Securites

Regulation
Code
Presented by Rain Sydney T. Villapando
 Purpose
The Securities Regulations Code or RA
No. 8799 aims to protects the investing
public primarily through a system of
disclosure and provide punishmenr for
fraudulent practices.
Principal Department of
Securities and Exchange
Commission
1 Department
The Markets and Securities Regulation

2 Department
The Corporate Governance and Finance

3 Monitoring Department
The Company Registration and

4 Deelopment
The Enforcement and Investor Protection
The Markets and Securities
Regulation Department
• Develops the registration criteria for all market
participants and supervises then to ensure
compliance with registration requiremnts and
endorces infractions of the Cose and rules and
regulations to the Enforcement and Investor
Protection Department
• Registers equity securities and debt
instruments, or recommends their exemptions
from registration
The Corporate Governance
and Finance Department
• Registers mutual funds, including exchange-traded
funds, membership certificates, club shares, botge
proprietary and non-proprietary, and time shares
before they are sold or offered for sale or sold to
public.
• It ensures that investors have access to all material
disclosures regarding the said offering and the
securities of public comapnies.
• It monitors compliance by the above issuers
and covered companies with the Code and
Rules and regulations adopted thereunder and to
the Revised Code of Corporate Governance
The Company Registration
and Monitoring
Department
• Registers domestic corporations, patrnership
and associations, including representative
offices and foreign corporations intending to do
business in the Philippines.
• It also supervises and monitors such entities
relativr to their compliance with law, rules and
regulations administered by the commission.
 The Enforcement and
Investor Protection
Department
• Ensure compliance by all market participants,
issuers and individuals, and takes appropriate
enforcement action against them for legal
infraction of the code and other relevants lawas,
rules and regulations administered by the
commission.
 Securities
• Are shares, participations or interests in an
corporation or in a commercial enterprise or
profit-making venture and evidenced by a
certificate, contract, instruments, whether
written or electronic in character (Section 3.1)
• The main feature of a security is that a person
purchses or acquires the same in the expectation
of obtaining passive income or asset
appreciation, that is income or gain obtained
through the effort of another person (Broker).
This include the following Securities required
to be registered with the SEC
• Shares of Stocks, bonds debentures, notes
evidences of indebtness, asset-backed securities;
• Investment contracts, certificates of interest or
participation in a profit-sharing agreement,
certifies of deposit for a future subscription;
• Fractional undivided interests in oil, gas, or other
mineral rights;
• Derivatives like option and warrants;
• Certificates of assignments, certificate of
participation, trust certificates, voting trust
certificates or similar instruments
• Proprietary or non-proprietary membership
certificates in corporations; and
• Other instruments as may in the future be
determined by the commission
 Definition of Terms
• ISSUER - the originator, maker, obligor or
creator of the securities
• BROKER - the person engaged in the business
of buying and selling securities for thr account
of others.
• DEALER - many persons who buys sells
securities for his/her own account in the
ordinary course of business.
• ASSOCIATED PERSON OF A BROKER OR
DEALER - an employee whom directly
exercises control of supervisory authority, but
does include a salesman, or an agent or a person
whose functions are solely clerical or
 Definition of Terms
• CLEARING AGENCY - any person who acts as
intermediary in making delieries upon payment
effect settlement in securities transactions.
• EXCHANGE - an organized marketplace or
facilty that brings together buyers and sellers and
executes trade of securities and/or commodities,
• INSIDER - the issuer; a person controlling the
issuer who gives or gave access to material
information about the issuer or the security that is
not generally availabe to the public; a government
employee, director, or officer of an exchange; a
person who learns such information by a
communication form any forgoing insiders,
 Definition of Terms
• PRE-NEED PLANS - are contracts which provide
for the performance of future services of or the
payment of future monetary considerations at the
time actual need.
• PROMOTER - a person who takes inititative in
foundinf and organizing the business or enterprise
of the issuer and receives consideration thereof.
• PROSPECTUS - the document made by on or
behlaf of an issuer, underwrtiter or dealer to sell of
offer securities for sale to the public through
registration statement filed with the commission.
 Definition of Terms
• REGISTRATION STATEMENT - is the
application for the registration of securities
required to be filled with the commission.
• SALESMAN - a natural person, employed as such
as an agent, by a dealer, issuer or broker to buy
and sell securities.
• UNCERTIFICATED SECURITY - a security
evidenced by electronic or similar records.
• UNDERWRITER - a person who guarantees on a
firm commitment and/or best effort basied the
distributuin and saled of securities of any kind by
another company.
 Registration Procedures
• Filling of SWORN REGISTRATION STATEMENT
containing the information as the SEC may by rule
require. These are :
⚬ Signatories to registration statement
⚬ Written consent of the expert
⚬ Registration statement includes share to be sold
and written certifications
• PAYMENT of the filling fees whoch shall not
exceed 1/10 of 1% of the aggregate price at which
securities are proposed to be offered
 Registration Procedures
• PUBLICATION of notice of filing of thr registration
statement in two newspapers of general circulation
once for two consecutives weeks.
• Withing 45 days after the date of filing, or by such
later date to which the issuer has consented, the SEC
shall give an ORDER declaring the registration
statement effective or rejecting it.
• PROSPECTUS under oath that all requirements
satisfirs and all statements in registration statement
and in such prospectures are correct.
Reportorial Requirements
• Annual report composed of a Balance Sheet, Profit
and Loss Statement, and a Statement of Cash Flows
certified by a CPA and a management discussion and
analysis of results of operation
• Other periodical reports for interim fiscal periods
and current reports on significant developments of
the issuer as the SEC may prescribe as necessary to
keep current information on the operation of the
business and financial condition of the issuer
Reportorial Requirements
These reportorial requirements shall apply to an issuer:
• Which has sold a class of its securities pursuant to
a registration
• With a class of securities listed for trading in an
Exchange
Reportorial Requirements
• With assets of at least Fifty million pesos
(50,000,000.00) or such other amount as the SEC
shall prescribe, and having two hundred (200) or
more holders each holding at least one hundred
(100) share of a class of its equity securities:
Provided, however, That the obligation of such
issuer to file report shall be terminate ninety (90)
days after notification to the SEC by the issuer
that the number of its holders holding at least one
hundred (100) share reduced to less than one
hundred (100)
 Insider Trading
committeed wheneer an insider, in possession of
a material non-public information, transacts in the
securities.
MATERIAL NON-PUBLIC INFORMATION -
information that will affect the price of the
security or would influence a person in deciding
whether to buy, sel, or hold a security which is
not available to the public.
 Tender Offer
is an offer by a person or group of persons to
the stockholders of a corporation to tender their
shares for purchase.

PURPOSE - Seeks to protect minority

shareholders and provide them with a fair
price for their share whenever a person or
group of persons intends to buy a sizable
number of shares in the company.
 Fraudulent
Transactions and
other Market
Manipulations
• WASH SALE - any transaction in a security
which involves no change in the beneficial
ownership. A series of buy and sale
transaction may be placed by one and the
same beneficial owner in the exchange which
would not affect any change of ownership of
the shares transacted.
• MATCHED ORDER – refers to an order or
orders for the purchase or sale of security with
the knowledge that a simultaneous order or
orders of substantially the same size, time and
price for the sale or purchase of such security
has, or wil be entered by or for the same or
different parties.
• MARKING THE CLOSE– placing of
purchase or sale order, at or near the close of
the trading period in order to affect the
closing price likewise affecting the opening
price the following day.
• PAINTING THE TAPE – akin to marking the
close but the activity is made during normal
trading hours which involves buying activity
among nominee accounts at increasingly
higher or lower prices or causing fictitious
reports to appear on the ticker tape
• SQUEEZING THE FLOAT – part or portion
of the issue/security which is outstanding but
intentionally held by dealers or other person
with a view of reselling them later for profit.
Thereby affecting supply of the security or its
availability while demand remains the same
or increases, driving the prices up.
• HYPE AND DUMP – involves the following
steps:
⚬ a. Purchase of outstanding capital stock of
a dormant public shell company for a
nominal amount;
⚬ b. Merger of the shell company with the
privately held company of the person or group
of persons involved to gain control of the
majority of the stocks of the merged entity;
⚬ c. Reverse-split of the shares
⚬ d. Reissuance of the shares certificates in the
name of the merged entity to relatives and
associates;
⚬ e. Hiring a broker-dealer who would market the
stocks of the newly merged entity;
⚬ f. Hiring a promoter to “hype” the virtues of the
company;
⚬ g. When the market reaches the high price, they
would “dump” their shareholdings and bail out.
 • BOILER ROOM OPERATIONS – involves an
intensive selling campaign through numerous
salesmen by telephone or through direct mail
offerings for securities of either a certain type or
from a specific issuer. Investors are induced to
purchase through hard-sell techniques based on
unfounded predictions and mailing of misleading
market letters.

All 5 above (3 to 7) become illegal/unlawful if its

effected to:
⚬ Raise the price or induce the purchase of a
security or of a controlling, controlled or
commonly controlled company by others
 ⚬ Raise the price or induce the purchase of a
security or of a controlling, controlled or
commonly controlled company by others
⚬ Depresses their price to induce the sale of a
security, whether of the same or of a different
class, of the same issuer or of a controlling,
controlled company, or commonly controlled
company by others; and
⚬ Creates active trading to induce such purchase
or sale through said devices or schemes.
• SHORT SALE – selling the security which the
vendor does not own and borrowed only from
another. This is not illegal per se but only regulated.
• MAKING FALSE OR MISLEADING
STATEMENTS – with respect to any material fact,
which he knew or had some reasonable grounds to
believe was so false or misleading for the purpose
of inducing the purchase or sale of any security
• PEGGING OR FIXING OR STABILIZING THE
PRICE OF SECURITY - effected either alone or
with others through any series of transactions for
the purchase or sale thereof, if done for such
purpose
• CIRCULATING OR DISSEMINATING
INFORMATION ON SHARE PRICE
MOVEMENT– involves people providing
information that the price of any security listed in
the exchange will or is likely to rise or fall because
of manipulative market operations of any one or
more persons conducted for the purpose of raising
or depressing the price of the security and thus
inducing the purchase or sale of such security.
 Thank You
Presented by Rain Sydney T. Villapando