Securities 2024 Flashcards
Securities
Definition - sic
sic
shares or interests in corporation or profit-making venture evidenced by contract or certificate, written or electronic
Securities
What are included in the term Securities?
a) shares of stocks, bonds, government securities, commercial papers, debentures, notes, evidences of indebtedness, asset backed securities
b)
Securities
What is the rule on the sale of securities?
Cannot be Sold if Without Registration statement approved by SEC
Kind of Securities
1.2
What are Exempt securities?
Exempt Securities under Philippine RA 8799 (Securities Regulation Code)
In simple terms:
Exempt securities are certain types of investments that DONT NEED TO BE REGISTERED WITH (SEC)** before they can be offered or sold in the Philippines.
Here’s a list of some key exempt securities under RA 8799:
-
Government Securities:
Any security issued or guaranteed by the Philippine government, its political subdivisions, or instrumentalities (Section 9.1.a). -
Bank Instruments:
Securities issued by banks and other financial institutions that are already regulated by the Bangko Sentral ng Pilipinas (BSP) (This is not explicitly stated in RA 8799 but is implied due to existing BSP regulations). - Government security of Foreign country with Philippines diplomatic relationship
- Securities regulated by OIC, HLURB, or BIR:
-
Small Offerings:
The SEC may issue rules exempting small offerings of securities from registration, considering factors like the size of the offering and the type of investors involved (This exemption power is granted to the SEC by the law).
Kind of Securities
2.2
What are Exempt Transactions?
Exempt transactions under Philippine RA 8799 are securities offerings or sales that QUALIFY FOR EXEMPTION from SEC registration due to specific characteristics like Government involvement, existing Regulations, or Limited scope.
Here’s a one-sentence summary for each exempt transaction under RA 8799:
(a) Sales through courts, estates, or insolvency don’t need registration.
(b) Selling pledged securities to collect a debt is exempt.
(c) One-time owner sales not done repeatedly are exempt.
(d) Stock dividends or distributions from a corporation’s surplus are exempt.
(e) Selling capital stock to existing shareholders without commission is exempt.
(f) Selling an entire mortgage package with secured bonds to one buyer is exempt.
(g) Exchanging one security for another of the same issuer under certain conditions is exempt.
(h) Broker trades on registered exchanges for customers are exempt.
(i) Initial subscriptions for corporate stock before incorporation or capital increase are exempt (if following Corporation Code).
(j) Exchanging securities with existing holders without commission is exempt.
(k) Selling securities to less than 20 people in the Philippines within a year is exempt.
(l) Selling securities to qualified buyers like banks, insurance companies, or investment houses is exempt.
Prohibition on Manipulation
Fraud &
Insider Trading:
What is manipulation of security prices?
Ai Sp through decptv for ua
- Manipulation of Security Prices:
Artificially inflating or deflating a security’s price through deceptive practices to gain an unfair advantage.
(Example: A group spreads false rumors about a company to drive down the stock price and then buy large quantities before the truth is revealed, profiting from the subsequent price rise.)
Prohibition on Manipulation
Fraud &
Insider Trading:
What is a Short Sale
Believing a stock price will decline,
1st B’ing a Sec
2nd S’ing it imm
3rd Buy Back at lower price.
- Short Selling:
Borrowing a security and selling it immediately, hoping to buy it back later at a lower price and return it to the lender, profiting from the price difference.
(Example: An investor believes a stock will decline, so they borrow 100 shares of Company X, sell them for $10 each ($1000 total), then buy back the shares later at $8 each ($800) and return them, pocketing the $2 per share difference ($200 total). )
Prohibition on Manipulation
Fraud &
Insider Trading:
What is OPTION trading
- Option Trading:
Buying or selling contracts (options) that give the right, but not the obligation, to buy or sell a security at a specific price by a certain date.
(Example: An investor believes a stock price will rise significantly. They can buy a “call option” that gives them the right to buy the stock at a set price in the future. If the stock price goes up significantly, they can exercise the option to buy the stock at the lower price and then immediately sell it at the higher market price.)
Prohibition on Manipulation
Fraud &
Insider Trading
What is Fraudulent Transaction
Fraudulent transactions listed in the Philippine Securities Regulation Code:
1. Don’t Trick People:
You can’t use any SCHEMES or lies to cheat someone when buying or selling investments (securities).
2. Be Truthful:
Don’t make FALSE statements about the investment or leave out important information that could mislead someone.
3. Act with Honesty:
Avoid any actions or behavior that could be considered dishonest or DECEIVING when dealing with securities.
Prohibition on Manipulation
Fraud &
Insider Trading:
What is Insider Trading
What is an Insider
Selling or buying of a security by an Insider
While in possession of material information (not available to the public)
with respect to the issuer or the security
Insider - anyone who has access to MATERIAL, NON-PUBLIC information that can affect the Stock PRICE
Protection of Shareholder Interests:
What is a Tender Offer Rule?
A tender offer is a formal public announcement by an individual or group (the bidder) offering to buy a significant portion of a company’s outstanding shares (usually at a premium price) directly from shareholders.
The tender offer rule dictates the procedures and disclosure requirements for such offers, ensuring transparency and fairness to existing shareholders.
Protection of Shareholder Interests
What is a MANDATORY Tender Offer Rule?
When is a Tender Offer Mandatory?
- An offer to acquire voting securities becomes mandatory if a person or group acting in concert (acquirer) reaches certain ownership thresholds within a 12-month period:
35% or more of the outstanding voting securities, OR
Enough voting power to gain control of the board of directors.
What Happens in a Mandatory Tender Offer?
- The acquirer is obligated to file a tender offer with the Securities and Exchange Commission (SEC) and make a public announcement.
The tender offer must be made for all outstanding voting securities of the company, not just a portion.
The offer price must be fair and reasonable, supported by a fairness opinion from an independent financial advisor.
Shareholders have the right to accept or reject the offer.
Protection of Shareholder Interests
What is the Rule on Proxy Solicitation?
Imagine a Voting Booth in Absentia:
Proxy solicitation is like setting up a voting booth where shareholders who can’t attend a company meeting can still have their voices heard.
It’s the process of asking shareholders for permission (through a proxy) to vote on their behalf at a company meeting.
KEY RULES to Remember:
1) Proxy Must Be in Writing and Signed:
The shareholder’s permission (proxy) to vote on their behalf must be a written document and signed by the shareholder or their authorized representative.
2) Disclosure Requirements:
The person or group soliciting proxies (solicitor) must disclose certain information, such as their identity, interest in the company, and the reasons for soliciting proxies.
3) Fairness and Accuracy:
The solicitation materials must be fair, accurate, and not misleading.
4) Filing with the SEC:
The proxy solicitation materials must be filed with the Securities and Exchange Commission (SEC) for review.
5) Shareholder Rights: Shareholders have the right to revoke their proxy at any time before the vote is cast.
6) Voting Authority:
The proxy only grants voting authority on the matters specified in the solicitation materials.
Protection of Shareholder Interests
What is Mandatory Disclosure Rule?
This rule ensures that Investors are informed of MATERIAL INFORMATION pertaining to a PUBLIC company:
To FILE w SEC:
- Issuers must file an annual report with financial statements and analysis within 135 days of their fiscal year end, or as otherwise specified by the Commission.
- Issuers must also submit additional reports for interim periods and significant developments as required by the Commission to maintain updated information on their operations and financial health.
Public Company
Qualification of a Public Company
Discuss
PC - Any corporation ;
a) Listed on Exchange or
b) With Assets of P50M
and
Has 200 or more sharesholders
