BANK SECRECY ACT (R.A.
1405) PROHIBITED DISCLOSURE
PURPOSES
“It is hereby declared to be the policy of the Government
to give encouragement to the people to deposit their
money in banking institutions and to discourage private
hoarding so that the same may be properly utilized by
banks in authorized loans to assist in the economic
development of the country.” [Sec. 1, R.A. 1405]
“R.A. No. 1405 has two allied purposes. It hopes to
discourage private hoarding and at the same time
encourage the people to deposit their money in banking
institutions, so that it may be utilized by way of
authorized loans and thereby assist in economic
development. ” [BSB Group Inc. v. Go, G.R. No. 168644, 16
February 2010]
ABSOLUTE CONFIDENTIALITY RULE
“ The absolute confidentiality rule in R.A. No. 1405
actually aims at protection from unwarranted inquiry or
investigation if the purpose of such inquiry or
investigation is merely to determine the existence and
nature, as well as the amount of the deposit in any given
bank account.” [BSB Group Inc. v. Go, G.R. No. 168644, 16
February 2010]
COVERAGE & EXCEPTIONS
“All deposits of whatever nature with banks or banking
institutions in the Philippines including investments in
bonds issued by the Government of the Philippines, its
political subdivisions and its instrumentalities, are
hereby considered as of an absolutely confidential
nature and may not be examined, inquired or looked into
by any person, government official, bureau or office,
except upon written permission of the depositor, or in
cases of impeachment, or upon order of a competent
court in cases of bribery or dereliction of duty of public
officials, or in cases where the money deposited or
invested is the subject matter of the litigation.” [Sec. 2, R.A.
1405]
EXCEPTIONS TO ABSOLUTE CONFIDENTIALITY
RULE
(1) In an examination made in the course of a special or
general examination of a bank that is specifically
authorized by the Monetary Board after being satisfied
that there is reasonable ground to believe that a bank
fraud or serious irregularity has been or is being
committed and that it is necessary to look into the
deposit to establish such fraud or irregularity,
(2) In an examination made by an independent auditor
hired by the bank to conduct its regular audit provided
that the examination is for audit purposes only and the
results thereof shall be for the exclusive use of the bank,
(3) Upon written permission of the depositor,
(4) In cases of impeachment,
5) Upon order of a competent court in cases of bribery
or dereliction of duty of public officials, or
(6) In cases where the money deposited or invested is
the subject matter of the litigation.
[Union Bank of the Philippines v. Court of Appeals, G.R. 134669, 23
December 1999]
“It shall be unlawful for any official or employee of a
banking institution to disclose to any person other than
those mentioned in Section two hereof any information
concerning said deposits.” [Sec. 3, R.A. 1405]
PENALTY
“Any violation of this law will subject offender upon
conviction, to an imprisonment of not more than five
years or a fine of not more than twenty thousand pesos
or both, in the discretion of the court.” [Sec. 5, R.A. 1405]
UNCLAIMED BALANCES LAW
(Act No. 3936)
UNCLAIMED BALANCES DEFINED
“Unclaimed balances, within the meaning of this Act,
shall include credits or deposits of money, bullion,
security or other evidence of indebtedness of any kind,
and interest thereon with banks, buildings and loan
associations, and trust corporations, as hereinafter
defined, in favor of any person known to be dead or who
has not made further deposits or withdrawals during the
preceding ten years or more.” [Sec. 1, Act. No. 3936]
DEPOSITED WITH THE TREASURER
“Such unclaimed balances, together with the increase
and proceeds thereof, shall be deposited with the
Treasurer of the Philippines to the credit of the
Government of the Republic of the Philippines to be
used as the National Assembly may direct.” [Sec. 1, Act. No.
3936]
REPORTORIAL REQUIREMENTS
“Immediately after the taking effect of this Act and within
the month of January of every odd year, all banks,
building and loan associations, and trust corporations
shall forward to the Treasurer of the Philippines a
statement, under oath, of their respective managing
officers, of all credits and deposits held by them in favor
of persons known to be dead, or who have not made
further deposits or withdrawals during the preceding ten
years or more.” [Sec. 2, Act. No. 3936]
DUTY OF THE SOLICITOR GENERAL
“Whenever the Solicitor General shall be informed of
such unclaimed balances, he shall commence an action
or actions in the name of the People of the Republic of
the Philippines in the Court of First Instance of the
province or city where the bank, building and loan
association or trust corporation is
located, in which shall be joined as parties the bank,
building and loan association or trust corporation and all
such creditors or depositors. XXX ” [Sec. 3, Act. No. 3936]
ESCHEAT
“Escheat is a proceeding, unlike that of succession or
assignment, whereby the state, by virtue of its
sovereignty, steps in and claims the real or personal
property of a person who dies intestate leaving no heir.”
[Republic of the Philippines v. C.A., G.R. No. 143483, 31 January
2002] See: Rule 91 of the Rules of Court
ANTI-MONEY LAUNDERING ACT of 2001
(R.A. 9160)
DECLARATION OF POLICY
“It is hereby declared the policy of the State to protect
and preserve the integrity and confidentiality of bank
accounts and to ensure that the Philippines shall not be
used as a money laundering site for the proceeds of any
unlawful activity. Consistent with its foreign policy, the
State shall extend cooperation in transnational
investigations and prosecutions of persons involved in
money laundering activities wherever committed, as well
as in the implementation of targeted financial sanctions
related to the financing of the proliferation of weapons of
mass destruction, terrorism, and financing of terrorism,
pursuant to the resolution of the United Nations Security
Council.” [Sec. 1, R.A. 9160]
COVERED INSTITUTIONS
• (1) banks, non-banks, quasi-banks, trust entities, and
all other institutions and their subsidiaries and affiliates
supervised or regulated by the Bangko Sentral ng
Pilipinas (BSP);
• (2) Insurance companies and all other institutions
supervised or regulated by the Insurance Commission;
and
• (3) (i) securities dealers, brokers, salesmen,
investment houses and other similar entities managing
securities or rendering services as investment agent,
advisor, or consultant, (ii) mutual funds, close and
investment companies, common trust funds, pre-need
companies and other similar entities, (iii) foreign
exchange corporations, money changers, money
payment, remittance, and transfer companies and other
similar entities, and (iv) other entities administering or
otherwise dealing in currency, commodities or financial
derivatives based thereon, valuable objects, cash
substitutes and other similar monetary instruments or
property supervised or regulated by Securities and
Exchange Commission. [Sec. 3, R.A. 9160]
"'Covered transactions' is a transaction in cash or other
equivalent monetary instrument involving a total amount
in excess of Five hundred thousand pesos (P500,000.00)
within one (1) banking day; for covered persons under
Section 3(a)(8), a single casino cash transaction
involving an amount in excess of Five million pesos
(P5,000,000.00) or its equivalent in any other
currency.” [Sec. 3 (b), R.A. 9160]
EXCEPTION TO THE R.A. 1405
“Notwithstanding the provisions of Republic Act No.
1405, as amended; Republic Act No. 6426, as amended;
Republic Act No. 8791, and other laws, the AMLC may
inquire into or examine any particular deposit or
investment with any banking institution or non-bank
financial institution upon order of any competent court in
cases of violation of this Act when it has been
established that there is probable cause that the
deposits or investments involved are in any way related
to a money laundering offense: Provided, That this
provision shall not apply to deposits and investments
made prior to the effectivity of this Act.” [Sec. 11, R.A. 9160]
FREEZE ORDER TO BE ISSUED BY COURT OF
APPEALS
“Upon a verified ex parte petition by the AMLC and after
determination that probable cause exists that any
monetary instrument or property is in any way related to
an unlawful activity as defined in Section 3(i) hereof, the
Court of Appeals may issue a freeze order which shall
be effective immediately, for a period of twenty (20) days.
Within the twenty (20) day period, the Court of Appeals
shall conduct a summary hearing, with notice to the
parties, to determine whether or not to modify or lift the
freeze order, or extend its effectivity. The total period of
the freeze order issued by the Court of Appeals under
this provision shall not exceed six (6) months.” [Sec. 10,
R.A. 9160]
SECURITIES REGULATION CODE
(RA 8799)
DECLARATION OF STATE POLICY
“The State shall establish a socially conscious, free
market that regulates itself, encourage the widest
participation of ownership in enterprises, enhance the
democratization of wealth, promote the development of
the capital market, protect investors, ensure full and fair
disclosure about securities, minimize if not totally
eliminate insider trading and other fraudulent or
manipulative devices and practices which create
distortions in the free market. To achieve these ends,
this Securities Regulation Code is hereby enacted.” [Sec.
2, R.A. 8799]
SECURITIES
“Securities are shares, participation or interests in a
corporation or in a commercial enterprise or profit-
making venture and evidenced by a certificate, contract,
instruments, whether written or electronic in character.”
[Sec 3.1, R.A. 8799]
“ It includes:
• (a) Shares of stocks, bonds, debentures, notes
evidences of indebtedness, asset-backed securities;
• (b) Investment contracts, certificates of interest or
participation in a profit sharing agreement, certifies of
deposit for a future subscription;
• (c) Fractional undivided interests in oil, gas or other
mineral rights;
• (d) Derivatives like option and warrants;
• (e) Certificates of assignments, certificates of
participation, trust certificates, voting trust certificates
=or similar instruments
• (f) Proprietary or nonproprietary membership
certificates in corporations; and
• (g) Other instruments as may in the future be
determined by the Commission.” [Sec 3.1, R.A. 8799]
STOCK
“Corporations formed or organized under this Code may
be stock or nonstock corporations. Stock corporations
are those which have capital stock divided into shares
and are authorized to distribute to the holders of such
shares, dividends, or allotments of the surplus profits on
the basis of the shares held. All other corporations are
nonstock corporations.”[Sec. 3, R.A. 11232]
ARTICLES OF INCORPORATION SAMPLE
Article of Incorporation and By-Laws (topfrontier.com.ph)
What is the distinction between
INVESTING and TRADING?
STOCK MARKET
✓ A place where one can buy/sell stocks.
✓ Bidding for the best price is normal.
✓ Primary market
- Initial Public Offering (IPO)
- Investment house http://cmprs.sec.gov.ph/
✓ Secondary market
STOCK EXCHANGE
✓ Facilitates the transactions of stock buyers and
sellers.
✓ A particular location where the stock trades are
executed (buying and selling stocks).
✓ Philippine Stock Exchange
What do you think are the factors that drive stock
price movement?
Illustration of how stock prices move
BROKER
- Certified stockbroker (Certification Exam).
https://www.sec.gov.ph/faqs/
- A person to contact if you want to buy or sell shares of
stock.
- Commission
DEALER
✓Buy and sell
✓Mark-up
✓http://cmprs.sec.gov.ph/
LONG POSITION v. SHORT POSITION
Long Position
✓ The trader expects that the stock price will go up
✓ Buy the stock and hold it
✓ Only sell the stock when it is favorable
✓ This MAY limit losses
Short Position
✓ Borrow stocks
✓ Sell stocks at a certain price
(P48)
✓ Buy (recover) the same stocks, later, at a lower price.
(P25)
✓ Naked short selling (no prior borrowing) – may result
to failure to deliver
✓ Covered short selling (borrow-sale-repurchase)
Short sale under SRC
“No person shall use or employ, in connection with the
purchase or sale of any security any manipulative or
deceptive device or contrivance. Neither shall any short
sale be effected nor any stop-loss order be executed in
connection with the purchase or sale of any security
except in accordance with such rules and regulations as
the Commission may prescribe as necessary or
appropriate in the public interest for the protection of
investors.” [Sec. 24.2, SRC]
GAMESTOP CONTROVERSY
(naked short selling)
GameStop Controversy
✓ Brick-and-mortar video game retailer (GME)
✓ Greatly affected by current trend of downloading
digital products
✓ Stock price on downward trend
✓ Short selling occurred
✓ GameStop business outlook improve (coordinated
buying)
✓ Stock price significantly increased
✓ The negative effect of short selling becomes apparent
Prohibitions on Fraud, Manipulation, and Insider
Trading
HOW THE SEC PROTECTS THE INVESTING PUBLIC
✓Full disclosure
✓Prevent price manipulation
✓Promote fair and honest trading
Section 24. Manipulation of Security Prices; Devices and
Practices. – 24.1 It shall be unlawful for any person
acting for himself or through a dealer or broker, directly
or indirectly:
(a) To create a false or misleading appearance of active
trading in any listed security traded in an Exchange of
any other trading market (hereafter referred to purposes
of this Chapter as "Exchange"):
(i) By effecting any transaction in such security which
involves no change in the beneficial ownership thereof;
(ii) By entering an order or orders for the purchase or
sale of such security with the knowledge that a
simultaneous order or orders 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; or
(iii) By performing similar act where there is no change
in beneficial ownership.
(b) To affect, alone or with others, a securities or
transactions in securities that:
(I) Raises their price to induce the purchase of a security,
whether of the same or a different class of the same
issuer or of controlling, controlled, or commonly
controlled company by others;
(I) Depresses their price to induce the sale of a security,
whether of the same or a different class, of the same
issuer or of a controlling, controlled, or commonly
controlled company by others;
(II) Creates active trading to induce such a purchase or
sale through manipulative devices such as marking the
close, painting the tape, squeezing the float, hype and
dump, boiler room operations and such other similar
devices.
MARKING THE CLOSE MATERIAL NON-PUBLIC
✓ Placing an order near the close of the trading day. “For purposes of this Section, information is "material
✓ Significantly higher price nonpublic" if: (a) It has not been generally disclosed to
✓ Effect: overvalued security the public and would likely affect the market price of the
security after being disseminated to the public and the
PAINTING THE TAPE lapse of a reasonable time for the market to absorb the
✓ Series of stock transactions information; or
✓ Reported publicly (b) would be considered by a reasonable person
✓ To depict activity or price movement of security important under the circumstances in determining his
https://www.tickertape.in/ course of action whether to buy, sell or hold a security.”
[Sec. 27.2, SRC]
SQUEEZING THE FLOAT
✓ Taking advantage of the shortage of security
✓ Controlling the demand side
✓ Artificial prices
✓ Exploit market congestion during the shortage

HYPE AND DUMP

✓ Person/s or entities cause the stock price to go up
✓ Making the stocks looks attractive to investors
✓ Then sell the stock at a higher price

BOILER ROOM OPERATION

✓Large scale operation designed to fraudulently attract
investors.
✓High pressure sales tactics:
cold calling
buy now or never
limited offer

Wash Sale
✓Trading stocks but there is no actual
change of beneficial ownership.
✓Artificial active trading

INSIDER TRADING

GENERAL RULE
“It shall be unlawful for an insider to sell or buy a
security of the issuer, while in possession of material
information with respect to the issuer or the security that
is not generally available to the public.” [Sec. 27, SRC]

EXCEPTIONS
(a) The insider proves that the information was not
gained from such relationship; or
(b) If the other party selling to or buying from the insider
(or his agent) is identified, the insider proves:
(i) that he disclosed the information to the other party, or
(ii) that he had reason to believe that the other party
otherwise is also in possession of the information. [Sec.
27, SRC]

PRESUMPTION
A purchase or sale of a security of the issuer made by
an insider, or such insider’s spouse or relatives by
affinity or consanguinity within the second degree,
legitimate or common-law, shall be presumed to have
been effected while in possession of material nonpublic
information if transacted after such information came
into existence but prior to dissemination of such
information to the public and the lapse of a reasonable
time for market to absorb such information: Provided,
however, That this presumption shall be rebutted upon a
showing by the purchaser or seller that he was aware of
the material nonpublic information at the time of the
purchase or sale. [See Sec. 27, SRC]