Securities Regulation Code Flashcards
Purpose of Securities Regulations Code
aims to protect the investing public primarily through a system of disclosure and provide punishment for fraudulent practices
Protection of the Public
- Requiring full disclosure of information to the public regarding the securities that are being offered and the issuers, including the filing and approval of the registration statement and the approval of the prospectus
- Requirement of regularly submitting material information to the SEC
- Close monitoring of the securities and other circumstances
- Prohibiting and penalizing different fraudulent practices
- Providing SEC the powers and functions
What are the securities
Shares, participation, or interest in a corporation or in a commercial enterprise of profit-making venture and evidence by a certificate, contract, instrument, whether written or electronic in character
Examples of Securities
- Shares of stocks
- Investment Contracts
- Fractional undivided interest in oil, gas, or other mineral rights
- Derivatives like options and warrants
- Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments
- Proprietary or nonproprietary membership certificates
- Other instruments deemed necessary
Investment Contract
Contract whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of the others
Procedure for Registration of Securities
- Filing of Sworn Registration Statement containing information the SEC may require
- Payment of filing fees which will not exceed 1/10 of 1% of aggregate price at which such securities to be offered
- Publication of notice of the filing of the registration statement
- Within 45 days, order from SEC will be given
- Prospectus under oath that all requirements satisfied and all statements in registration statemen an in such prospectus are correct
Exemption from Registration
- Securities issued by Government of the Philippines
- Securities issued by the government of any country which Philippines has diplomatic relations
- Certificates issued by a receiver in bankruptcy duly approved by the proper body
- Any security under the supervision of the office of the Insurance Commission
- Any security issued by a bank
Transactions exempt from Registration
- Broker’s Transaction upon a customer’s order
- Isolated transaction of any security
- Stock dividends
- Securities have a conversion feature
- Exclusive sale of capital stock to its own stockholders
- Private Placement of shares to fewer than twenty persons
- Subscription prior to incorporation or pursuance of increase in authorized capital stock
- Sale to qualified buyers (Bank, registered investment house, insurance company)
- Mortgage backed Securities
- Any judicial sale involving insolvency or bankruptcy
- Liquidation of a bonafide debt, a security is pledged in good faith
- Exchange of securities by the issuer with existing security holders
Reportorial Requirements
- Annual report of Balance Sheet, P&L statements, and Statement of Cash Flows
- Other periodical reports for interim fiscal periods and current reports on significant development
Applicability of Reportorial Requirements
- Those selling securities pursuant to a registration
- Listed in an exchange or
- A public company (50 MIL assets and 200 shareholders who hold at least 100 shares each)
Deadline for Filing
30 Calendar Days from
1. Stock Corporations- date of annual stockholder’s meeting
2. Non-Stock- date of annual members meeting
3. Foreign- anniversary date of the issuance of SEC license
Filing of Annual Financial Statements
- Corporations using calendar year depending n their last numerical digit of their SEC registration or license number
- Corporations using fiscal year, 120 days from end of fiscal year; exception: broker dealers- 110 calendar days & listed companies- 105 days
Insider Trading
Committed whenever an insider in possession of a material non-public information transacts on the securities
Who are insiders
- The issuer
- A director or officer of the issuer or a person controlling the issuer
3.A person whose relation hip or former relationship gave him access to non-public information - A government employee who has access to non-public information
- A person who learns information from any of the foregoing insiders
Fraudulent Transactions
- Wash Sale- transactions which involves no change in beneficial ownership. A series of buy and sell transactions by one and the same beneficial owner
- Matched Order- An order 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 will be entered by same or different parties
- Marking the Close- placing the purchase or sale to change the closing price and opening price the next day
- Painting the tape- marking close during normal hours which involves buying at increasingly high or lower price causing fictitious reports
- Squeezing the Float- Holding securities to affect supply or availability of demand
- Hype and Dump- Pump and Dump
- Boiler Room Operations- Involve an intensive selling campaign through numerous salesmen
- Circulating or Disseminating Information on Price Movement
- Making False Statements
- Pegging the price of the security
- Short Sale
