Securities Regulations Code and Related Laws venture and evidenced by a certificate, instrument, contract,
whether written or electronic in character.
Powers and Functions of the SEC: JARS-PIPE-FICISE
1. Jurisdiction and supervision over all corporations, It includes:
partnerships or associations who are the grantees of 1.
primary franchises and/or a license or permit issued by
the Government; 2.
2. Approve, reject, suspend, revoke or require amendments
to registration statements, and registration and licensing
applications; 3.
3. Regulate, investigate or supervise the activities of
persons to ensure compliance; 4.
4. Supervise, monitor, suspend or take over the activities of 5.
exchanges, clearing agencies and other SROs;
5. Punish for contempt of the Commission, both direct and
indirect, in accordance with the pertinent provisions of 6.
and penalties prescribed by the Rules of Court;
6. Impose sanctions for the violation of laws and the rules, 7.
regulations and orders issued pursuant thereto;
7. Prepare, approve, amend or repeal rules, regulations and
orders, and issue opinions and provide guidance on and DEFINITION OF TERMS:
supervise compliance with such rules, regulations and a. Issuer - originator, maker, obligor or creator of the
orders;
8. Enlist the aid and support of and/or deputize any and all
enforcement agencies of the Government, civil or military b.
as well as any private institution, corporation, firm,
association or person in the implementation of its powers
and functions under this Code; c.
9. Formulate polices and recommendations on issues
concerning the securities market, advise Congress and
other government agencies on all aspects of the d.
securities market and propose legislation and
amendments thereto;
10. Issue cease and desist orders to prevent fraud or injury
to the investing public;
11. Compel the officers of any registered corporation or
association to call meetings of stockholders or members
thereof under its supervision;
12. Issue subpoena duces tecum and summon witnesses to
appear in any proceedings of the Commission and in e.
appropriate cases, order the examination, search and
seizure of all documents, papers, files, and records, tax
returns, and books of accounts of any entity or person
under investigation as may be necessary for the proper f.
disposition of the cases before it, subject to the
provisions of existing laws;
13. Suspend, or revoke, after proper notice and hearing the
franchise or certificate of registration of corporations, g.
partnerships or associations, upon any of the grounds
provided by law;
14. Exercise such other powers as may be provided by law,
or incidental to or necessary to carry out its express
powers. h.
TRANSFERRED JURISDICTION - memorize
The following are within the jurisdiction of the RTC:
FICAP
1. Fraudulent devices and schemes employed by directors i.
detrimental to public interest and to other firms;
2. Intra-corporate dispute and with the state in relation to
their franchise and right to exist as such;
3. Controversies in election or appointment of directors or j.
trustees;
4. Appointment of Rehabilitation Receiver or Management
Committee; k.
5. Petition to be declared in state of suspension of
payments.
SECURITIES - shares, interest or participation sip in a
corporation or in a commercial enterprise or profit-making l.
Shares of stock, evidences of indebtedness, notes,
debentures, bonds, asset-backed securities send-ba;
Investment contracts, certificates of interest,
participation in a profit-sharing agreement, certificates of
deposit for a future subscription icpc;
Fractional undivided interests in oil, gas or other mineral
rights;
Derivatives like option and warrants;
Certificates of assignments, certificates of participation,
trust certificates, voting trust certificates or similar
instruments;
Proprietary or non-proprietary membership certificates in
corporations;
Other instruments as may be determined by the
Commission.
security.
Broker - person engaged in the business of buying and
selling securities for the account of others.
Dealer - person who buys and sells securities for his
own account in the ordinary course of business.
Clearing agency - entity that provides facility for the
performance of the following activities:
1. Make deliveries of securities and/or payments in
connection with transactions in securities;
2. Reduce the number of settlements of securities
transactions or allocate settlement responsibilities in
accordance with SEC rules;
3. Provide means for central handling of securities.
Exchange - organized marketplace or facility that brings
together buyers and sellers, and executes trades of
securities and/or commodities.
Pre-need plans - contracts, agreements, deeds or plans
for the benefit of the planholders. Now regulated by the
Insurance Commission.
Promoter - person who, acting alone or with others,
takes initiative in founding and organizing the business or
enterprise of the issuer and receives consideration
therefor.
PROSPECTURS - document made by or on behalf of an
issuer, underwriter or dealer to sell or offer securities for
sale to the public thru a registration statement filed with
the Commission.
Registration statement - application for the
registration of securities required to be filed with the
Commission.
Uncertified security - security evidenced by electronic
or similar records.
UNDERWRITER - person who guarantees on a firm
commitment and/or declared best effort basis, the
distribution and sale of securities of any kind by another
company.
Associate - entity over which the investor has significant
1
 influence and that is neither a subsidiary or an interest in
a joint venture.
m. Registrant - issuer of securities with respect to which a
registration statement or required issuer report has been
or is to be filed.
n. Securities Depository - holds securities accounts,
provide central safekeeping and asset services.
o. Self-regulatory organization - an organized
Exchange, registered clearing agency, organization or
association registered with the SEC as SRO, authorized
by the SEC to:
1. Enforce compliance with relevant provisions of SRC;
2. Promulgate and enforce its own rules, approved by
SEC, members and/or participants;
3. Enforce fair, ethical and efficient practice in the
securities and commodity futures industry.
p. Transfer agent - person who performs on behalf of the
Issuer or by itself as Issuer any of the following activities:
CM-RER
1. Countersign certificates upon their issuance;
2. Monitor issuance of certificates;
3. Register transfer of such securities;
4. Exchange or convert such securities;
5. Record the ownership of securities by bookkeeping
entry without physical issuance of certificates.
q. Trade participant - broker dealer who has the right,
pursuant to the rules of the Exchange or any organized
market, to trade in that Exchange or organized market.
r. Dealing in Securities - making or offering to make with
any person, or inducing or attempting to induce any
person, to enter into or to offer to enter into any
agreement for or with a view to acquiring, disposing of or
subscribing for securities.
s. Solicitation - act of seeking or asking for business or
information and including the act of providing information
about a security or investment product being offered for
sale, with the view of making another person a client, or
closing or bringing in a sale or purchase of security or
investment product.
INVESTMENT CONTRACTS - contract, transaction or
scheme whereby a person invests his money in a common
enterprise, and is led to expect profits primarily from the
efforts of others.
 Presumption of Investment Contract - arises
when a person seeks to use the money of others on
the promise of profits.
 Requisties of Investment Contract: ICE-P
1. Investment in money;
2. In a Common enterprise;
3. With Expectation of profits;
4. Primarily from efforts of others.
 Common Enterprise - deemed created when 2 or
more investors POOL their resources, creating a
common enterprise, even if the promoter receives
nothing more than a broker’s commission.
DERIVATIVES - financial instruments whose values changes
in response to changes in a:
 specified interest rate;
 security price;
 commodity price;
 foreign exchange rate;
 index of prices or rates;
 credit rating or credit index; or
 similar variable or underlying factor.
It is settled at a future date. They include, but are not
limited to, OPTIONS and WARRANTS.
 OPTION - contracts that give the buyer the right to buy
or sell an underlying security at a predetermined price,
called the exercise or strike price, on or before a
predetermined date, called the expiry date.
 Stock options may be granted to non-
stockholders if the board has been authorized to
grant that benefit by:
1. The corporation’s AOI;
2. By-laws;
3. Resolution of stockholders representing at
least 2/3 of outstanding voting and non-voting
capital stock.
 Stock options granted to directors and officers must
be approved in a meeting of the stockholders
representing at least 2/3 of outstanding voting and
non-voting capital stock.
 WARRANTS - rights to subscribe or purchase new
shares or existing shares in a company, on or before a
predetermined date called the expiry date. They have
longer exercise period than options.
 Detachable warrant - warrant that may be sold,
transferred, or assigned to any person by the holder
separate from and independent of the
corresponding beneficiary securities.
 Beneficiary security - shares of stock or
other securities that form the basis of
entitlement in a warrant.
 Non-detachable warrant - warrant that may not
be sold, transferred or assigned to any person by
the warrant holder separate from, and independent
of the beneficiary securities.
COMMODITY FUTUES CONTRACT - a contract providing for
the making or taking delivery at a prescribed time in the
future, of a specific quantity and quality of a commodity or the
cash value thereof.
Commodity - any goods, articles, services, rights and
interests, including any group or index of any of the foregoing,
in which commodity interests contracts are presently or in the
future dealt in.
PROPRIETARY SHARE OR CERTIFICATE - evidence of
interest, participation or privilege in a corporation, which
gives the holder of the share or certificate the right to use the
facilities covered by such certificate, and to receive dividends
or earnings from the corporation.
 Upon liquidation of the corporation, the holder shall have
a proportionate ownership over its assets.
NON-PROPRIETARY SHARE OR CERTIFICATE - evidence
of interest, participation or privilege over a specific property
of a corporation that allows the holder of the share or
certificate to use such property under certain terms and
conditions.
 The holder, however, shall not be entitled to
dividends from the corporation or to its assets upon
liquidation.
2
Sec. 8.1 of the SRC require the filing with and approval by
the SEC of a registration statement duly.
 If registration statement is not filed and approved, the
following are PROHIBITED: SOD
a. Sale of securities in the Philippines;
b. Offer to sell or distribute securities within the
Philippines;
c. Disseminate information relating to an offering of
securities.
 The PROSPECTUS shall be submitted to the SEC
as part of the registration statement. The
prospectus shall be widely disseminated and
sufficient copies are made available to all interested
parties prior to the sale of the securities.
 Issuers of registered securities are also required to
enter into an UNDERWRITING AGREEMENT with
a universal bank, investment house, or any other
financial institution duly licensed under the
Investment Houses Law.
 The sale of shares subject of registration shall
commence within 10 business days from date
of effectivity of registration statement and
shall continue until the end of the offering period or
until the sale is terminated by the Issuer.
 Registration statement is CANCELLED if sale
is not commenced within 10 business days.
EXEMPT SECURITIES - memorize
Registration shall not, as a general rule, apply to any of the
following classes of securities.
Under the SRC: GG-RSB
1. Security issued or guaranteed by the Government of the
Philippines;
2. Security issued or guaranteed by the Government of any
country with which the Philippines maintains diplomatic
relations, or by any state, province or political subdivision
thereof on the basis of reciprocity; Provided, that the
Commission may require compliance with the form and
content of disclosures the Commission may prescribe;
3. Certificates issued by a Receiver or by a trustee in
bankruptcy duly approved by the proper adjudicatory
board;
4. Security or its derivatives the Sale or transfer of which,
by law, is under the supervision and regulation of:
a. The Office of the Insurance Commission;
b. Housing and Land Use Regulatory Board; or
c. The BIR.
5. Security issued by a Bank except its own shares of stock.
Provided by the SEC:
6. Evidence of indebtedness issued to the BSP under its
open market operations;
7. Bills of exchange arising form a bona fide sale of goods
and services that are distributed and/or traded by banks
or investment houses;
8. Security issued or guaranteed by multilateral financial
entities;
9. Commercial papers that meet the following conditions:
PINA
a. Payable to a specific person;
b. Issued to not more than 10 non-institutional
lenders;
c. Neither negotiable or assignable and held on to
maturity; and
d. In the Amount not exceeding P150,000,000 or such
higher amount as the SEC may prescribe.
EXEMPT TRANSACTIONS - memorize 5
The requirement of registration shall not apply to the sale of
any security in any of the following transactions: J-BISS
1. Judicial sale, or sale by an executor, administrator,
guardian or receiver or trustee in insolvency or
bankruptcy;
2. Broker’s transaction, executed upon customer’s orders,
on any registered exchange or other trading market;
3. Isolated transaction in which any security is sold, offered
for sale, subscription or delivery by the owner thereof,
not being made in the course of repeated and successive
transactions;
4. Sale of securities by an issuer to fewer than 20 persons
in the Philippines during any 12-month period;
5. Sale of capital stock of a corporation to its own
stockholders exclusively, where no commission or other
remuneration is paid or given, directly or indirectly, in
connection with the sale of such capital stock.
Issuance of evidence of indebtedness to PRIMARY
INSTITUTIONAL LENDERS is an exempt transaction
provided that the following requirements are present: ENN
1. Evidence of indebtedness shall be negotiated or assigned
to any PIL or the DBP with respect to private
development banks in relation with their rediscounting
privileges;
2. In case of Non-banks without underwriting licenses,
negotiation or assignment shall be thru banks or non-
banks licensed to be an underwriter or securities deler;
3. In No case shall said instrument be negotiated or
assigned to non-qualified investors.
Grounds for REVOCATION and/or REJECTION of the
REGISTRATION OF SECURITIES: F-FIVE-RC
After due notice and hearing, if SEC finds that the ISSUER
has:
1. made False or misleading representation of material facts
in any prospectus;
2. Failed to comply with any requirement the Commission
may impose as a condition for registration;
3. Been judicially declared Insolvent;
4. Violated the provisions of SEC;
5. Engaged in fraudulent transactions;
6. Registration statement is on its face incomplete or
inaccurate in any material respect;
7. Conviction of an offense involving moral turpitude.
MANIPULATIVE DEVICES AND PRACTICES ON
MANIPULATION OF SECURITY PRICES IDENTIFIED
UNDER SRC:
1. WASH SALE - by effecting any transaction in such
security which involves no change in the beneficial
ownership thereof.
2. Matched Orders - By entering an order or orders for
the purchase or sale of such security with the knowledge
that a simultaneous order of substantially the same size,
time and price, for the sale or purchase of any such
security, has or will be entered by or for the same or
different parties.
3. MARKET RIGGING OR JIGGLING - by performing
similar act where there is no change in beneficial
ownership.
4. PAINTING THE TAPE - engaging in a series of
transactions in securities that are reported publicly to
give the impression of activity or price movement in a
security.
3
5. Marking the Close - buying and selling securities at the
close of the market in an effort to alter the closing price
of the security.
6. Hype and Dump - engaging in buying activity at
increasingly higher prices and then selling securities in
the market at the higher prices or vice versa.
7. Squeezing the Float - taking advantage of a shortage
of securities in the market by controlling the demand side
and exploiting market congestion during such shortages
in a way as to create artificial prices.
8. Disseminating false or misleading information
thru media.
PUT - a transferable option or offer to deliver a given number
of shares of stock at a stated price at any given time during a
stated period.
CALL - transferable option to buy a specified number of
shares at a stated price.
STRADDLE - combination of put and call.
 SRC prohibits members of an Exchange from directly or
indirectly indorsing or guaranteeing the performance of a
put, call or straddle.
SHORT SALE - includes the following:
1. Sale of a security which the seller does not own; or
2. Sale which is consummated by delivery of security
borrowed by or for the account of the seller with
the commitment of the seller or securities borrower to
return or deliver said securities or their equivalent to the
lender on a determinable future time.
 This is NOT PROHIBITED, except in the following
instances: DS
1. Directors, officers or principal shareholder of a
corporation cannot make a short sale in securities of
the corporation in which he is occupying such
position;
2. When the SEC prohibits short sale indefinitely or for
such period as it may deem proper.
Who is an INSIDER?
INSIDER means:
a. The issuer;
b. A director or officer of, or a person controlling the issuer;
c. A person whose relationship or former relationship to the
issuer gives or gave him access to material
information about the issuer or the security that is
not generally available to the public;
d. A government employee or director, or officer of an
exchange, clearing agency and/or self-regulatory
organization who has access to material information
about an issuer or a security that is not generally
available to the public; or
e. A person who learns such information by a
communication from any of the foregoing insiders.
 (prohibited because in restraint of free trade.)
 Material fact or information - one which may result in
a change in the market price or value of any of the
Issuer’s securities or may potentially affect the
investment decision of the investor.
TENDER OFFER - publicly announced intention by a person
acting alone or in concert with other persons, to acquire equity
securities of a public company.
 It is an offer by the acquiring person to stockholders of
a public company, for them to tender their shares therein
on the terms specified in the offer.
 Its purpose is to protect minority shareholders against
any scheme that dilutes the share value of their
investments. It gives the minority shareholders the
change to exit the company under reasonable terms,
giving them the opportunity to sell their shares at the
same price as those of the majority shareholders.
 PUBLIC COMPANY - corporation with a class of equity
securities listed on an Exchange or with assets in excess
of P50,000,000 and having 200 or more holders, at
200 of which are holding at least 100 shares of a
class of its equity securities.
 ACQUIRER must file a declaration with the SEC if
he intends to acquire 15% of equity securities in a public
company within a period of 12 months.
 ACQUIRER is required to (1) Disclose the intention
and (2) to make tender offer for the percentage
sought to all holders of such securities, when he
intends to acquire (1) 34% or more of the outstanding
voting share or (2) such outstanding voting shares that
are sufficient to gain control of the board in a public
company in one or more transactions within a period of
12 months equity shares in a public company.
 ACQUIRER is required to make tender offer for ALL
THE OUTSTANDING VOTING SHARES if he intends to
acquire (1) 35% or more of the outstanding voting
shares or (2) such outstanding voting shares that are
sufficient to gain control of the board in a public company
DIRECTLY FROM ONE OR MORE SHAREHOLDERS.
 If any acquisition of even less than 35% would result in
ownership of over 51 % of total outstanding equity
securities of a public company, the acquirer shall be
required to make a tender offer for ALL THE
OUTSTANDING EQUITY SECURITIES to all remaining
stockholders of the said company.
 Tender Offer when NOT REQUIRED: Any person or
group of persons acting in concert, who intends to
acquire 35% of the outstanding voting shares or such
outstanding voting shares that is sufficient to gain control
of the board in a public company thru the Exchange
trading system shall not be required to make a
tender offer even if such person or group of persons
acting in concert acquire the remainder thru a block sale
if, after the acquisition thry the Exchange trading system,
they fail to acquire the target of 35% or such
outstanding voting shares that is sufficient to gain
control of the board.
EXEMPT FROM MANDATORY TENDER OFFER
REQUIREMENT: COMPUFI
1. Purchases in connection with Corporate rehabilitation
under court supervision;
2. Purchases thru an Open market at the prevailing market
price;
3. Merger or consolidation;
4. Purchases in connection with Privatization undertaken by
the Government;Purchase of shares from Unissued
capital stock, provided that acquisition will not result to a
50% or more ownership of shares by the purcchaser;
5. Purchase in connection with Foreclosure proceedings
involving a duly constituted pledge or security
4
 arrangement where the acquisition is made by the debtor
or creditor;
6. Purchase of shares from an Increase in authorized capital
stock.

Obligations of person making a tender offer: ATR

1. Announce his intention in a newspaper of general
circulation prior to the commencement of the offer;
2. At least Two business days prior to the date of the
commencement of the tender offer:
a. File with the SEC a required form of tender offer;
b. Hand deliver a copy of such form to the target
company at its principal executive office and to each
Exchange where such class of the target company’s
securities are listed for trading;
3. Report results of tender offer by filing with the
Commission not later than 10 days after termination of
the tender offer, copies of the final amendments to the
form.