PART 1 SRC Flashcards
All corporations whose securities are registered under the Securities Regulation Code are required to
Register first with the security of exchange commission
Approval of the stockholders must be secured within how many days upon the declaration of the stock dividend by the board of Directors
30 days
Application for increase in authorized capital stock and for the registration of the securities must be filed w/ SEC w/in how many days from the date of approval by the stockholders
45 days
Record of declaration shall not be less than how many days nor more than how many days after clearances and approval by the commission
Less than 10 days nor more than 30 days
Sanctions for violation of any off the provision of the rules
- Fine less than 200php nor more than 50,000php plus not more than 500php for each dag continuing violation
- suspension and revocation of certificate of registration or permit to offer securities
Considered as a qualified individual buyer if he has registered as such with entities that are authorized by the commission to as registrar of qualified buyers
Natural person
Annual gross income of qualified individual buyer
At least 10M pesos at least 2 years prior to registration
Total portfolio investment of qualified individual buyers (in securities registered with the SEC)
At least 10,000,000 pesos
Personal net worth of qualified individual buyer
Not less than 30M pesos
Minimum period qualified individual buyers must be engaged in securities trading personally or through a fund manager
1 year
Qualified individual buyers must hold at least how many years in position of responsibility in any professional business entity w/ knowledge/ expertise in securitis trading
2 years
Expertise in securities trading example
Legal consultant
Financial Adviser
Sales person
Associated Person of a broker - dealer
Bank finance/ treasury officer
Trust office4
Qualified Gross asset if the buyer is a Juridical Person
At least 100,000,000php
Qualified Total Portfolio Investment if the buyer is a Juridical Person
At least 60,000,000php
Requirements of an individual buyer
Total Portfolio of Securities
Annual Gross Income
Net Worth
Treshold Risk
The registration as qualified buyer shall be valid for how many years if qualifications provided are continuously complied with?
3 years
Application for renewal of qualified buyer is subject to
New evaluation by the registrar and accompanied by updated information sheets
The registrar shall maintain this book of qualified buyers that shall be open for inspection of Commission
Registry Book
Registration Requirements for a Broker Dealer, Investment Company Adviser/ Fund Manager, Associated Person, Compliance Officer, Certified Investment Solicitor and Salesman are under what Department
CRMD or Company Registration and Monitoring Department
Market participants are regulated by what institution?
MSRD or Market and Securities Regulation Department
Who are the different Market Participants/ Professionals?
Broker
Dealer
Associated Person
Salesman
Settlement officer
A natural person hired to buy and sell securities on a salary or commission basis endorsed to the Commission by the employing Broker Dealer
Salesman
Any person who buys and sells securities for his/her own account in the ordinary course of business
Dealer
A person engaged in the business of buying and selling securities for the account of others
Broker
Any person employed full time by the Broker Dealer whose responsibilities include internal control supervision of other employees, agents, salesman, officers, directors, clerks and stockholders of such Broker Dealer for compliance with the SRC and its IRR
Associated Person
A person or entity engaged in buying or selling government securities such as Treasury Bills, Treasury Nites, and Treasury Bonds.
GSED or Government Securities Eligible Dealers
A corporation which engages in the underwriting of securities of another person, including securities of the government or its instrumentalitist
Investment House/ Underwriters of Securities
Any person who engages on behalf of an issuer of securities in, among others, registering the transfer of such securities
Transfer Agent
Is an organized marketplace that brings together buyers and sellers and executes trades of securities and/ or commodities
Exchange
Any person who acts as an intermediary in making deliveries upon payment to effect settlement in securities transactions
Clearing Agency
No person shall engage in the business of buying or selling securities in the philippines as a broker or dealer or act as a salesman or an associated person of any broker or dealer unless registered as such with the commission
No registered broker or dealer shall employ any salesman or any associated person who is not registered as such with the commission.
Registration of Brokers and Dealers Section 28 - SRC
This person must satisfactorily pass a written examination as to his proficiency and knowledge in the area of activity for which registration is sought
Natural person
This person must satisfy a minimum of what requirement as prescribed by the commission and provide a bond or other security as the commission may prescribe to secure compliance with the provisions of this code
RBCA Requirement
This refer to the minimum levels of capital that has to be maintained by firms which are licensed or securing a broker dealer license taking into consideration the firm size complexity and business risk
Risk-based Capital Adequacy Requirement/Ration
These are the risk that are considered in determining the capital requirement
Operation
Position
Counterparty
Large Exposure
Underwriting
Margin Financing Risk
Registration of broker dealer license shall remain valid unless otherwise revoked for cost or suspended or voluntarily surrendered by the broker dealer.
True
Broker dealer shall pay the annual fee every what month of each year of registration?
November
No sale or transfer of assets and liabilities of an existing broker dealer to an entity or any form of reorganization or change in management of a broker dealer the facto or otherwise shall be affected without prior approval by the commission
Registration of Success to broker dealer
Request for withdrawal of business and or cancellation of registration as a broker dealer shall be filed on what sec form
SEC Form 28-BDW
Capitalization requirement of broker and dealers
100,000,000php
The firm that manages the funds of an investment company
Investment company adviser or fund manager
A company that pulls funds from numerous investors through the insurance of its shares to the public
Investment company
Two types of investment company
Open end investment company or mutual fund and close end investment company
Distribute shares or units of an investment company as either principal distributor or subdistributor
Mutual fund distributor
Agent are employee of an investment company advisor or fund manager or distributor who solicits or procures investments or applications for investment in an investment company or mutual fund company
Certified investment solicitor
Registration requirements for capital market professionals
SEC Form
Proof of Examination (SEC Cert Exam.)
Valid ID
Letter from Employer
Not only natural persons can apply and be employed by a capital market institution
False, only natural persons
Applicants for salesman or certified investment solicitor shall be at least what age?
18 years old
Applicants for an associated person or compliance officer shall be at least what age?
21 years old
Any applicant applying for registration for the first time has have taken and pass the applicable examination within the last 5 years immediately preceding the date of his application
False, should be 3 years
Applicant for registration as capital market professional shall be registered even though he or she has not completed the certification requirement yet
False
The registration of a capital market professional shall sees when he is no longer employed by the capital market institution identified in his registration application of how many days after the skin to new ones of employment
5 business days
Objectives of securities regulation
- protect the investors
- ensure that markets are fair, efficient and transparent
- reduce systematic risk
SRC rule 28.1.1
Registration of broker dealer
SRC Rule 28.1.5
Registration of salesman and associated person of broker dealers
SRC Rule 36.4
Registration of transfer agents and clearing and settlement
SRC 40.1
Approval of registration of self regulatory organization
In the conduct of business the registered person shall observe high standards of commercial honor and just and equitable principles of trade
Ethical Standards Rule SRC rule 30.2.1
IOSCO standard
Honesty and fairness, diligence, capabilities, information about client, information for clients, conflicts of interest, compliance.
All communication by registered persons with the public shall be based on principles of fair dealing and good faith and should provide a sound basis for facts; no material fact shall be omitted; no exaggerated, unwarranted or misleading statements or claims.
Rule on advertisements and communication with the public SRC rule 24.1(d).1
What SRC Rule?
- minimum information needed in account opening for individuals, corporate and institutional customers.
- special rules for trust accounts more than one party is named in the account and numbered accounts
- reference must also be made to the account opening information requirements of amla as amended
SRC rule 52.1.6
Customer account information
Registered person shall have reasonable grounds for believing that the recommendation is suitable for customer upon the basis of the facts disclosed by such customer as to his security holdings and his financial situation and needs
SUITABILITY RULE SRC Rule 30.2.4
What SRC Rule?
- registered person shall ensure that a client agreement is entered into before any service is provided
- the client agreement shall be in a language understood by the client and the contents explained to the client
Client agreement rule SRC Rule 30.2.3
Unlawful activities of any person acting for himself or through broker or dealer directly and indirectly. Examples of prohibited conduct: painting the tape, marking the close, improper matched orders hype and dump.
Manipulative practices src rule 24.1.1
Obtain money or property by means of any untrue statement of a material fact or any omission
Fraudulent transactions src rule 26
Civil liability for manipulation of security prices is under what src rule?
SRC Rule 59
Civil liability on account of insider trading is under what SRC Rule?
SRC Rule 61
Types of offerings
- primary ( initial public offering or ipo)
- secondary ( sale of previously owned securities)
- follow on ( stocks rights offering means new shares are issued out of the capital stock of the company and are being offered to the existing shareholders who have preemptive rights.
What law regulates the offer or sale of securities in the philippines?
Securities regulation code ra 8799
What is registration?
- act of filing a registration statement or prospectus
- required prior to any public offer or securities
- precedes listing at the philippine stock exchange
Signatories to the rs?
Principal executive officer
Principal operating officer
Principal financial officer
Comptroller
Principal accounting officer
Corporate secretary
Sale of security shall commence within how many business date from the date of the effectivity of the rs until the end of the offering period or until the sale is terminated by the issuer
10 business days
If rs not comments within 10 business days what will happen?
Rs shall be cancelled and all feast paid thereon forfeited
Securities which are intended to be issued in crunches at more than one instance after the rs has been rendered effective by the commission
Shelf Registration
- parameters or standards are set
- maybe interpreted as an endorsement
Merit system
Disclosure of information required
- financial disclosures for the last 3 years
- for ipos-audited interim fs
- non-financial disclosures
- bases of intelligent investment decision
Full disclosure regime
Who are the qualified buyers?
-Bank
-Investment houses
-Insurance companies
-Pension fund or retirement plan maintained by the GOP
-other persons determine on the basis of financial sophistication network and experience in financial and business matters or amount of assets under management
What must be declared by corporation in securing approval of stockholders within 45 days from such declaration by the board directors?
Stock or property dividends
Qualified individual buyers registered as such with entities that are authorized by the commission to act as a registrar or qualified buyers
Natural person
Qualified gross annual income of natural person buyer
At least 10,000,000 at least 2 years prior to registration
Qualified total portfolio investment of natural person buyer
At least 10,000,000php
Qualified personal net worth of natural person buyer
Not less than 30,000,000php
Qualified gross asset of juridical person buyer
At least 100,000,000php
Qualified total portfolio investment of juridical person buyer
At least 60,000,000php
4 DEC Departments
- market regulation department
- corporation finance department
- non traditional securities and investment department
- compliance and enforcement department
Develops criteria for market participants and supervises them to ensure compliance with registration requirements
Market regulation department
Register pre needs plans commodity features contracted proprietor or non proprietor membership certification
Non traditional securities and investment department
Registers securities before being sold and ensure compliance by issuer with the code of conduct
Corporation finance department
Natural person hired to buy and sell securities on a salary commission basis endorsed by the commission by the broker dealer
Salesman
The person employed the full time by the broker dealer whose responsibilities include internal control supervision of other employees agents salesman officers directors of such broker dealer for compliance with the code and rules and regulation
Associated person
When does dissociated person shall submit a sworn statement to pdex
First five days of the month
Ensures compliance of all markets
The compliant and enforcement department
Participants that buys or sells securities for its own account
Dealing participant
A dealer shall not
Deal with a non-qualified investor except through a broker
An organization that enforces fair ethical and sufficient practices in the securities and commodities
Self regulatory organization
Participants that buy or sell securities for the account of others
Brokering Participants
They may participate through the service of a broker investment house or bank
Non-qualified investors
Src rule number 28.1.5
registration of salesman and associated person
Technology infrastructure that provides the trading participant with automated deal capture and price discovery to transact and conclude their trades
Pdex or philippine dealing and exchange corporation
Member of sro who are recognized by a broker or dealer and bound by the pertinent agreement and or the internal rules prescribed by the otc market
Qualified investor participants
Fees and penalties of first second entered violation of broker or dealer
First 100,000 pesos
Second 150,000 pesos
Third 200,000 pesos
Execution of negotiation on pdex trading system
1 minute
Fees and penalties for the first second and third violation of salesman or associated person
First 50,000 pesos
Second 75,000 pesos
Third 100,000 pesos
If the order is mentioned by the customer regardless of who initiated the phone call or other communication
Unsolicited
Registered personnel governing otc market
Traders
Salesman
Sec registered associated person
Representative officer
Counterparty limit officer
If order is mentioned or ordered first by salesman
Solicited
Designated and authorized by trading participants to enter counterparty limits
Counterparty limit officer
Broker dealer affecting transaction on behalf of the client without the client’s specific authorization but shall be specified on the client agreement obtaining such authorization
Discretionary account
Period of all records concerning orders shall kept and maintained a separate file of all advertisements and sale literature
5 years
Period of telephone call in the file or record shall be made available for pdex inspection
6 months
Frequency of sending a statement to the customer by broker dealer
Monthly
A broker dealer may issue statement whose accounts have?
Have not been traded for 1 year or inactive
A written request made by the customer
Refers to a market where new securities are sold
Primary market
Refers to a market where outstanding securities are bought and sold
Secondary
A trading participant shall submit written request within how many days prior to the intended effectivity
60 calendar days
Pdex shall write within how many days for a notice to the trading participant to suspend or terminate his participation
30 calendar days
What SRC Rule?
Promptly execute clients order, fairly allocated, act diligently
SRC Rule 30.2.13
Best Execution Rule
When such broker dealer is not a member of an exchange
The commission shall notify the affected customers of such suspension or revocation and require that they transfer their account to another broker dealer
Should always prioritize their orders even though member broker stockholder officers directors associated person and salesman order is pre-existing
Customer first policy on clients order
What is c a i f
Customer account information
What are included in caif?
Name
Address
Telephone
Date and place of birth
Nationality
Signature
Specimen signature
What SRC Rule?
- registered person shall observe high standards
SRC Rule 30.2.1
Ethical Standards Rule
The broker dealer shall send the customer a written confirmation as promptly as possible during office hours on the day of the transactions that not later than the next business day after transaction
Confirmation of customer order rule src rule 30.2.2
Send at least once a month containing a description of any securities position money balances or account activity for trades during the period
Customer account statement rule src rule 52.1.8
Client orders shall be handled fairly and in the order in which they are received and shall have priority over orders for the account of the registered person
Customer first policy src rule 30.2.1.2.6.1
Make keep current and maintain in the principle office preserve for a period of not less than 5 years in an easily accessible
Books and records rule src rule 52.1.1
Count should be at least once a month physically examine and count all securities held and compare the result with its record account and verify the discrepancies noted
Monthly securities count rule src rule 5.2.10
Maintain and preserve separate files of all complaints from customers received and the action by the broker dealer
Customer complaint rule src rule 52.1.9
Unlawful for an insider to sell or buy a security of the issuer while in the possession of material information with respect to the issuer or the security that is not generally available to the public
Insider trading src rule 27
After due notice in hearing when there is violation the commission may spend or revoke any registration impose a fine of no less than 10,000 nor more than 1 million thousand plus not more than 2,000 for each day of continuing valuation
Administrative sanctions src rule 54
The commission may investigate as it deems necessary to determine whether any person has violated or is about to violate any provision of the src its rule regulation or order order rule of the exchange etc
Investigations injunctions and prosecutions of offense src rule 53
What are the self regulatory organizations
Cmic
Pse
Pdex
Sccp
CMIC
Capital markets integrity corporation
PSE
Philippine stock exchange
PDEX
Philippine dealing and exchange
SCCP
Securities cleaning corp of the philippines
GSED
Government securities eligible dealers
GSB
Government securities broker
MFD
Mutual fund distributors
ICA
Investment company advisers
Who are the professionals?
The market participants
Who are the market intermediaries?
The capital market institutions
What are the capital market institutions
Exchanges
Clearing agency or depository
Self regulatory organizations
Securities companies or intermediaries
Supporting institutions
SRD
Securities registration division
What are the institutions in exchanges
Pse and p d e x
Who are the clearing agency or depository
Sccp or pdtc
Who are the self regulatory organizations
Cmic
Pse
Pdex
Sccp
Who are the securities companies or intermediaries
Brokers dealers
Gsed
Gsb
Underwriters
Mfd
Ica
Who are the supporting institutions
Transfer agents
Securities custodian
Trustee
Registrar of quibs
2 special offices of SEC
Office of the General Council
Office of the General Accountant
Category i violation (PDEX trading)
1st violation - warning
2nd violation - reprimand
3rd violation - 5k php
SRC
Securities regulation code
IRR
Implementing rules and regulation
