SECURITIES REGULATIONS CODE by such owner, or on his account by such representative and such owner or
representative not being the underwriter of such security.
1. Pre-Need plans have an insurance feature; an aleatory contract
2. ADRs are considered derivatives, which in turn in considered securities.
3. The doctrine of caveat emptor does not apply; the burden is shifted to
the seller to comply with all the requirements of the law and not the
buyer.
4. HOWEY TEST – test for determination WON an investment contract is
a security. (1) investment (2) expectation of profit (3) scheme is made by
common enterprise (4) depends on effort of 3rd person.
5. The offer of purchase of dollars under prosperity.com is not an
investment contract. The realization is not dependent upon the 3 rd
persons but upon the investor alone.
6. Markets
- Equity market = for capital
- Money market = for working capital; matures in less than 1 year
- Short term bond – 3 yrs
- Medium Term Bond = 5 yrs
- LTB = 10 yrs
- Equity Bond = 50 yrs
- Future Markets = selling of contracts that will be given in the
future
- Financial Future Markets = promisor binds to sell currency at
certain amount
- Proprietary market – shares of stocks and derivatives
7. Future Contracts are not for raising of capital, but for reduction of risk.
8. Exempt Securities [Section 9.1, SRC]
9.1. The requirement of registration under Subsection 8.1 shall not as a
general rule apply to any of the following classes of securities:
(a) Any security issued or guaranteed by the Government of the Philippines,
or by any political subdivision or agency thereof, or by any person controlled
or supervised by, and acting as an instrumentality of said Government.
(b) Any security issued or guaranteed by the government of any country with
which the Philippines maintains diplomatic relations, or by any state, province
or political subdivision thereof on the basis of reciprocity: Provided, That the
Commission may require compliance with the form and content of disclosures
the Commission may prescribe.
(c) Certificates issued by a receiver or by a trustee in bankruptcy duly
approved by the proper adjudicatory body.
(d) Any security or its derivatives the sale or transfer of which, by law, is
under the supervision and regulation of the Office of the Insurance
Commission, Housing and Land Use Regulatory Board, or the Bureau of
Internal Revenue.
(e) Any security issued by a bank except its own shares of
stock.
9. Exempt Transaction [Section 10.1, SRC]
10.1. The requirement of registration under Subsection 8.1. shall not apply to
the sale of any security in any of the following transactions:
(a) At any judicial sale, or sale by an executor, administrator, guardian or
receiver or trustee in insolvency or bankruptcy.
(b) By or for the account of a pledge holder, or mortgagee or any other
similar lien holder selling or offering for sale or delivery in the ordinary
course of business and not for the purpose of avoiding the provisions of this
Code, to liquidate a bona fide debt, a security pledged in good faith as security
for such debt.
(c) An isolated transaction in which any security is sold, offered for sale,
subscription or delivery by the owner thereof, or by his representative for the
owner’s account, such sale or offer for sale, subscription or delivery not being
made in the course of repeated and successive transactions of a like character
(d) The distribution by a corporation, actively engaged in the business
authorized by its articles of incorporation, of securities to its stockholders or
other security holders as a stock dividend or other distribution out of surplus.
(e) The sale of capital stock of a corporation to its own stockholders
exclusively, where no commission or other remuneration is paid or given
directly or indirectly in connection with the sale of such capital stock.
(f) The issuance of bonds or notes secured by mortgage upon real estate
or tangible personal property, where the entire mortgage together with all
the bonds or notes. secured thereby are sold to a single purchaser at a single
sale.
(g) The issue and delivery of any security in exchange for any other
security of the same issuer pursuant to a right of conversion entitling the
holder of the security surrendered in exchange to make such conversion:
provided, That the security so surrendered has been registered under this Code
or was, when sold, exempt from the provisions of this Code, and that the
security issued and delivered in exchange, if sold at the conversion price,
would at the time of such conversion fall within the class of securities entitled
to registration under this Code. Upon such conversion the par value of the
security surrendered in such exchange shall be deemed the price at which the
securities issued and delivered in such exchange are sold.
(h) Broker’s transactions, executed upon customer’s orders, on any
registered Exchange or other trading market.
(i) Subscriptions for shares of the capital stock of a corporation prior to the
incorporation thereof or in pursuance of an increase in its authorized capital
stock under the Corporation Code, when no expense is incurred, or no
commission, compensation or remuneration is paid or given in connection
with the sale or disposition of such securities, and only when the purpose for
soliciting, giving or taking of such subscriptions is to comply with the
requirements of such law as to the percentage of the capital stock of a
corporation which should be subscribed before it can be registered and duly
incorporated, or its authorized capitalincreased.
(j) The exchange of securities by the issuer with its existing security holders
exclusively, where no commission or other remuneration is paid or given
directly or indirectly for soliciting such exchange.
(k) The sale of securities by an issuer to fewer than twenty (20) persons in
the Philippines during any twelve-month period.
(l) The sale of securities to any number of the following qualified buyers:
(i) Bank;
(ii) Registered investment house;
(iii) Insurance company;
(iv) Pension fund or retirement plan maintained by the Government of the
Philippines or any political subdivision thereof or managed by a bank or other
persons authorized by the Bangko Sentral to engage in
trust functions;
(v) Investment company; or
(vi) Such other person as the Commission may by rule determine as qualified
buyers, on the basis of such factors as financial sophistication, net worth,
knowledge, and experience in financial and business matters,
10. Registration may be Rejected or revoked on ground of material
information – those information that would influence the investing
public as to WON it should buy, hold, sell security.
11. Registration may only “effective” (not approve), or rejected.
12. If within 45 days there is no showing of any irregularity, securities may
be sold already.
13. The PSE is a Self – Regulatory Organization. Thus it can enforce
compliance, Promulgate own rules, enforce fair practices.
14. If there is irregularity in the management of the PSE, SEC may
investigate.
15. Stock exchange is not considered as place, but a facility.
16. 5/10 % acquisition = disclosure of beneficial owner 3. Section 94. Petition. - An individual debtor who, possessing sufficient
17. 25% = tender offer rule property to cover all his debts but foreseeing the impossibility of
18. 50% = general offer meeting them when they respectively fall due, may file a verified
19. Manipulative Practices petition that he be declared in the state of suspension of payments by the
- Wash Sales – making it appear that the stocks moves/ there is court of the province or city in which he has resides for six (6) months
transaction; there is actually no changes in beneficial ownership of prior to the filing of his petition. He shall attach to his petition, as a
a security. minimum: (a) a schedule of debts and liabilities; (b) an inventory of
- Matched order – agreement to manipulate assess; and (c) a proposed agreement with his creditors.
- Pegging the close/marking the close – pegging the price for the last
transaction. 4. Section 95. Action on the Petition. - If the court finds the petition
- Margin trading - financed by the broker; a stock market player sufficient in form and substance, it shall, within five (5) working days
trades, buys, sells shares on credit/ from the filing of the petition, issue an Order:
- Insider trading – insider who holds a material information not yet
disclosed to the public (a) calling a meeting of all the creditors named in the schedule of debts
- Structural insider trading - It refers to any incident that involves and liabilities at such time not less than fifteen (15) days nor more than
trading of a listed company's securities by certain individuals forty (40) days from the date of such Order and designating the date,
(called 'insiders') who have access to unpublished price-senstive time and place of the meeting;
information about the company; significant investor in a
corporation that is given an early access to information. (b) directing such creditors to prepare and present written evidence of
- Street certificates – certified in blank and may be endorse by their claims before the scheduled creditors' meeting;
delivery
(c) directing the publication of the said order in a newspaper of general
circulation published in the province or city in which the petition is filed
once a week for two (2) consecutive weeks, with the first publication to
20. Rules on Proxy solicitations be made within seven (7) days from the time of the issuance of the
- A publicly listed traded corporation must be explicit in soliciting Order;
proxies
- A minority stockholder can issue for proxy statement (d) directing the clerk of court to cause the sending of a copy of the
- It is within the exclusive and jurisdiction of the SEC to answer Order by registered mail, postage prepaid, to all creditors named in the
questions if the only issue is PROXY. But if its incidental to an schedule of debts and liabilities;
election protest – ICC.
21. Rules on transfer of Jurisdiction of certain Jurisdiction from SEC – ICC. (e) forbidding the individual debtor from selling, transferring,
A. Devices or schemes that result in pyramiding encumbering or disposing in any manner of his property, except sthose
- If there is no commodity or product of value or service with an used in the ordinary operations of commerce or of industry in which the
economic value involved in the marketing program then it is petitioning individual debtor is engaged so long as the proceedings
pyramiding scheme [FALSE] relative to the suspension of payments are pending;
- If in the marketing scheme the revenues that are derived are taken (f) prohibiting the individual debtor from making any payment outside
from membership fees more than the sale of products that are of the necessary or legitimate expenses of his business or industry, so
tangible and with economic value, it is pyramiding scheme long as the proceedings relative to the suspension of payments are
[TRUE] pending; and
B. Intra-Corporate Controversies (g) appointing a commissioner to preside over the creditors' meeting.
a. CPA – PUBLIC
b. CPA – STATE (franchise, permit, licens0 NEW CENTRAL BANK ACT
c. CPA – SH
d. Among SH, partners associates 1. Bangko Sentral is an independent central monetary authority
- Under Controversy Test, controversy must not only be rooted in 2. Moneytary Board is composed of non-public officials.
intra-corporate relationship but must pertain to the enforcement of 3. BS governor is the chairman of the MB; there is also a cabinet memb er
the parties’ correlative rights and obligations under the corpo code. that is appointed a member
C. Controversies in the election and appointment 4. MB members may be reappointed.
- SEC has the power to annul or invalidate improper proxies 5. Instances of bank distress
- Conservatorship
- Regular courts, however, has jurisdiction if issue of proxy is
o State of continuing inability or unwillingness to
intimately related with elections.
22. Common type of securities under the SRC maintain a condition of liquidity deemed adequate to
- Proprietary securities protect the interest of the depositors and creditors
o Conservator has a renumeration not more than 2/3 of
- Credit securities
the yearly compensation of the president of the bank;
- Investment contracts
done within a year
- Derivatives
o Conservator can overrule or revoke the acts of the BOD
- Pre-need plans
o An official of the Banko sentral or another banker can
be a conservator
o The violation of NCB will also put a bank into a
FRIA [RA 10142] conservatorship.
- Receivership
1. The proceedings shall be conducted in a summary and non-adversarial o Grounds: cash flow test and
manner consistent with the declared policies of this Act and in o PDIC is the only receiver of the bank
accordance with the rules of procedure that the Supreme Court may
o The receiver shall gather and take charge of all the
promulgate.
assets, exercise general powers within 90 days from
2. Petition for insolvency of payments is filed not only with the inta-
take over
corporate court, but also with the insolvency court.
o (1) inability to pay liabilities as they become due in the
(A) Suspension of Payments. ordinary course of business (2) insufficient realized
asset to meet liabilities (3) cannot continue business
without incurring probable losses to its depositors and
 creditors (4) violation of CDO amounting to fraud or
dissipation of the assets of the institution.
o R informs MB -> MB notify in writing the BOD -> R
files ex parte with RTC assistance for liquidation
o A petition for certiorari may onl
- Liquidation
o If the bank cannot be rehabilitated, the receiver,
together with monetary board indorses the bank to the
regular court; court is the liquidator.
6. The members of the MB and all members of the BS must be reimbursed
if they are sued for something that they were responsible for in the
course of performing their official duty
7. A petition for certiorari may only be filed by the stockholders of record
representing the majority of the capital stock within 10 days from receipt
of the board of directors of the order directing receivership,
conservatorship, or liquidation.
8.

GENERAL BANKING LAW

1. It is the monetary board of the bangko sentral that has authority to set
additional criteria for the qualifications of the bank directors under the
fit and proper rule.
2. Demand deposits are liabilities of the bangko sentral and of other banks
which are denominated in the PH currency and are subject to payment in
legal tender upon demand by presentation of checks
3. Deposit substitutes (done by financing companies and investment
companies) are alternative from of obtaining funds from the public,
other than deposits, through issuance, acceptance or endorsement of debt
for purposes of relending or purchasing of receivables or other
obligations.
4. A syndicated loan is a banking practice to escape a single borrower’s
limit.
5. RA 8791 allows foreign bank to own or purchase 100% of the quity of
the commercial bank. (limited only to 1 commercial bank or unibank)
6. Foreigners can also own up to 100% of the outstanding capital stocks of
rural banks.
7. The Volcker rule
- Prohibits the banks from conducting certain investment activities
with their own accounts or limits or dealings with hedge funds,
private equity funds, covered funds
- Aims to protect bank customers by preventing banks from making
certain types of speculative investments that contributed to the
2008 financial crisis.