Securities Regulation Code

Question 1

What is an Investment Contract?

Answer 1

Contract, transaction or scheme whereby a person invests his money in a common enterprise and is led to expect profits PRIMARILY from the efforts of others.

Question 2

What is the Howey Test?

Answer 2

For an investment contract to exists, the following elements must concur:

1) A contract, transaction or scheme;
2) An investment of money;
3) Investment is made in a common enterprise;
4) Expectation of profits; and
5) Profits arising primarily from the efforts of others.

Question 3

What are the acts that shall give rise to civil liability under the SRC?

Answer 3

1) On account of false registration statement
2) In connection with prospectus, communication, and reports:
a) sale of security in violation of registration requierments
b) sale of security by means of prospectus or communication with untrue statement
3) For fraud in connection with securities transaction
4) For manipulation of security prices
5) With respect to commodity future contracts and pre-need plans
6) On account of insider trading

Question 4

What is the Declaration of State Policy under RA 8799 or the SRC?

Answer 4

To establish a socially conscious and free market that:

1) Regulates itself;
2) Encourages the widest participation of ownership in enterprises;
3) Enhances the democratization of wealth;
4) Promotes the development of the capital market;
5) Protects investors;
6) Ensures full and fair disclosure about securities;
7) Minimizes, if not totally eliminate, insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market.