Securities Regulation Code (RA No.

8799) o Information must be disclosed to

prospective purchasers before the
Purpose sale.
2. Registration Process:
 Main Objective: Protect the investing o Step 1: Filing a sworn registration
public by: statement with required details.
1. Requiring full disclosure of securities o Step 2: Payment of filing fees (≤
and issuers' information. 0.1% of the aggregate price of
2. Penalizing fraudulent practices. securities).
3. Ensuring compliance with pertinent o Step 3: Publication of notice in two
laws through monitoring. general circulation newspapers for
two consecutive weeks.
KEY FEATURES OF SECURITIES o Step 4: SEC decision on the
statement within 45 days (approval
1. Definition (Section 3): or rejection).
o Securities are shares, bonds, or o Step 5: Submission of a prospectus
interests in a corporation, confirming the correctness of all
commercial enterprise, or profit- statements.
making venture. 3. Sworn Registration Statement:
o Evidence of ownership is o Signed by corporate officers (e.g.,
provided through certificates, CEO, CFO, Corporate Secretary).
contracts, or instruments (electronic o Includes written consent from
or written). experts and shareholders if
2. Primary Feature: applicable.
o Purchased with the expectation of
earning passive income or asset EXEMPTIONS FROM REGISTRATION
appreciation.
o Income is generated primarily 1. Securities issued or guaranteed by:
through the efforts of others. o The Philippine government or
3. Examples of Securities: foreign governments with diplomatic
o Stocks, bonds, notes, debentures, relations.
investment contracts. o Entities under supervision of
o Derivatives like options and regulatory agencies (e.g., Insurance
warrants. Commission, HLURB).
o Membership certificates and other o Banks, except their own shares of
instruments deemed by the SEC. stock.
2. Transactions exempt from registration
INVESTMENT CONTRACT (acronym: BISCEPS SMILE):
o Broker’s transactions on registered
 Definition: A contract or scheme where an exchanges.
individual invests money with o Isolated transactions by owners not
expectations of profits generated by acting as underwriters.
others’ efforts. o Stock dividends.
 Requisites (Howey Test): o Conversions within the same issuer.
1. Investment of money. o Exclusive sales to existing
2. Involvement in a common stockholders.
enterprise. o Private placements (≤ 20 buyers in
3. Expectation of profits. 12 months).
4. Profits arise from the efforts of o Sophisticated buyers (banks,
others. pension funds, investment
 Illustration: A pyramid scheme requiring companies).
members to recruit others for profit qualifies
as an investment contract (e.g., Power REPORTORIAL REQUIREMENTS
Homes Unlimited Corp. case).
1. Annual Reports:
REGISTRATION REQUIREMENTS o Balance Sheet, Profit and Loss
Statement, and Statement of Cash
1. General Rule: Flows certified by a CPA.
o Securities cannot be sold or offered o Management discussion and analysis
in the Philippines without a of operational results.
registration statement filed with and 2. Periodic Reports:
approved by the SEC. o Updates for interim fiscal periods.
o Significant business or financial
developments.
 3. General Information Sheet (GIS): o An offer to purchase shares from
o Filing deadlines depend on the type stockholders when acquiring
of corporation (e.g., stock, non- significant ownership in a company.
stock, foreign). 2. Thresholds:
4. Filing of Annual Financial Statements: o ≥ 35% of equity securities in 12
o Deadlines depend on SEC months.
registration/license numbers and o Ownership exceeding 50% after the
fiscal/calendar year usage. transaction.
3. Purpose:
INSIDER TRADING o Protect minority shareholders by
ensuring fair terms.
1. Definition: o Provide an option to exit the
o Occurs when an insider transacts in company at reasonable prices.
securities based on material non- 4. Exemptions:
public information. o Purchases during mergers,
o Material non-public information privatization, or corporate
includes data that affects security rehabilitation.
prices or influences buying/selling
decisions.
2. Who Qualifies as an Insider:
o Directors, officers, controlling
persons, and government employees
with access to material information.
o Individuals with direct
communication from an insider.
3. Exceptions:
o Trades are lawful if:
 Information was not obtained
from an insider.
 The other party was aware of
the material information.
4. Presumption of Insider Trading:
o Transactions by insiders or close
relatives before public dissemination
of information are presumed
unlawful.

FRAUDULENT TRANSACTIONS AND MARKET

MANIPULATIONS

1. Types:
o Wash Sale: No actual ownership
change in a transaction.
o Matched Orders: Coordinated
buy/sell orders to create the illusion
of market activity.
o Marking the Close: Placing orders
to influence closing prices.
o Hype and Dump: Misleading
campaigns to inflate stock prices for
profit.
o Boiler Room Operations:
Aggressive selling with unfounded
predictions.
2. Effects:
o Artificially inflates or depresses
prices.
o Misleads investors into buying or
selling securities.

MANDATORY TENDER OFFER RULE

1. Definition: