordinary course of
shall inure to and be recoverable by the issuer, business and incident to the establishment or
irrespective of any intention of holding the maintenance of a primary or secondary market.
security purchased or of not repurchasing the
security sold for a period exceeding six (6) CHAPTER VII
months. Suit to recover such profit may be PROHIBITIONS AND FRAUD,
instituted before the Regional Trial Court by the MANIPULATION AND INSIDER TRADING
issuer, or by the owner of any security of the
issuer in the name and in behalf of the issuer if Section 24. Manipulation of Security Prices;
the issuer shall fail or refuse to bring such suit Devices and Practices. – 24.1 It shall be

Page 14 of 42
unlawful for any person acting for himself or price of the security for the purpose of
through a dealer or broker, directly or indirectly: inducing the purpose of sale of such
security.
(a) To create a false or misleading
appearance of active trading in any (d) To make false or misleading
listed security traded in an Exchange of statement with respect to any material
any other trading market (hereafter fact, which he knew or had reasonable
referred to purposes of this Chapter as ground to believe was so false or
"Exchange"): misleading, for the purpose of inducing
the purchase or sale of any security
(i) By effecting any transaction listed or traded in an Exchange.
in such security which involves
no change in the beneficial (e) To effect, either alone or others, any
ownership thereof; series of transactions for the purchase
and/or sale of any security traded in an
(ii) By entering an order or Exchange for the purpose of pegging,
orders for the purchase or sale fixing or stabilizing the price of such
of such security with the security; unless otherwise allowed by
knowledge that a simultaneous this Code or by rules of the
order or orders of substantially Commission.
the same size, time and price,
for the sale or purchase of any 24.2. No person shall use or employ, in
such security, has or will be connection with the purchase or sale of any
entered by or for the same or security any manipulative or deceptive device
different parties; or or contrivance. Neither shall any short sale be
effected nor any stop-loss order be executed in
(iii) By performing similar act connection with the purchase or sale of any
where there is no change in security except in accordance with such rules
beneficial ownership. and regulations as the Commission may
prescribe as necessary or appropriate in the
(b) To affect, alone or with others, a public interest for the protection of investors.
securities or transactions in securities
that: (I) Raises their price to induce the 24.3. The foregoing provisions
purchase of a security, whether of the notwithstanding, the Commission, having due
same or a different class of the same regard to the public interest and the protection
issuer or of controlling, controlled, or of investors, may, by rules and regulations,
commonly controlled company by allow certain acts or transactions that may
others; or (iii) Creates active trading to otherwise be prohibited under this Section.
induce such a purchase or sale through
manipulative devices such as marking Section 25. Regulation of Option Trading. –
the close, painting the tape, squeezing No member of an Exchange shall, directly or
the float, hype and dump, boiler room indirectly endorse or guarantee the
operations and such other similar performance of any put, call, straddle, option or
devices. privilege in relation to any security registered
on a securities exchange. The terms "put",
(c) To circulate or disseminate "call", "straddle", "option", or "privilege" shall
information that the price of any not include any registered warrant, right or
security listed in an Exchange will or is convertible security.
likely to rise or fall because of
manipulative market operations of any Section 26. Fraudulent Transactions. – It shall
one or more persons conducted for the be unlawful for any person, directly or
purpose of raising or depressing the

Page 15 of 42
indirectly, in connection with the purchase or after being disseminated to the public and the
sale of any securities to: lapse of a reasonable time for the market to
absorb the information; or (b) would be
26.1. Employ any device, scheme, or artifice to considered by a reasonable person important
defraud; under the circumstances in determining his
course of action whether to buy, sell or hold a
26.2. Obtain money or property by means of security.
any untrue statement of a material fact of any
omission to state a material fact necessary in 27.3. It shall be unlawful for any insider to
order to make the statements made, in the light communicate material nonpublic information
of the circumstances under which they were about the issuer or the security to any person
made, not misleading; or who, by virtue of the communication, becomes
an insider as defined in Subsection 3.8, where
26.3. Engage in any act, transaction, practice the insider communicating the information
or course of business which operates or would knows or has reason to believe that such
operate as a fraud or deceit upon any person. person will likely buy or sell a security of the
issuer whole in possession of such information.
Section 27. Insider’s Duty to Disclose When
Trading. – 27.1. It shall be unlawful for an 27.4. (a) It shall be unlawful where a tender
insider to sell or buy a security of the issuer, offer has commenced or is about to commence
while in possession of material information with for:
respect to the issuer or the security that is not
generally available to the public, unless: (a) (i) Any person (other than the tender
The insider proves that the information was not offeror) who is in possession of
gained from such relationship; or (b) If the other material nonpublic information relating
party selling to or buying from the insider (or his to such tender offer, to buy or sell the
agent) is identified, the insider proves: (I) that securities of the issuer that are sought
he disclosed the information to the other party, or to be sought by such tender offer if
or (ii) that he had reason to believe that the such person knows or has reason to
other party otherwise is also in possession of believe that the information is
the information. A purchase or sale of a nonpublic and has been acquired
security of the issuer made by an insider directly or indirectly from the tender
defined in Subsection 3.8, or such insider’s offeror, those acting on its behalf, the
spouse or relatives by affinity or consanguinity issuer of the securities sought or to be
within the second degree, legitimate or sought by such tender offer, or any
common-law, shall be presumed to have been insider of such issuer; and
effected while in possession of material
nonpublic information if transacted after such (ii) Any tender offeror, those acting on
information came into existence but prior to its behalf, the issuer of the securities
dissemination of such information to the public sought or to be sought by such tender
and the lapse of a reasonable time for market offer, and any insider of such issuer to
to absorb such information: Provided, communicate material nonpublic
however, That this presumption shall be information relating to the tender offer
rebutted upon a showing by the purchaser or to any other person where such
seller that he was aware of the material communication is likely to result in a
nonpublic information at the time of the violation of Subsection 27.4 (a)(I).
purchase or sale.
(b) For purposes of this subsection the term
27.2. For purposes of this Section, information "securities of the issuer sought or to be sought
is "material nonpublic" if: (a) It has not been by such tender offer" shall include any
generally disclosed to the public and would securities convertible or exchangeable into
likely affect the market price of the security

Page 16 of 42
such securities or any options or rights in any service of process upon the
of the foregoing securities. Commission pursuant to Section 65
hereof.
CHAPTER VIII
REGULATION OF SECURITIES MARKET 28.5. A broker or dealer may apply for
PROFESSIONALS registration by filing with the Commission a
written application in such forms and containing
Section 28. Registration of Brokers, Dealers, such information and documents concerning
Salesmen and Associated Persons. – 28.1. No such broker or dealer as the Commission by
person shall engage in the business of buying rule shall prescribe.
or selling securities in the Philippine as a broker
or dealer, or act as a salesman, or an 28.6. Registration of a salesman or of an
associated person of any broker or dealer associated person of a registered broker or
unless registered as such with the dealer may be made upon written application
Commission. filed with the Commission by such salesman or
associated person. The application shall be
28.2. No registered broker or dealer shall separately signed and certified by the
employ any salesman or any associated registered broker or dealer to which such
person, and no issuer shall employ any salesman or associated person is to become
salesman, who is not registered as such with affiliated, or by the issuer in the case of a
the Commission. salesman employed appointed or authorized
solely by such issuer. The application shall be
28.3. The Commission, by rule or order, may in such form and contain such information and
conditionally or unconditionally exempt from documents concerning the salesman or
subsection 28.1 and 28.2 any broker, dealer, associated person as the Commission by rule
salesman, associated person of any broker or shall prescribe. For purposes of this Section, a
dealer, or any class of the foregoing, as it salesman shall not include any employee of an
deems consistent with the public interest and issuer whose compensation is not determined
the protection of investors. directly or indirectly on sales of securities if the
issuer.
28.4. The Commission shall promulgate rules
and regulation prescribing the qualifications for 28.7. Applications filed pursuant to
registration of each category of applicant, Subsections 28.5 and 28.6 shall be
which shall, among other things, require as a accompanied by a registration fee in such
condition for registration that: reasonable amount prescribed by the
Commission.
(a) If a natural person, the applicant
satisfactorily pass a written 28.8. Within thirty (30) days after the filing of
examination as to his proficiency and any application under this Section, the
knowledge in the area of activity for Commission shall by order: (a) Grant
which registration is sought; registrations if it determines that the
requirements of this Section and the
qualifications for registrations set forth in its
(b) In the case of a broker or dealer, the
rules and regulations have been satisfied ; or
applicant satisfy a minimum net capital
(b) Deny said registration.
as prescribed by the Commission, and
provide a bond or other security as the
Commission may prescribe to secure 28.9. The names and addresses of all persons
compliance with the provisions of this approved for the registration as brokers,
Code; and dealers, associated persons or salesman and
all orders of the Commission with respect
thereto shall be recorded in a Register of
(c) If located outside of the Philippines,
Securities Market Professionals kept in the
the applicant files a written consent to

Page 17 of 42
office of the Commission which shall be open such violation, another person who
to public inspection. commits such violation;

28.10. Every person registered pursuant to this (b) Has willfully made or caused to be
Section shall file with the Commission, in such made a materially false or misleading
form as the Commission shall prescribe, statement in any application for
information necessary to keep the application registration or report filed with the
for registration current and accurate, including Commission or a self-regulatory
in the case of a broker or dealer changes in organization, or has willfully omitted to
salesmen, associated persons and owners state any material fact that is required
thereof. to be stated therein;

28.11. Every person registered pursuant to this (c) Has failed to satisfy the
Selection shall pay to the Commission an qualifications or requirements for
annual fee at such time and in such reasonable registration prescribed under Section
amount as the Commission shall prescribe. 28 and the rules and regulations of the
Upon notice by the Commission that such Commission promulgated thereunder;
annual fee has not been paid as required, the
registration of such person shall be suspended (d) Has been convicted, by a
until payment has been made. competent judicial or administrative
body of an offense involving moral
28.12. The registration of a salesman or turpitude, fraud, embezzlement,
associated person shall be automatically counterfeiting, theft, estafa,
terminated upon the cessation of his affiliation misappropriation, forgery, bribery, false
with said registered broker or dealer or with an oath, or perjury, or of a violation of
issuer in the case of a salesman employed, securities, commodities, banking, real
appointed or authorized by such issuer. state or insurance laws;
Promptly following any such cessation of
affiliation, the registered broker or dealer, (e) Is enjoined or restrained by a
issuer as the case may be, shall file with the competent judicial or administrative
Commission a notice of separation of such body from engaging in securities,
salesman or associated person. commodities, banking, real state or
insurance activities or from willfully
Section 29. Revocation, Refusal or violating laws governing such activities;
Suspension of Registration of Brokers,
Dealers, Salesmen and Associated Persons. – (f) Is subject to an order of a competent
29.1. Registration under Section 28 of this judicial or administrative body refusing,
Code may be refused , or any registration revoking or suspending any
granted thereunder may be revoked, registration, licensed or other permit
suspended, or limitations placed thereon, by under this Code, the rules and
the Commission if, after due notice and hearing regulations promulgated thereunder,
the Commission determines the application or any other law administered by the
registrant. Commission;

(a) Has willfully violated any provision (g) Is subject to an order of a self-
of this Code, any rule, regulation or regulatory organization suspending or
order made hereunder, or any other expelling him from membership or
law administered by the Commission, participating therein or from
or in the case of a registered broker, association with a member or
dealer or associated persons has failed participant thereof;
to supervise, with a view to preventing

Page 18 of 42
 (h) Has been found by a competent the registration of a dealer or broker shall also
judicial or administrative body to have automatically suspend the registration of a
willfully violated any provisions of dealer or broker shall also automatically
securities, commodities, banking, real suspend the registration of all salesmen and
state or insurance laws, or has willfully associated persons affiliated with such broker
aided, abetted, counseled, or dealer.
commanded, induced or procured such
violation; or 29.4. It shall be sufficient cause for refusal,
revocation or suspension of a broker’s or
(i) Has been judicially declared dealer’s registrations, if any associated person
insolvent. thereof or any juridical entity controlled by such
associated person has committed any act or
For purposes of this subsection, the term omission or is subject to any disability
"competent judicial or administrative body" enumerated in paragraphs (a) through (i) of
shall include a foreign court of competent Subsection 29. I hereof.
jurisdiction and a foreign financial regulator.
Section 30. Transactions and Responsibility of
29.2. (a) In case of charges against a salesman Brokers and Dealers. – 30.1 No brokers or
or associated person, notice thereof shall also dealer shall deal in or otherwise buy or sell, for
be given the broker, dealer or issuer employing its own account or for its own account or for the
such salesman or associated person. account of customers, securities listed on an
Exchange issued by any corporation where any
(b) Pending the hearing, the stockholders, director, associated person or
Commission shall have the power to salesman, or authorized clerk of said broker or
order the suspensions of such broker’s, dealer and all the relatives of the foregoing
dealers, associated person’s or within the fourth civil degree of consanguinity
salesman’s registration: Provided, That or affinity, is at the same time holding office in
such order shall state the cause for said issuer corporation as a director, president,
such suspension. Until the entry of a vice-president, manager, treasurer,
final order, the suspension of such comptroller, secretary or any office trust and
registration, though binding upon the responsibility, or is a controlling of the issuer.
persons notified thereof, shall be
deemed confidential, and shall not be 30.2. No broker or dealer shall effect any
published, unless it shall appear that transaction in securities or induce or attempt to
the order of suspension has been induce the purchase or sale of any security
violated after notice. except in compliance with such rules and
regulations as the Commission shall prescribe
29.3. The orders of the Commission refusing, to ensure fair and honest dealings in securities
revoking, suspending or placing limitations on and provide financial safeguards and other
a registration as herein above provided, standards for the operations of brokers and
together with its findings, shall be entered in the dealers, including the establishments of
Register of Securities Market Professionals. minimum net capital requirements, the
The suspension or revocation of the acceptance of custody and use of securities of
registration of a dealer or broker shall also customers, and the carrying and use of
automatically suspend the registration of all deposits and credit balances of customers.
salesmen and associated persons affiliated
with such broker or dealer. The order of the Section 31. Development of Securities Market
Commission refusing, revoking, suspending or Professionals. – The Commission in joint
placing limitations on a registration as herein undertaking with self regulatory organizations,
above provided, together with its findings, shall organizations and associations of finance
be entered in the Register of Securities Market professionals as well as private educational
Professionals. The suspension or revocation of and research institute shall undertake or
facilitate/organize continuing training,

Page 19 of 42
conferences/seminars, updating programs, Section 33. Registration of Exchanges. – 33.1.
research and developments as well as Any Exchange may be registered as such with
technology transfer at the latest and advance the Commission under the terms and
trends in issuance and trading of securities, conditions hereinafter provided in this Section
derivatives, commodity trades and other and Section 40 hereof, by filing an application
financial instruments, as well as securities for registration in such form and containing
markets of other countries. such information and supporting documents as
the Commission by rule shall prescribe,
CHAPTER IX including the following:
EXCHANGES AND OTHER SECURITIES
TRADING MARKETS (a) An undertaking to comply and
enforce by its members with the
Section 32. Prohibition on Use of Unregistered provisions of this Code, its
Exchange; Regulation of Over-the-Counter implementing rules and regulations
Markets. –32.1. No broker, dealer, salesman, and the rules of the Exchange;
associated person of a broker or dealer, or
Exchange, directly or indirectly shall make use (b) The organizational charts of the
of any facility of an Exchange in the Philippines Exchange, rules of procedure, and a
to effect any transaction in a security, or to list of its officers and members;
report such transaction, unless such Exchange
is registered as such under Section 33 of this (c) Copies of the rules of the Exchange;
Code. and

32.2. (a) No broker, dealer, salesman or (d) An undertaking that in the event a
associated person of a broker or dealer, singly member firm becomes insolvent or
or in concert with any other person, shall make, when the Exchange shall have found
create or operate, or enable another to make, that the financial condition of its
create or operate, any trading market, member firm has so deteriorated that it
otherwise than on a registered Exchange, for cannot readily meet the demands of its
the buying and selling of any security, except in customers for the delivery of securities
accordance with rules and regulations the and/or payment of sales proceeds, the
Commission may prescribe. Exchange shall, upon order of the
Commission, take over the operation of
(b) The Commission may promulgate the insolvent member firm and
rules and regulations governing immediately proceed to settle the
transactions by brokers, dealers, member firm’s liabilities to its
salesmen or associated persons of a customers.
broker or dealer, over any facilities of
such trading market and may require 33.2. Registrations of an Exchange shall be
such market to be administered by a granted upon compliance with the following
self-regulatory organization provisions:
determined by the Commission as
capable of insuring the protection of (a) That the applicant is organized as a
investors comparable to that provided stock corporation: Provided, That any
in the case of a registered Exchange. registered Exchange existing prior to
Such self-regulatory organization must the effectivity of this Code shall within
provide a centralized marketplace for one (1) year reorganize as a stock
trading and must satisfy requirements corporation pursuant to a
comparable to those prescribed for demutualization plan approved by the
registration of Exchanges in Section 33 Commission;
of this Code.

Page 20 of 42
 (b) That the applicant is engaged solely than forty-nine percent (49%) of such
in the business of operating an board and shall proportionately
exchange: Provided, however, That represent the Exchange membership
the Commission may adopt rules, in terms of volume/value or trade and
regulations or issue an order, upon paid up capital, and that any natural
application, exempting an Exchange person associated with a juridical entity
organized as a stock corporation and that is a member for this
owned and controlled by another purpose; Provide, That any registered
juridical person from the restriction. Exchange existing prior to the
affectivity of this Code shall
(c) Where the Exchange is organized immediately comply with this
as a stock corporation, that no person requirement;
may beneficially own or control, directly
or indirectly, more than five percent (g) For the board of the Exchange to
(5%) of the voting rights of the include in its composition (1) the
Exchange and no industry or business president of the Exchange, and (ii) no
group may beneficially own or control, less than fifty one percent (51%) of the
directly or indirectly, more than twenty remaining members of the board to be
percent (20%) of the voting rights of the comprised of three (3) independent
Exchange: Provided, however, That directors and persons who represent
the Commission may adopt rules, the interests of issuers, investors, and
regulations or issue an order, upon other market participants, who are not
application from this prohibition where associated with any broker or dealer or
it finds that such ownership or control member of the Exchange for a period
will not negatively impact on the of two (2) years prior to his/her
exchange’s ability to effectively operate appointment. No officer or employee of
in the public interest. a member, its subsidiaries or affiliates
or related interests shall become an
(d) The expulsion, suspension, or independent director:
disciplining of a member and persons Provided, however, That the
associated with a member for conduct Commission may by rule, regulation, or
or proceeding inconsistent with just and order upon application, permit the
equitable principles of fair trade, and for exchange organized as a stock
violations of provisions of this Code, or corporation to use a different
any other Act administered by the governance structure: Provided,
Commission, the rules, regulations and further, That the Commission is
orders thereunder, or the rules of the satisfied that the Exchange is acting in
Exchange;’ the public interest and is able to
effectively operate as a self-regulatory
(e) A fair procedure for the disciplining organization under this
of members and persons associated Code: Provided, finally, That any
with members, the denial of registered exchange existing prior to
membership to any person seeking to the affectivity of this Code shall
be a member, the barring of any person immediately comply with this
from association with a member, and requirement.
the prohibition or limitation of any
person from association with member, (h) The president and other
and the prohibition or limitation of any management of the Exchange to
person from access to services offered consist only of persons who are not
by the Exchange; members and are not associated in any
capacity, directly or indirectly with any
(f) That the brokers in the board of the broker or dealer or member or listed
Exchange shall comprise of not more company of the Exchange: Provided,

Page 21 of 42
 That the Exchange may only appoint, an application may be made upon such terms
and a person may only serve, as an as the Commission may prescribe.
officer of the exchange if such person
has not been a member or affiliated 33.5. Upon the registration of an Exchange, it
with any broker, dealer, or member of is shall pay a fee in such amount and within
the Exchange for a period of at least such period as the Commission may fix.
two (2) years prior to such
appointment; 33.6. Upon appropriate application in
accordance with the rules and regulations of
(i) The transparency of transactions on the Commission and upon such terms as the
the Exchange; Commission may deemed necessary for the
protection of investors, an exchange may
(j) The equitable allocation of withdraw its registration or suspend its
reasonable dues, fees, and other operations or resume the same.
charges among members and issuers
and other persons using any facility or Section 34. Segregation and Limitation of
system which the Exchange operates functions of Members, Broker and Dealers.
or controls; - 34.1. It shall be unlawful for any member-
broker of an Exchange to effect any transaction
(k) Prevention of fraudulent and on such Exchange for its own account, the
manipulative acts and practices, account of an associated person, or an account
promotion of just and equitable with the respect to which it or an associated
principles of trade, and, in general, person thereof exercises the investment
protection of investors and the public discretion: Provided, however, That this
interest; and Section shall not make unlawful-

(l) The transparent, prompt and (a) Any transaction by a member-

accurate clearance and settlement of broker acting in the capacity of a
transactions effected on the Exchange. market maker;

33.3. If the Commission finds that the applicant (b) Any transaction reasonably
Exchange is capable of complying and necessary to carry on an odd-lot
enforcing compliance by its members, and transactions;
persons associated with such members, with
the provisions of this Code, and the rules of the (c) Any transaction to offset a
Exchange, and that the rules of Exchange are transaction made in error; and
fair, just and adequate, the Commission shall
cause such Exchange to be registered. If, after (d) Any other transaction of a similar
notice due and hearing, the Commission finds nature as may be defined by the
otherwise, the application shall be denied. Commission.

33.4. Within ninety (90) days after the filing of 34.2. In all instances where the member-broker
the application the Commission may issue an effects a transaction on an Exchange for its
order either granting or denying registration as own account or the account of an associated
an Exchange, unless the Exchange applying person or an account with the respect to which
for registration shall withdraw its application or it exercises investment discretion, it shall
shall consent to the Commission’s deferring disclose to such customer at or before the
action on its application for a stated longer completion of the transaction it is acting for its
period after the date of filing. The filing with the own account: Provided, further, That this fact
Commission of an application for registration shall be reflected in the order ticket and the
by an Exchange shall be deemed to have taken confirmation slip.
place upon the receipt thereof. Amendments to

Page 22 of 42
34.3. Any member-broker who violates the 36.4. The Commission, having due regard to
provisions of this Section shall be subject to the the public interest, the protection of investors,
administrative sanctions provided in Section 54 the safeguarding of securities and funds, and
of this Code. maintenance of fair competition among
brokers, dealers, clearing agencies, and
Section 35. Additional Fees of Exchanges. – transfer agents, shall promulgate rules and
In addition to the registration fee prescribed in regulations for the prompt and accurate
Section 33 of this Code, every Exchange shall clearance and settlement of securities
pay to the Commission, on a semestral basis transactions.
on or before the tenth day of the end of the end
of every semester of the calendar year, a fee in 36.5. (a) The Commission may establish or
such an amount as the Commission shall facilitate the establishment of trust funds which
prescribe, but not more than one-hundredth of shall be contributed by Exchanges, brokers,
one per centum (1%) of the aggregate amount dealers, underwriters, transfer agents,
of the sales of securities transacted on such salesmen and other persons transacting in
Exchange during the preceding calendar year securities, as the Commission may require, for
for the privilege of doing business, during the the purpose of compensating investors for the
preceding calendar year or any part thereof. extraordinary losses or damage they may
suffer due to business failure or fraud or
Section 36. Powers with Respect to mismanagement of the persons with whom
Exchanges and Other Trading Market. – 36.1. they transact, under such rules and regulations
The Commission is authorized, if in its opinion as the Commission may from time to time
such action is necessary or appropriate for the prescribe or approve in the public interest.
protection of investors and the public interest
so requires, summarily to suspend trading in (b) The Commission may, having due
any listed security on any Exchange or other regard to the public interest or the
trading market for a period not exceeding thirty protection of investors, regulate,
(30) days but not exceeding ninety (90) supervise, examine, suspend or
days: Provided, however, That the otherwise discontinue such and other
Commission promptly following the issuance of similar funds under such rules and
the order of suspension, shall notify the regulations which the Commission may
affected issuer of the reasons for such promulgate, and which may include
suspension and provide such issuer with an taking custody and management of the
opportunity for hearing to determine whether fund itself as well as investments in and
the suspension should be lifted. disbursements from the funds under
such forms of control and supervision
36.2. Wherever two (2) or more Exchanges or by the Commission as it may from time
other trading markets exist, the Commission to time require. The authority granted to
may require and enforce uniformity of trading the Commission under this subsection
regulations in and/or between or among said shall also apply to all funds established
Exchanges or other trading markets. for the protection of investors, whether
established by the Commission or
36.3. In addition to the existing Philippine Stock otherwise.
Exchange, the Commission shall have the
authority to determine the number, size and Section 37. Registration of Innovative and
location of stock Exchanges, other trading Other Trading Markets. – The Commission,
markets and commodity Exchanges and other having due regard for national economic
similar organizations in the light of national or development, shall encourage competitiveness
regional requirements for such activities with in the market by promulgating within six (6)
the view to promote, enhance, protect, months upon the enactment of this Code, rules
conserve or rationalize investment. for the registration and licensing of innovative
and other trading markets or Exchanges
covering, but not limited to, the issuance and

Page 23 of 42
trading of innovative securities, securities of coordinating the distribution or publication of,
small, medium, growth and venture information with respect to transactions in or
enterprises, and technology-based ventures quotations for any security; or (b) Distributing
pursuant to Section 33 of this Code. or publishing, whether by means of a ticker
tape, a communications network, a terminal
Section 38. Independent Directors. – Any display device, or otherwise, on a current and
corporation with a class of equity securities continuing basis, information with respect to
listed for trading on an Exchange or with assets such transactions or quotations. The
in excess of Fifty million pesos Commission may prescribe rules and
(P50,000,000.00) and having two hundred regulations which are necessary or appropriate
(200) or more holders, at least of two hundred in the public interest or for the protection of
(200) of which are holding at least one hundred investors to govern self-regulatory
(100) shares of a class of its equity securities organizations and other organizations licensed
or which has sold a class of equity securities to or regulated pursuant to the authority granted
the public pursuant to an effective registration in Subsection 39.1 including the requirement of
statement in compliance with Section 12 hereof cooperation within and among, and electronic
shall have at least two (2) independent integration of the records of, all participants in
directors or such independent directors shall the securities market to ensure transparency
constitute at least twenty percent (20%) of the and facilitate exchange of information.
members of such board whichever is the
lesser. For this purpose, an "independent 39.2. An association of brokers and dealers
director" shall mean a person other than an may be registered as a securities association
officer or employee of the corporation, its pursuant to Subsection 39.3 by filing with the
parent or subsidiaries, or any other individual Commission an application for registration in
having a relationship with the corporation, such form as the Commission, by rule, may
which would interfere with the exercise of prescribe containing the rules of the
independent judgement in carrying out the association and such other information and
responsibilities of a director. documents as the Commission, by rule, may
prescribe as necessary or appropriate in the
CHAPTER X public interest or for the protection of investors.
REGISTRATION, RESPONSIBILITIES AND
OVERSIGHT OF SELF-REGULATORY 39.3. An association of brokers and dealers
ORGANIZATIONS shall not be registered as a securities
association unless the Commission determines
Section 39. Associations of Securities that:
Brokers, and Dealers, and Other Securities
Related Organizations. – 39.1. The (a) The association is so organized and
Commission shall have the power to register as has the capacity to be able to carry out
a self-regulatory organization, or otherwise the purposes of this Code and to
grant licenses, and to regulate, supervise, comply with, and to enforce compliance
examine, suspend or otherwise discontinue, as by its members and persons
a condition for the operation of organizations associated with its members, with the
whose operations are related to or connected provisions of this Code, the rules and
with the securities market such as but not regulations thereunder, and the rules of
limited to associations of brokers and dealers, the association.
transfer agents, custodians, fiscal and paying
agents, computer services, news (b) The rules of the association,
disseminating services, proxy solicitors, notwithstanding anything in the
statistical agencies, securities rating agencies, Corporation Code to the contrary,
and securities information processor which are provide that:
engaged in business of: (a) Collecting,
processing, or preparing for distribution or
publication, or assisting, participating in, or

Page 24 of 42
 (i) Any registered broker or general, the protection of
dealer may become a member investors and the public
of the association; interest;

(ii) There exist a fair (vi) That its members and

representation of its members persons associated with its
to serve on the Board of members shall be appropriately
Directors of the association and disciplined for violation of any
in the administration of its provision of this Code, the rules
affairs, and that may any and regulations thereunder, or
natural person associated with the rules of the association;
a juridical entity that is a
member shall himself be (vii) That a fair procedure for
deemed to be a member for the disciplining of members
this purpose; and persons associated with
members, the denial of
(iii) The Board of Directors of membership to any person
the association includes in its seeking membership therein,
composition: the barring of any person from
becoming associated with a
(a) The president of the member thereof, and the
association and prohibition or limitation by the
association of any person with
(b) Person who respect to access to services
represent the interests offered by the association or a
of the issuer and public member thereof.
investors and are not
associated with any 39.4. (a) A registered securities association
broker or dealer or shall deny membership to any person who is
member of the not a registered broker or dealer.
association; that the
president and other (b) A registered securities association
management of the may deny membership to, or condition
association not be a the membership of, a registered broker
member or associated or dealer if such broker or dealer:
with any broker, dealer
or member of the (i) Does not meet the standards
association; of financial responsibility,
operational capability, training,
(iv) For the equitable allocation experience or competence that
of reasonable dues, fees, and are prescribe by the rules of the
other charges among member association; or
and issuers and other persons
using any facility or system (ii) Has engaged, and there is a
which the association operates reasonable likelihood it will
or controls; again engage, in acts or
practices inconsistent with just
(v) For the prevention of and equitable principles of fair
fraudulent and manipulative trade.
acts and practices, the
promotion of just and equitable (c) A registered securities association
principles of trade, and, in may deny membership to a registered

Page 25 of 42
 broker or dealer not engage in a type of association shall provide notice to the person
business in which the rules of the under review of the specific grounds being
association require members to be considered for denial, afford him an opportunity
engaged: Provided, however,That no to defend against the allegations, and keep a
registered securities association may record of the proceedings. A determination by
deny membership to a registered the association to deny membership shall be
broker or dealer by reason of the supported by a statement setting forth the
amount of business done by the broker specific grounds on which the denial is based.
or dealer.
Section 40. Powers with Respect to Self-
A registered securities association may Regulatory Organizations. - 40.1. Upon the
examine and verify the qualifications of filing of an application for registration as an
an applicant to become a member in Exchange under Section 33, a registered
accordance with procedure established securities association under Section 39, a
by the rules of the association. registered clearing agency under Section 42, or
other self-regulatory organization under this
(d) A registered securities association Section, the Commission shall have ninety (90)
may bar a salesman or person days within which to either grant registration
associated with a broker or dealer from should be denied. In the event proceedings are
being employed by a member or set instituted, the Commission shall have two
conditions for the employment of a hundred seventy (270) days within which to
salesman or associated if such person: conclude such proceedings at which time it
shall, by order, grant or deny such registration.
(i) Does not meet the standards
of training, experience, or 40.2. Every self-regulatory organization shall
competence that are prescribe comply with the provision of this Code, the
by the rules of the association; rules and regulations thereunder, and its own
or rules, and enforce compliance therewith,
notwithstanding any provisions of the
(ii) Has engage, and there is a Corporation Code to the contrary, by its
reasonable likelihood he will members, persons associated with its
again engage, in acts or members of its participants.
practices inconsistent with just
and equitable principles of fair 40.3. (a) Each self-regulatory organization
trade. shall submit to the Commission for prior
approval any proposed rule or amendment
A registered securities association may thereto, together with a concise statement of
examine and verify the qualifications of an the reason and effect of the proposed
applicant to become a salesman or associated amendment
person employed by a member in accordance
with the procedures establish by the rules of (b) Within sixty (60) days after
the association. A registered association also submission of a proposed amendment,
may require a salesman or associated person the Commission shall, by order,
employed by a member to be registered with approve the proposed amendment.
the association in accordance with the Otherwise, the same may be made
procedures prescribed in the rules of the effective by the self-regulatory
association. organization.

39.5. In any proceeding by a registered (c) In the event of an emergency

securities association to determine whether a requiring action for the protection of
person shall be denied membership, or barred investors, the maintenance of fair and
from association with a member, the orderly markets, or the safeguarding of

Page 26 of 42
 securities and funds, a self-regulatory (j) Minimum units of trading;
organization may put a proposed
amendment into effect (k) Odd-lot purchases and sales;
summarily; Provided however, That
the copy of the same shall be (l) Minimum deposits on margin
immediately submitted to the accounts; and
Commission.
(m) The supervision, auditing and
40.4. The Commission is further authorized, if disciplining of members or participants.
after making appropriate request in writing to a
self-regulatory organization that such
40.5. The Commission, after due notice and
organization effect on its own behalf specified
hearing, is authorized, in the public interest and
changes in its rules and practices and, after
to protect investors:
due to notice and hearing it determines that
such changes have not been effected, and that
such changes are not necessary, by the rule or (a) To suspend for a period not
regulation or by order, may alter, abrogate or exceeding twelve (12) months or to
supplement the rules of such self-regulatory revoke the registration of a self-
organization in so far as necessary or regulatory organization, or to censure
appropriate to effect such changes in respect or impose limitations on the activities,
of such matters as: functions, and operations of such self-
organization, if the Commission finds
that such a self-regulatory organization
(a) Safeguards in respect of the
has willfully violated or is unable to
financial responsibility of members and
comply with any provision of this Code
adequate provision against the evasion
or of the rules and regulations
of financial responsibility through the
thereunder, or its own or has failed to
use of corporate forms or special
enforce compliance therewith by a
partnerships;
member of, person associated with a
member, or a participant in such self-
(b) The supervision of trading regulatory organization;
practices;
(b) To expel from a self-regulatory
(c) The listing or striking from listing of organization any member thereof or
any security; any participant therein who is subject to
an order of the Commission under
(d) Hours of trading; Section 29 of this Code or is found to
have willfully violated any provision of
(e) The manner, methods, and place of this Code or suspend for a period not
soliciting business; exceeding twelve (12) months for
violation of any provision of this Code
(f) Fictitious accounts; or any other laws administered by the
Commission, or rules and regulations
(g) The time and method of making thereunder, or effected, directly or
settlements, payments, and deliveries, indirectly, any transaction for any
and of closing accounts; person who, such member or
participant had reason to believe, was
violating in respect of such transaction
(h) The transparency of securities
any of such provisions; and
transactions and prices;
(c) To remove from the office or
(i) The fixing of reasonable rates of
censure any officer or director of a self-
fees, interest, listing and other charges,
regulatory organization if it finds that
but not rates of commission;

Page 27 of 42
 such officer or director has violated any organization: Provided, That the self-
provision of this Code, any other law regulatory organization immediately
administered by the Commission, the notifies the Commission of the action
rules or regulations thereunder, or the taken. Any person aggrieved by a
rules of such self-regulatory summary action pursuant to this
organization, abused his authority, paragraph shall be promptly afforded
without reasonable justification or an opportunity for a hearing by the
excuse has failed to enforce association in accordance with the
compliance with any of such provisions of paragraph (a) of this
provisions. subsection. The Commission, by order,
may stay a summary action on its own
40.6. (a) A self-regulatory organization is motion or upon application by any
authorized to discipline a member of or person aggrieved thereby, if the
participant in such self-regulatory organization, Commission determines summarily or
or any person associated with a member, after due notice and hearing (which
including the suspension or expulsion of such hearing may consist solely of the
member or participant, and the suspension or submission of affidavits or presentation
bar from being associated with a member, if of oral arguments) that a stay is
such person has engage in acts or practices consistent with the public interest and
inconsistent with just and equitable principles the protection of investors.
of fair trade or in willful violation of any
provision of the Code, any other law 40.7. A self-regulatory organization shall
administered by the Commission, the rules or promptly notify the Commission of any
regulations thereunder, or the rules of the self- disciplinary sanction on any member thereof or
regulatory organization. In any disciplinary participant therein, any denial of membership
proceeding by a self-regulatory organization or participation in such organization, or the
(other than a summary proceeding pursuant to imposition of any disciplinary sanction on a
paragraph (b) of this subsection) the self- person associated with a member or a bar of
regulatory organization shall bring specific such person from becoming so associated.
charges, provide notice to the person charged, Within thirty (30) days after such notice, any
afford the person charged with an opportunity aggrieved person may appeal to the
to defend against the charges, and keep a Commission from, or the Commission from, or
record of the proceedings. A determination to the Commission on its own motion within such
impose a disciplinary sanction shall be period, may institute review of, the decision of
supported by a written statement of the the self-regulatory organization, at the
offenses, a summary of the evidence conclusion of which, after due notice and
presented and a statement of the sanction hearing (which may consist solely of review of
imposed. the record before the self-regulatory
organization), the Commission shall affirm,
(b) A self-regulatory organization may modify or set aside the sanction. In such
summarily: (I) Suspend a member, proceeding the Commission shall determine
participant or person associated with a whether the aggrieved person has engaged or
member who has been or is expelled or omitted to engage in the acts and practices as
suspended from any other self- found by the self-regulatory organization,
regulatory organization; or (ii) Suspend whether such acts and practices constitute
a member who the self-regulatory willful violations of this Code, any other law
organization finds to be in such administered by the Commission, the rules or
financial or operating difficulty that the regulations thereunder, or the rules of the self-
member or participant cannot be regulatory organization as specified by such
permitted to continue to do business as organization, whether such provisions were
a member with safety to investors, applied in a manner consistent with the
creditors, other members, participants purposes of this Code, and whether, with due
or the self-regulatory regard for the public interest and the protection

Page 28 of 42
of investors the sanction is excessive or any amendments thereto, and the
oppressive. implementing rules or regulations
made or to be made thereunder, and
40.8. The powers of the Commission under this the clearing agency’s rules;
Section shall apply to organized exchanges
and registered clearing agencies. (b) The organizational charts of the
Exchange, its rules of procedure, and
CHAPTER XI list of its officers and participants;
ACQUISITION AND TRANSFER OF
SECURITIES AND SETTLEMENT OF (c) Copies of the clearing agency’s
TRANSACTION IN SECURITIES rules.

Section 41. Prohibition on Use of Unregistered 42.2. No registration of a clearing agency shall
Clearing Agency. – It shall be unlawful for any be granted unless the rules of the clearing
broker, dealer, salesman, associated person of agency include provision for:
a broker or dealer, or clearing agency, directly
or indirectly, to make use of any facility of a (a) The expulsions, suspension, or
clearing agency in Philippines to make disciplining of a participant for
deliveries in connection with transaction in violations of this Code, or any other Act
securities or to reduce the number of administered by the Commission, the
settlements of securities transactions or to rules, regulations, and orders
allocate securities settlement responsibilities or thereunder, or the clearing agency’s
to provide for the central handling of securities rules;
so that transfers, loans and pledges and similar
transaction can be made by bookkeeping entry (b) A fair procedure for the disciplining
or otherwise to facilitate the settlement of of participants, the denial of
securities transactions without physical participation rights to any person
delivery of securities certificates, unless such seeking to be a participant, and the
clearing agency is registered as such under prohibition or limitation of any person
Section 42 of this Code or is exempted from from access to services offered by the
such registration upon application by the clearing agency;
clearing agency because, in the opinion of the
Commission, by reason of the limited volume of
(c) The equitable allocation of
transactions which are settled using the
reasonable dues, fees, and other
clearing agency, it is not practicable and not
charges among participants;
necessary or appropriate in the public interest
or for the protection of investors to require such
registration. (d) Prevention of fraudulent and
manipulative acts and practices,
promotion of just and equitable
Section 42. Registration of Clearing
principles of trade, and, in general,
Agencies. - 42.1. Any clearing agency may be
protection of investors and the public
registered as such with the Commission under
interest;
the terms and conditions hereinafter provided
in this Section, by filing an application for
registration in such form and containing such (e) The transparent, prompt and
information and supporting documents as the accurate clearance and settlement of
Commission by rule shall prescribe, including transactions in securities handled by
the following: the clearing agency; and

(a) An undertaking to comply and (f) The establishment and oversight of

enforce compliance by its participants a fund to guarantee the prompt and
with the provisions of this Code, and accurate clearance and settlement of
transaction executed on an exchange,

Page 29 of 42
 including a requirement that members (b) If so provided in its articles of
each contribute an amount based on incorporation and by-laws, issue all of
their and a relevant percentage of the the shares of a particular class in the
daily exposure of the (4) largest trading form of Uncertificated securities and
brokers which adequately reflects subject to a condition that investors
trading risks undertaken or pursuant to may not require the corporation to
another formula set forth in issue a certificate in respect of any
Commission rules or regulations or shares recorded in their name.
order, upon application: Provided,
however, That a clearing agency 43.2. The Commission by rule may allow other
engaged in the business of securities corporations to provide in their articles of
depository shall be exempt from this incorporation and by-laws for the use of
requirement. uncertificated securities.

42.3. In the case of an application filed 43.3. Transfers of securities, including an

pursuant to this section, the Commission shall uncertificated securities, may be validly made
grant registration if it is finds That the and consummated by appropriate book-entries
requirements of this code and the rules and in the securities intermediaries, or in the stock
regulations thereunder with respect to the and transfer book held by the corporation or the
applicant have been satisfied, and shall deny stock transfer agent and such bookkeeping
registration if it does not make such finding. entries shall be binding on the parties to the
transfer. A transfer under this subsection has
42.4. Upon appropriate application in the effect of the delivery of a security in bearer
accordance with the rules and regulations of form or duly indorsed in blank representing the
the Commission and upon such terms as the quantity or amount of security or right
Commission may deem necessary for the transferred, including the unrestricted
protection of investors, a clearing agency may negotiability of that security by reason of such
withdraw its registration or suspend its delivery. However, transfer of uncertificated
operation or resume the same. shares shall only be valid, so far as the
corporation is concerned, when a transfer is
Section 43. Uncertificated Securities. – recorded in the books of the corporation so as
Notwithstanding Section 63 of the Corporation to show the names of the parties to the transfer
Code of the Philippines: 43.1. A corporation and the number of shares transferred.
whose securities are registered pursuant to this
Code or listed on securities exchange may: However, nothing in this Code shall compliance
by banking and other institutions under the
(a) If so resolved by its Board of supervision of the Bangko Sentral ng Pilipinas
Directors and agreed by a shareholder, and their stockholders with the applicable
investor or securities intermediary, ceilings on shareholding prescribed under
issue shares to, or record the transfer pertinent banking laws and regulations.
of some or all its shares into the name
of said shareholders, investors or, Section 44. Evidentiary Value of Clearing
securities intermediary in the form of Agency Record. – The official records and book
uncertified securities. The use of entries of a clearing agency shall constitute the
uncertified securities in these best evidence of such transactions between
circumstances shall be without clearing agency shall constitute the best
prejudice to the rights of the securities between clearing agency and its participants’
intermediary subsequently to require or members’ clients to prove their rights, title
the corporation to issue a certificate in and entitlement with respect to the book-entry
respect of any shares recorded in its security holdings of the participants or
name; and members held on behalf of the clients.
However, the corporation shall not be bound by
the foregoing transactions unless the corporate

Page 30 of 42
secretary is duly notified in such manner as the 47.2. Establish when a person acquires a
Commission may provide. security or an interest therein and when
delivery of a security to a purchaser occurs;
Section 45. Pledging a Security or Interest
Therein. – In addition to other methods 47.3. Establish which records constitute the
recognized by law, a pledge of, including an best evidence of a person’s interests in a
uncertificated security, is properly constituted security and the effect of any errors in
and the instrument proving the right pledged electronic records of ownership;
shall be considered delivered to the creditor
under Articles 2093 and 2095 of the Civil Code 47.4. Codify the rights of investors who choose
if a securities intermediary indicates by book to hold their securities indirectly through a
entry that such security has been credited to a registered clearing agency and/ or other
specially designated pledge account in favor of securities intermediaries;
the pledgee. A pledge under this subsection
has the effect of the delivery of a security in 47.5. Codify the duties of securities
bearer form or duly indorsed in blank intermediaries (including clearing agencies)
representing the quantity or amount of such who hold securities on behalf of investors; and
security or right pledged. In the case of a
registered clearing agency, the procedures by
47.6 Give first priority to any claims of a
which, and the exact time at which, such book-
registered clearing agency against a
entries are created shall be governed by the
participant arising from a failure by the
registered clearing agency’s rules. However,
participant to meet its obligations under the
the corporation shall not be bound by the
clearing agency’s rules in respect of the
foregoing transactions unless the corporate
clearing and settlement of transactions in
secretary is duly notified in such manner as the
securities, in a dissolution of the participant,
Commission may provide.
and any such rules and regulation shall bind
the issuers of the securities, investors in the
Section 46. Issuer’s Responsibility for securities, any third parties with interests in the
Wrongful Transfer to Registered Clearing securities, and the creditors of a participant of
Agency. - The registration of a transfer of a a registered clearing agency.
security into the name of and by a registered
clearing agency or its name of or by a
CHAPTER XII
registered clearing agency or its nominee shall
MARGIN AND CREDIT
be final and conclusive unless the clearing
agency had notice of an adverse claim before
the registration was made. The above Section 48. Margin Requirements. – 48.1. For
provisions which the claimant may have the purpose of preventing the excessive use of
against the issuer for wrongful registration in credit for the purchase or carrying of securities,
such circumstances. the Commission, in accordance with the credit
and monetary policies that may be
promulgated from time to time by the Monetary
Section 47. Power of the Commission With
Board of the Bangko Sentral ng Pilipinas, shall
Respect to Securities Ownership. – The
prescribed rules and regulations with respect to
Commission is authorize, having due regard to
the amount of credit that may be extended on
the public interest and the protection of
any security. For the extension of credit, such
investors, to promulgate rules and regulations
rules and regulations shall be based upon the
which:
following standard:
47.1. Validate the transfer of securities by
An amount not greater than the whichever is
book-entries rather than the delivery of physical
the higher of –
certificates;
(a) Sixty-five per centum (65%) of the
current market price of the security, or

Page 31 of 42
 (b) One hundred per centum (100%) of 48.3 Any person not subject to Subsection 48.2
the lowest market price of the security hereof shall extend or maintain credit or
during the preceding thirty-six (36) arrange for the extension or maintenance of
calendar months, but not more than credit for the purpose of purchasing or carrying
seventy-five per centum (75%) of the any security, only in accordance with such
current market price. rules and regulations as the Commission shall
prescribe to prevent the excessive use of credit
However, the Monetary Board may increase or for the purchasing or carrying of or trading in
decrease the above percentages, in order to securities in circumvention of the other
achieve the objectives of the Government with provisions of this Section.. Such rules and
due regard for promotion of the economy and regulations may impose upon all loans made
prevention of the use of excessive credit. for the purpose of purchasing or carrying
securities limitations similar to those imposed
Such rules and regulations may make upon members, brokers, or dealers by
appropriate provision with respect to the Subsection 48.2 and the rules and regulations
carrying of undermargined accounts for limited thereunder. This subsection and the rules and
periods and under specified conditions; the regulations thereunder shall not apply:
withdrawal of funds or securities; the transfer of
accounts from one lender to another; special or (a) To a credit extension made by a
different margin requirements for delayed person not in the ordinary course of
deliveries, short sales, arbitrage transactions, business; (b) to a loan to a dealer to aid
and securities to which letter (b) of the second in the financing of the distribution of
paragraph of this subsection does not apply; securities to customers not through the
the methods to be used in calculating loans, medium of an Exchange; or (c) To such
and margins and market prices; and similar other credit extension as the
administrative adjustments and details. Commission shall exempt from the
operation of this subsection and the
48.2. No member of an Exchange or broker or rules and regulations thereunder upon
dealer shall, directly or indirectly, extend or specified terms and conditions for
maintain credit is extended and maintain credit stated period.
or arrange for the extension or maintenance of
credit to or for any customer: Section 49. Restrictions on Borrowings by
Members, Brokers, and Dealers. – It shall be
(a) On any security unless such credit unlawful for any registered broker or dealer, or
is extended and maintained in member of an Exchange, directly or indirectly;
accordance with the rules and
regulations which the Commission 49.1. To permit in the ordinary course of
shall prescribe under this Section business as a broker or dealer his aggregate
including rules setting credit in relation indebtedness including customers’ credit
to net capital of such member, broker balances, to exceed such percentage of the net
or dealer; and capital (exclusive of fixed assets and value of
Exchange membership) employed in the
(b) Without collateral or any collateral business, but not exceeding in any case to
other than securities, except (I) to thousand percentum (2,000%), as the
maintain a credit initially extended in Commission may be rules and regulations
conformity with rules and regulations of prescribe as necessary or appropriate in the
the Commission and (ii) in cases where public interest or for the protection of investors.
the extension or maintenance of credit
is not for the purpose of purchasing or 49.2. To pledge, mortgage, or otherwise
carrying securities or of evading or encumber or arrange for the pledge, mortgage,
circumventing the provisions of or encumbrance of any security carried for the
paragraph (a) of this subsection. account of any customer under circumstances:
(a) That will permit the commingling of his

Page 32 of 42
securities, without his written consent, with the Section 51. Liabilities of Controlling Persons,
securities of any customer; (b) That will permit Aider and Abettor and Other Secondary
such securities to be commingled with the Liability. 51.1. Every person who, by or through
securities of any person other than a bona stock ownership, agency, or otherwise, or in
fide customer; or (c) that will permit such connection with an agreement or
securities to be pledged, mortgaged or understanding with one or more other persons,
encumbered, or subjected to any lien or claim controls any person liable under this Code or
of the pledgee, for a sum in excess of the the rules or regulations of the Commission
aggregate indebtedness of such customers in thereunder, shall also be liable jointly and
respect of such securities. However, the severally with and to the same extent as such
Commission, having due regard to the controlled persons to any person to whom such
protection of investors, may, by rules and controlled person is liable, unless the
regulations, allow certain transactions that may controlling person proves that, despite the
otherwise be prohibited under this subsection. exercise of due diligence on his part, he has no
knowledge of the existence of the facts by
49.3. To lend or arrange for the lending of any reason of which the liability of the controlled
security carried for the account of any customer person is alleged to exist.
without the written consent of such customer or
in contravention of such rules and regulations 51.2. It shall be unlawful for any person,
as the Commission shall prescribe. directly, or indirectly, to do any act or thing
which it would be unlawful for such person to
Section 50. Enforcement of Margin do under the provisions of this Code or any rule
Requirement and Restrictions on Borrowing. – or regulation thereunder.
To prevent indirect violations of the margin
requirements under Section 48, the broker or 51.2. It shall be unlawful for any director or
dealer shall require the customer in non-margin officer of, or any owner of any securities issued
transactions to pay the price of the security by, any issuer required to file any document,
purchased for his account within such period as report or other information under this Code or
the Commission may prescribe, which shall in any rule or regulation of the Commission
no case exceed the prescribed settlement date. thereunder, without just cause, to hinder, delay
Otherwise, the broker shall sell the security or obstruct the making or filing of any such
purchased starting on the next trading day but document, report, or information.
not beyond ten (10) trading days following the
last day for the customer to pay such purchase 51.3. It shall be unlawful for any person to aid,
price, unless such sale cannot be effected abet, counsel, command, induce or procure
within said period for justifiable reasons. The any violation of this Code, or any rule,
sale shall be without prejudice to the right of the regulation or order of the Commission
broker or dealer to recover any deficiency from thereunder.
the customer. To prevent indirect violation of
the restrictions on borrowing under Section 49, 52.4. Every person who substantially assists
the broker shall, unless otherwise directed by the act or omission of any person primarily
the customer, pay the net sales price of the liable under Sections 57, 58, 59 and 60 of this
securities sold for a customer within the same Code, with knowledge or in reckless disregard
period as above prescribed by the that such act or omission is wrongful, shall be
Commission: Provided, That the customer jointly and severally liable as an aider and
shall be required to deliver the instruments abettor for damages resulting from the conduct
evidencing the securities as a condition for of the person primarily liable: Provided,
such payment upon demand by the broker. however, That an aider and abettor shall be
liable only to the extent of his relative
CHAPTER XIII contribution in causing such damages in
GENERAL PROVISIONS comparison to that of the person primarily
liable, or the extent to which the aider and

Page 33 of 42
abettor was unjustly enriched thereby, information concerning any such violations,
whichever is greater. and to investigate any fact, condition, practice
or matter which it may deem necessary or
Section 52. Accounts and Records, Reports, proper to aid in the enforcement of the
Examination of Exchanges, members, and provisions of this Code, in the prescribing of
Others. – 52.1. Every registered Exchange, rules and regulations thereunder, or in securing
broker or dealer, transfer agent, clearing information to serve as a basis for
agency, securities association, and other self- recommending further legislation concerning
regulatory organization, and every other the matters to which this Code
person required to register under this Code, relates: Provided, however, That any person
shall make, keep and preserve for such requested or subpoenaed to produce
periods, records, furnish such copies thereof, documents or testify in any investigation shall
and make such reports, as the Commission by simultaneously be notified in writing of the
its rules and regulations may prescribe. Such purpose of such investigation: Provided,
accounts, correspondence, memoranda, further, That all criminal complaints for
papers, books, and other records shall be violations of this Code, and the implementing
subject at any time to such reasonable rules and regulations enforced or administered
periodic, special or other examinations by by the Commission shall be referred to the
representatives of the Commission as the Department of Justice for preliminary
Commission may deem necessary or investigation and prosecution before the proper
appropriate in the public interest of for the court: Provided, furthermore, That in instances
protection of investors. where the law allows independent civil or
criminal proceedings of violations arising from
52.2. Any brother, dealer or other person the same act, the Commission shall take
extending credit, who is subject to the rules and appropriate action to implement the
regulations prescribed by the Commission same: provided, finally, That the investigation,
pursuant to this Code, shall make such reports prosecution, and trial of such cases shall be
to the Commission as may be necessary or given priority.
appropriate to enable it to perform the functions
conferred upon it by this Code. 53.2. For the purpose of any such investigation,
or any other proceeding under this Code, the
52.3. For purposes of this Section, the term Commission or any officer designated by it is
"records refers to accounts, correspondence, empowered to administer oaths and
memoranda, tapes, discs, papers, books and affirmations, subpoena witnesses, compel
other documents or transcribed information of attendance, take evidence, require the
any type, whether written or electronic in production of any book, paper,
character. correspondence, memorandum, or other
record which the Commission deems relevant
or material to the inquiry, and to perform such
Section 53. Investigations, Injunctions and
other acts necessary in the conduct of such
Prosecution of Offenses. 53.1. The
investigation or proceedings.
Commission may, in its discretion, make such
investigations as it deems necessary to
determine whether any person has violated or 53.3. Whenever it shall appear to the
is about to violate any provision of this Code, Commission that any person has engaged or is
any rule, regulation or order thereunder, or any about to engage in any act or practice
rule of an Exchange, registered securities constituting a violation of any provision of this
association, clearing agency, other self- Code, any rule, regulation or order thereunder,
regulatory organization, and may require or or any rule of an Exchange, registered
permit any person to file with it a statement in securities association, clearing agency or other
writing, under oath or otherwise, as the self-regulatory organization, it may issue an
Commission shall determine, as to all facts and order to such person to desist from committing
circumstances concerning the matter to be such act or practice: Provided, however, That
investigated. The Commission may publish the Commission shall not charge any person

Page 34 of 42
with violation of the rules of an Exchange or conduct an inquiry with reasonable diligence to
other self-regulatory organization unless it insure that a registration statement is accurate
appears to the Commission that such and complete in all material respects; or (d)
Exchange or other self-regulatory organization Any person has refused to permit any lawful
is unable or unwilling to take action against examinations into its affairs, it shall, in its
such person. After finding that such person has discretion, and subject only to the limitations
engaged in any such act or practice and that hereinafter prescribed, impose any or all of the
there is a reasonable likelihood of continuing, following sanctions as may be appropriate in
further or future violations by such person, the light of the facts and circumstances:
Commission may issue ex-parte a cease and
desist order for a maximum period of ten (10) (i) Suspension, or revocation of any
days, enjoining the violation and compelling registration for the offering of
compliance with such provision. The securities;
Commission may transmit such evidence as
may be available concerning any violation of (ii) A fine of no less than Ten thousand
any provision of this Code, or any rule, pesos (P10,000.00) nor more than One
regulation or order thereunder, to the million pesos (P1,000,000.00) plus not
Department of Justice, which may institute the more than Two thousand pesos
appropriate criminal proceedings under this (P2,000.00) for each day of continuing
Code. violation;

53.4. Any person who, within his power but (iii) In the case of a violation of Sections
without cause, fails or refuses to comply with 19.2, 20, 24, 26 and 27, disqualification
any lawful order, decision or subpoena issued from being an officer, member of the
by the Commission under Subsection 53.2 or Board of Directors, or person
Subsection 53.3 or Section 64 of this Code, performing similar functions, of an
shall after due notice and hearing, be guilty of issuer required to file reports under
contempt of the Commission. Such person Section 17 of this Code or any other
shall be fined in such reasonable amount as act, rule or regulation administered by
the Commission may determine, or when such the Commission;
failure or refusal is a clear and open defiance
of the Commission’s order, decision
(iv) In the case of a violation of Section
or subpoena, shall be detained under an arrest
34, a fine of no more than three (3)
order issued by the Commission, until such
times the profit gained or loss avoided
order, decision or subpoena is complied with.
as result of the purchase, sale or
communication proscribed by such
Section 54. Administrative Sanctions. – 54.1. Section, and
If, after due notice and hearing, the
Commission finds that: (a) There is a violation
(v) Other penalties within the power of
of this Code, its rule, or its orders; (b) Any
the Commission to impose.
registered broker or dealer, associated person
thereof has failed reasonably to supervise, with
a view to preventing violations, another person 54.2. The imposition of the foregoing
subject to supervision who commits any such administrative sanctions shall be without
violation; (c) Any registrant or other person has, prejudice to the filing of criminal charges
in a registration statement or in other reports, against the individuals responsible for the
applications, accounts, records or documents violation.
required by law or rules to be filed with the
Commission, made any untrue statement of a 54.3. The Commission shall have the power to
material fact, or omitted to state any material issue writs of execution to enforce the
fact required to be stated their or necessary to provisions of the Section and to enforce
make the statements therein not misleading; payment of the fees and other dues collectible
or, in the case of an underwriter, has failed to under this Code.

Page 35 of 42
Section 55. Settlement Offers. – 55.1. At any a partner in, the issuer and whose
time, during an investigation or proceeding written consent thereto is filed with the
under this Code, parties being investigated registration statement;
and/or charged may propose in writing an offer
of settlement with the Commission. (d) Every auditor or auditing firm
named as having certified any financial
55.2. Upon receipt of such offer of settlement, statements used in connection with the
the Commission may consider the offer based registration statement or prospectus.
on timing, the nature of the investigation or
proceeding, and the public interest. (e) Every person who, with his written
consent, which shall be filed with the
55.3. The Commission may only agree to a registration statement, has been
settlement offer based on its findings that such named as having prepared or certified
settlement is in the public interest. Any any part of the registration statement,
agreement to settle shall have no legal effect or as having prepared or certified any
until publicly disclosed. Such decision may be report or valuation which is used in
made without a determination of guilt on the connection with the registration
part of the person making the offer. statement, with respect to the
statement, report, or valuation, which
55.4. The Commission shall adopt rules and purports to have been prepared or
procedures governing the filing, review, certified by him.
withdrawal, form of rejection and acceptance of
such offers. (f) Every selling shareholder who
contributed to and certified as to the
Section 56. Civil Liabilities on Account of False accuracy of a portion of the registration
Registration Statement. 56.1. Any person statement, with respect to that portion
acquiring a security, the registration statement of the registration statement which
of which or any part thereof contains on its purports to have been contributed by
effectivity an untrue statement of a material fact him.
or omits to state a material fact required to be
stated therein or necessary to make such (g) Every underwriter with respect to
statements not misleading, and who suffers such security.
damage, may sue and recover damages from
the following enumerated persons, unless it is 56.2. If the person who acquired the security
proved that at the time of such acquisition he did so after the issuer has made generally
knew of such untrue statement or omission: available to its security holders an income
statement covering a period of at least twelve
(a) The issuer and every person who (12) months beginning from the effective date
signed the registration statement: of the registration statement, then the right of
recovery under this subsection shall be
(b) Every person who was a director of, conditioned on proof that such person acquired
or any other person performing similar the security relying upon such untrue statement
functions, or a partner in, the issuer at in the registration statement or relying upon the
the time of the filing of the registration registration statement and not knowing of such
statement or any part, supplement or income statement, but such reliance may be
amendment thereof with respect to established without proof of the reading of the
which his liability is asserted; registration statement by such person.

(c) Every person who is named in the Section 57. Civil Liabilities Arising in
registration statement as being or Connection With Prospectus, Communications
about to become a director of, or a and Reports. 57.1. Any person who:
person performing similar functions, or

Page 36 of 42
 (a) Offers to sell or sells a security in thereunder, shall be liable to any other person
violation of Chapter III, or who purchases or sells any security, grants or
refuses to grant any proxy, consent or
(b) Offers to sell or sells a security, authorization, or accepts or declines an
whether or not exempted by the invitation for tender of a security, as the case
provisions of this Code, by the use of may be, for the damages sustained by such
any means or instruments of other person as a result of such act or
transportation or communication, by transaction.
means of a prospectus or other written
or oral communication, which includes Section 59. Civil Liability for Manipulation of
an untrue statement of a material fact Security Prices. – Any person who willfully
or omits to state a material fact participates in any act or transaction in violation
necessary in order to make the of Section 24 shall be liable to any person who
statements, in the light of the shall purchase or sell any security at a price
circumstances under which they were which was affected by such act or transaction,
made, not misleading (the purchaser and the person so injured may sue to recover
not knowing of such untruth or the damages sustained as a result of such act
omission), and who shall fail in the or transaction.
burden of proof that he did not know,
and in the exercise of reasonable care Section 60. Civil Liability with Respect to
could not have known, of such untruth Commodity Futures Contracts and Pre-need
or omission, shall be liable to the Plans. – 60.1. Any person who engages in any
person purchasing such security from act or transactions in willful violation of any rule
him, who may sue to recover the or regulation promulgated by the Commission
consideration paid for such security under Section 11 or 16, which the Commission
with interest thereon, less the amount denominates at the time of issuance as
of any income received thereon, upon intended to prohibit fraud in the offer and sale
the tender of such security, or for of pre-need plans or to prohibit fraud,
damages if he no longer owns the manipulation, fictitious transactions, undue
security. speculation, or other unfair or abusive practices
with respect to commodity future contracts,
57.2. Any person who shall make or cause to shall be liable to any other person sustaining
be made any statement in any report, or damages as a result of such act or transaction.
document filed pursuant to this Code or any
rule or regulation thereunder, which statement 60.2. As to each such rule or regulation so
as at the time and in the light of the denominated, the Commission by rule shall
circumstances under which it was made false prescribe the elements of proof required for
or misleading with respect to any material fact, recovery and any limitations on the amount of
shall be liable to any person who, not knowing damages that may be imposed.
that such statement was false or misleading,
and relying upon such statement shall have Section 61. Civil Liability on Account of Insider
purchased or sold a security at a price which Trading. – 61.1. Any insider who violates
was affected by such statement, for damages Subsection 27.1 and any person in the case of
caused by such reliance, unless the person a tender offer who violates Subsection 27.4
sued shall prove that he acted in good faith and (a)(I), or any rule or regulation thereunder, by
had no knowledge that such statement was purchasing or selling a security while in
false or misleading. possession of material information not
generally available to the public, shall be liable
Section 58. Civil Liability of Fraud in in a suit brought by any investor who,
Connection with Securities Transactions. – Any contemporaneously with the purchase or sale
person who engages in any act or transaction of securities that is the subject of the violation,
in violation of Sections 19.2, 20 or 26, or any purchased or sold securities of the same class
rule or regulation of the Commission unless such insider, or such person in the case

Page 37 of 42
of a tender offer, proves that such investor wantonness in the violation of this Code or the
knew the information or would have purchased rules and regulations promulgated thereunder.
or sold at the same price regardless of
disclosure of the information to him. The Court is also authorized to award
attorney’s fees not exceeding
61.2. An insider who violates Subsection 27.3 thirty percentum (30%) of the award.
or any person in the case of a tender offer who
violates Subsection 27.4 (a), or any rule or 63.2. The persons specified in Sections 56, 57,
regulation thereunder, by communicating 58, 59, 60 and 61 hereof shall be jointly and
material nonpublic information, shall be jointly severally liable for the payment of damages.
and severally liable under Subsection 61.1 However, any person who becomes liable for
with, and to the same extent as, the insider, or the payment of such damages may recover
person in the case of a tender offer, to whom contribution from any other person who, if sued
the communication was directed and who is separately, would have been liable to make the
liable under Subsection 61.1 by reason of his same payment, unless the former was guilty of
purchase or sale of a security. fraudulent representation and the latter was
not.
Section 62. Limitation of Actions. – 62.1. No
action shall be maintained to enforce any 63.3. Notwithstanding any provision of law to
liability created under Section 56 or 57 of this the contrary, all persons, including the issuer,
Code unless brought within two (2) years after held liable under the provisions of Sections 56,
the discovery of the untrue statement or the 57, 58, 59, 60 and 61 shall contribute equally
omission, or, if the action is to enforce a liability to the total liability adjudged herein. In no case
created under Subsection 57.1 (a), unless, shall the principal stockholders, directors and
brought within two (2) yeas after the violation other officers of the issuer or persons
upon which it is based. In no event shall an occupying similar positions therein, recover
such action be brought to enforce a liability their contribution to the liability from the issuer.
created under Section 56 or Subsection 57.1 However, the right of the issuer to recover from
(a) more than five (5) years after the security the guilty parties the amount it has contributed
was bona fide offered to the public, or under under this Section shall not be prejudiced.
Subsection 57.1 (b0 more than five (5) years
after the sale. Section 64. Cease and Desist Order. – 64.1.
The Commission, after proper investigation or
62.2. No action shall be maintained to enforce verification, motu proprio or upon verified
any liability created under any other provision complaint by any aggrieved party, may issue a
of this Code unless brought within two (20 cease and desist order without the necessity of
years after the discovery of the facts a prior hearing if in its judgment the act or
constituting the cause of action and within five practice, unless restrained, will operate as a
(5) years after such cause of action accrued. fraud on investors or is otherwise likely to
cause grave or irreparable injury or prejudice to
Section 63. Amount of Damages to be the investing public.
Awarded. – 63.1. All suits to recover damages
pursuant to Sections 56, 57, 58, 59, 60 and 61 64.2. Until the Commission issue a cease and
shall be brought before the Regional Trial desist order, the fact that an investigation has
Court, which shall have exclusive jurisdiction to been initiated or that a complaint has been
hear and decide such suits. The Court is filed, including the contents of the complaint,
hereby authorized to award damages in an shall be confidential. Upon issuance of a cease
amount not exceeding triple the amount of the and desist order, the Commission shall make
transaction plus actual damages. public such order and a copy thereof shall be
immediately furnished to each person subject
Exemplary damages may also be awarded in to the order.
cases of bad faith, fraud, malevolence or

Page 38 of 42
64.3. Any person against whom a cease and contained in any such application, report, or
desist order was issued may, within five (5) document only when a disclosure of such
days from receipt of the order, file a formal information is required in the public interest or
request for a lifting thereof. Said request shall for the protection of investors; and copies of
be set for hearing by the Commission not later information so made available may be
than fifteen (15) days from its filing and the furnished to any person having a legitimate
resolution thereof shall be made not later than interest therein at such reasonable charge and
ten (10) days from the termination of the under such reasonable limitations as the
hearing. If the Commission fails to resolve the Commission may prescribe.
request within the time herein prescribed, the
cease and desist order shall automatically be 66.4. It shall be unlawful for any member,
lifted. officer, or employee of the Commission to
disclose to any person other than a member,
Section 65. Substituted Service Upon the officer or employee of the Commission or to
Commission. – Service of summons or other use for personal benefit, any information
process shall be made upon the Commission contained in any application, report, or
in actions or legal proceedings against an document filed with the Commission which is
issuer or any person liable under this Code who not made available to the public pursuant to
is not domiciled in the Philippines. Upon receipt Subsection 66.3.
by the Commission of such summons, the
Commission shall within ten (10) days 66.5. Notwithstanding anything in Subsection
thereafter, transmit by registered mail a copy of 66.4 to the contrary, on request from a foreign
such summons and the complaint or other legal enforcement authority of any country whose
process to such issuer or person at his last laws grant reciprocal assistance as herein
known address or principal office. The sending provided, the Commission may provide
thereof by the Commission, the expenses for assistance in accordance with this subsection,
which shall be advanced by the party at whose including the disclosure of any information filed
instance it is made, shall complete such with or transmitted to the Commission. If the
service. requesting authority states that it is conducting
an investigation which it deems necessary to
Section 66. Revelation of Information Filed determine whether any person has violated, is
with the Commission. – 66.1. All information violating, or is about to violate any laws relating
filed with the commission in compliance with to securities or commodities matters that the
the requirements of this Code shall be made requesting authority administers or enforces.
available to any member of the general public, Such assistance may be provided without
upon request, in the premises and during regard to whether the facts stated in the
regular office hours of the Commission, except request would also constitute a violation of law
as set forth in this Section. of the Philippines.

66.2. Nothing in this Code shall be construed Section 67. Effect of action of Commission and
to require, or to authorize the Commission to Unlawful Representations with Respect
require, the revealing of trade secrets or Thereto. – 67.1. No action or failure to act by
processes in any application, report, or the Commission in the administration of this
document filed with the Commission. Code shall be construed to mean that the
Commission has in any way passed upon the
66.3. Any person filing any such application, merits of or given approval to any security or
report or document may make written objection any transactions or transactions therein, nor
to the public disclosure of information shall such action or failure to act with regard to
contained therein, stating the grounds for such any statement or report filed with or examined
objection, and the Commission may hear by the Commission pursuant to this Code or the
objections as it deems necessary. The rules and regulations thereunder to be deemed
Commission may, in such cases, make a finding by the Commission that such
available to the public the information statements or report is true and accurate on its

Page 39 of 42
face or that it is not false or misleading. It shall act complained of: Provided, That exemplary
be unlawful to make, or cause to be made, to damages may be awarded in cases of bad
any prospective purchaser or seller or a faith, fraud, malevolence or wantonness in the
security any representation that any such violation of this Code or the rules and
action or failure to act by the Commission is to regulations promulgated thereunder.
be so construed or has such effect.
Section 70. Judicial Review of Commission
67.2. Nothing contained in Subsection 67.1 Orders. – Any person aggrieved by an order of
shall, however, be construed as an exemption the Commission may appeal the order to the
from liability of an employee or officer of the Court of Appeals by petition for review in
Commission for any nonfeasance, accordance with the pertinent provisions of the
misfeasance or malfeasance in the discharge Rules of Court.
of his official duties.
Section 71. Validity of Contracts. – 71.1. Any
Section 68. Special Accounting Rules. – The condition, stipulation, provision binding any
Commission shall have the authority to make, person to waive compliance with any provision
amend, and rescind such accounting rules and of this Code or of any rule or regulation
regulations as may be necessary to carry out thereunder, or of any rule of an Exchange
the provisions of this Code, including rules and required thereby, as well as the waiver itself,
regulations as may be necessary to carry out shall be void.
the provisions of this Code, including rules and
regulations governing registration statements 71.2. Every contract made in violation of any
and prospectuses for various classes of provision of this Code or of any rule or
securities and issuers, and defining regulation thereunder, and every contract,
accounting, technical and trade terms used in including any contract for listing a security or an
this Code. Among other things, the Exchange heretofore or hereafter made, the
Commission may prescribe the form or forms performance of which involves the violation of,
in which required information shall be set forth, or the continuance of any relationship or
the items or details to be shown in the balance practice in violation of, any provision of this
sheet and income statement, and the methods Code, or any rule or regulation thereunder,
to be followed in the preparation of accounts, shall be void:
appraisal or valuation of assets and liabilities,
determination of depreciation and depletion, (a) As regards the rights of any person
differentiation of recurring and non-recurring who, in violation of any such provision,
income, differentiation of investment and rule or regulation, shall have made or
operating income, and in the preparation, engaged in the performance of any
where the Commission deems it necessary or such contract, and
desirable of consolidated balance sheets or
income accounts of any person directly or
(b) As regards the rights of any person
indirectly controlling or controlled by the issuer,
who, not being a party to such contract,
or any person under direct or indirect common
shall have acquired any right
control with the issuer.
thereunder with actual knowledge of
the facts by reason of which the making
Section 69. Effect on Existing Law. – The or performance of such contract was in
rights and remedies provided by this Code shall violation of any such provision, rule or
be in addition to any and all order rights and regulation.
remedies that may now exist. However, except
as provided in Section 56 and 63 hereof, no
71.3. Nothing in this Code shall be construed:
person permitted to maintain a suit for
damages under the provisions of this Code
shall recover, through satisfaction of judgment (a) To affect the validity of any loan or
in one or more actions, a total amount in extension of credit made or of any lien
excess of his actual damages on account of the created prior or subsequent to the

Page 40 of 42
 effectivity of this Code, unless at the deceptive or manipulative practices in
time of the making of such loan or connection with the purchase by an issuer, by
extension of credit or the creating of tender offer or otherwise, of and equity security
such lien, the person making such loan of a class issued by it that satisfies the
or extension of credit or acquiring such requirements of Subsection 17.2. such rules
lien shall have actual knowledge of the and regulations may require such issuer to
facts by reason of which the making of provide holders of equity securities of such
such loan or extension of credit or the dates with such information relating to the
acquisition of such lien is a violation of reasons for such purchase, the source of
the provisions of this Code or any rules funds, the number of shares to be purchased,
or regulations thereunder, or the price to be paid for such securities, the
method of purchase and such additional
(b) To afford a defense to the collection information as the Commission deems
of any debt, obligation or the necessary or appropriate in the public interest
enforcement of any lien by any person or for the protection of investors, or which the
who shall have acquired such debt, Commission deems to be material to a
obligation or lien in good faith for value determination by holders whether such security
and without actual knowledge of the should be sold.
violation of any provision of this Code
or any rule or regulation thereunder 72.3. For the purpose of Subsection 72.2, a
affecting the legality of such debt, purchase by or for the issuer or any person
obligation or lien. controlling, controlled by, or under common
control with the issuer, or a purchase subject to
Section 72. Rules and Regulations; the control of the issuer or any such person,
Effectivity. – 72.1. This Code shall be self- shall be deemed to be a purchased by the
executory. To effect the provisions and issuer. The commission shall have the power
purposes of this Code, the Commission may to make rules and regulations implementing
issue, amend, and rescind such rules and this subsection, including exemptive rules and
regulations and orders necessary or regulations covering situations in which the
appropriate, including rules and regulations Commission deems it unnecessary or
defining accounting, technical, and trade terms inappropriate that a purchase of the type
used in this Code, and prescribing the form or described in this subsection shall be deemed
forms in which information required in to be a purchase by the issuer for the purpose
registration statements, applications, and of some or all of the provisions of Subsection
reports to the Commission shall be set forth. 72.2.
For purposes of its rules or regulations, the
Commission may classify persons, securities, 72.4. The rules and regulations promulgated by
and other matters within its jurisdiction, the Commission shall be published in two (20
prescribe different requirements for different newspapers or general circulation in the
classes of persons, securities, or matters, and Philippines, and unless otherwise prescribed
by rule or order, conditionally or unconditionally by the Commission, the same shall be effective
exempt any person, security, or transaction, or fifteen (15) days after the date of the last
class or classes of persons, securities or publication.
transactions, from any or all provisions of this
Code. Section 73. Penalties. – Any person who
violates any of the provisions of this Code, or
Failure on the part of the Commission to issue the rules and regulations promulgated by the
rules and regulations shall not in any manner Commission under authority thereof, or any
affect the self-executory nature of this Code. person who, in a registration statement filed
under this Code, makes any untrue statement
72.2. The Commission shall promulgate rules of a material fact or omits to state any material
and regulations providing for reporting, fact required to be stated therein or necessary
disclosure and the prevention of fraudulent, to make the statements therein not misleading,

Page 41 of 42
shall, upon conviction, suffer a fine of not less All employees of the Commission who
than Fifty thousand pesos (P50,000.00) nor voluntarily retire or are separated from the
more than Five million pesos (P5,000,000.00) service with the Commission and whose
or imprisonment of not less than seven (7) retirement or separation has been approved by
years nor more than twenty-one (21) years, or the Commission, shall be paid retirement or
both in the discretion of the court. If the separation benefits and other entitlement
offender is a corporation, partnership or granted under existing laws.
association or other juridical entity, the penalty
may in the discretion of the court be imposed Section 75. Partial Use of Income. – To carry
upon such juridical entity and upon the officer out the purposes of this Code, the Commission
or officers of the corporation, partnership, is hereby authorized, in addition to its annual
association or entity responsible for the budget, to retain and utilize an amount equal to
violation, and if such officer is an alien, he shall One hundred million pesos (P100,000,000.00)
in addition to the penalties prescribed, be from its income.
deported without further proceedings after
service of sentence. The use of such additional amount shall be
subject to the auditing requirements, standards
Section 74. Transitory Provisions. – The and procedures under existing laws.
Commission, as organized under existing laws,
shall continue to exist and exercise its powers, Section 76. Repealing Clause. – The Revised
functions and duties under such laws and this Securities Act (Batas Pambansa Blg. 178), as
Code: Provided, That until otherwise mandated amended, are hereby repealed. All other laws,
by a subsequent law, the Commission shall orders, rules and regulations, or parts thereof,
continue to regulate and supervise commodity inconsistent with any provision of this Code are
futures contracts as provided in Section 11 and hereby repealed or modified accordingly.
pre-need plans and the pre-need industry as
provided in Section 16 of this Code.
Section 77. Separability Clause. – if any
portion or provision of this Code is declared
All further requirements herein shall be unconstitutional or invalid, the other portions or
complied with upon approval of this provisions hereof, which are not affected
Code: Provided, however, That compliance thereby shall continue in full force and effect.
may be deferred for such reasonable time as
the Commission may determine but not to
Section 78. Effectivity. – This Code shall take
exceed one (1) year from approval of this
effect fifteen (15) days after its publication in
Code: Provided, further, That securities which
the Official Gazette or in two (2) newspapers of
are being offered at the time of effectivity of this
general circulation.
Code pursuant to an effective registration and
permit, may continue to be offered and sold in
accordance with the provisions of the Revised Approved: July 19, 2000
Securities Act in effect immediately prior to
approval of this Code.

All unexpended funds for the calendar year,

properties, equipment and records of the
Securities and Exchange Commission are
hereby retained by the Commission as
reorganized under this Code and the amount of
Two hundred million pesos (P200,000,000.00)
or such amount necessary to carry out the
reorganization provided in this Code is hereby
appropriated.

Page 42 of 42