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Outline - Securities Law1 3rd Trimester AY 2013-2014 I. Overview; general c nce!ts 1. Overview 1.1. 1.2.

Securities transactions issuer transactions; trading transactions Why securities are regulated; blue sky laws

See:2
Sec. 2, Securities Regulation ode !R" #$%%& 'all v. (eiger)*ones o. 2+2 ,.S. -.% !1%1$& /eo0le v. Rosenthal, 1# /hil .2# !1%.%& 2. Regulatory 2ra3ework3 2.1. 2.2. 2... 2.+. 2.-. 2.1. 2.$. 2.8. 2.%. 2.1?. Securities Regulation ode !4SR 5&, R" #$%% 630le3enting Rules and Regulations o2 SR !4SR Rules5& /rior laws: Securities "ct ! " #. 71%.18; Revised Securities "ct !9/ 9lg 1$# 71%#28& /hili00ine Stock :;change !4/S:5& <isting Rules /S: =isclosure Rules Revised ode o2 or0orate (overnance 74 ( ode58 !S: >e3o ircular 1, series o2 2??%& /hili00ine @inancial Re0orting Standards !/@RS& S: (uidelines 2or the "ssess3ent o2 /er2or3ance o2 "udit o33ittees o2 o30anies <isted on the :;change !the 4(uidelines5& Aarious S: and /S: rules, regulations and 0olicies /ertinent rules on nationality !1%#. onstitution, @oreign 6nvest3ents "ct, S: and /S: regulations, etc.&

.. So3e i30ortant conce0ts in securities regulation ..1. ..2. .... ..+. ..-.
1

6ssuer SR Sec. ..2 /ublic co30any SR Rule ..1!>& 9ene2icial owner or bene2icial ownershi0 SR Rule ..1!"& See: S: v. 6nter0ort Resources, et al., -1$ S R" .-+ !Oct. 1, 2??#& ontrol Rule ..1!:& >aterial in2or3ation SR Rule ..1!6&; Rule 1+.1; /S: =isclosure Rules, Sec. +.. B +.+;

Co 0articular te;tbook is reDuired; however, students 3ay 2ind =iEon, Securities Regulation ode, 2?11, Re; /rinting, use2ul 2or basic discussions. 2 Fhe te;t o2 ,.S. cases cited in this outline 3ay be 2ound on the internet. Su33aries o2 several cases are in =iEon but students are encouraged to look at the te;t o2 the original 3 S: and /S: rules 3ay be obtained 2ro3 these agencies and are generally available on their res0ective websites.

2 ..1. ..$. ..#. ..%. Guali2ied 9uyer !6nstitutional investor& SR Rule 1?!<& Stock e;change SR Sec. ..$ 9rokers and dealers SR Sec. ...; ..+ 6nsider SR Sec. ..#

II. T"!es # securities 1. =e2inition and ty0es o2 securities ) SR Section ..1 !a& to !g&; SR ha0ter 1, 0ages 1)2# 1.1. 1.2. 1... 1.+. 1.-. 1.1. 1.$. Rules; =iEon,

Shares o2 stock, bonds, debentures, notes, evidences o2 indebtedness, asset) backed securities 6nvest3ent contracts, certi2icates o2 interest or 0artici0ation; certi2icates o2 de0osit 2or 2uture subscri0tion SR Rule ..1!(& @ractional undivided interests in oil, gas or other 3ineral rights =erivatives such as o0tions !0ut, call, straddle& and warrants SR Rule ..1!@& /ro0rietary, non)0ro0rietary 3e3bershi0 certi2icates !clubs, gol2 clubs, etc.& :vidences o2 indebtedness !0ro3issory notes, co33ercial 0a0ers, etc.& SR Rule ..1!R&!S& Other instru3ents as 3ay be deter3ined by the S: See: Reves v. :rnst B Houng, +%+ ,.S. -1 !1%%?& S: v. W. *. 'owey o., .2# ,.S. 2%. !1%+1& /ower 'o3es ,nli3ited v. S: , -+1 S R" -1$ !2??#& S: v. (lenn W. Furner :nter0rises, +$+ @.2d +$1 !1%$.& (abionEa v. ourt o2 "00eals, -1- S R" .% !2??#& S: v. Ioscot 6nter0lanetary 6nc., ,S ourt o2 "00eals, +%$ @ 2d -#$ !1%$+& S: v. <i2e /artners, 6nc., =. . ircuit, 1%%1, 1?2 @. .d -#$ !1%%1& /roctor B (a3ble v. 9ankers Frust, %2- @. Su00le3ent 12$? !1%%1& 6nternational 9rotherhood o2 Fea3sters v =aniel, +2% ,S --1 !1%$%& /eo0le v. 9alasa, 2%- S R" +% 71%%#8 S: O0inion dated 21 @ebruary 1%#+ re 3ulti)level 3arketing 6n the >atter o2 Octo0us Cetwork, 6nc., /:= !S: & ase %#)222?, 22 >ay 1%%#

III. $egistrati n and listing


When no subsection is indicated, all subsections are included, e.g., when the reference is to SRC Sec. 8, the student must also read SRC Sections 8.1 to 8.5 inclusive

1.

Registration 1.1. 1.2. 1... Registration SR Sec. #; Rule #.1 to #.. :;e30t securities SR Sec. %; Rule %.2 :;e30t transactions SR Sec. 1?; Rule 1?.1 See: Cestle /hili00ines v. ourt o2 "00eals and S: , 2?. S R" -?+ !1%%1& Rivilla v. 6nter3ediate "00ellate ourt, 1$- S R" $$. !1%#%& ,nion 9ank v. S: , .-# S R" +$% !2??1& Fi3bershare Realty or0. v. <ao and orteE, -++ S R" 2-+ !2??#& S: O0inions: (See i!on, Cha"ter #$ 1 @ebruary 1%%1 to >r. *orge Huson

3 11 @ebruary 1%%1 to "ir <iDuids "sian >anage3ent $ Cove3ber 1%%-, to "tty. Roberto O. /arel .? >arch 2??+ to >r. >anuel >orato 1.+. 1.-. 1.1. 1.$. 1.#. 1.%. o33odities 2utures contract SR Sec. 11 /rocedure 2or registration SR Sec. 12 Registration State3ent and /ros0ectus ) SR Sec. ..12; SR ReJection and revocation o2 RS SR Sec. 1. "3end3ents to RS SR Sec. 1+ Sus0ension o2 registration SR Sec. 1%rou" Re"ort 1: 2. <isting o2 securities+ 2.1. 2.2. 2... 2.+. Why listing is necessary See: /hili00ine Stock :;change v. ourt o2 "00eals, 2#1 S R" 2.2 !1%%$& (eneral obJectives and 0rinci0les ) "rt. 6, /art ", /S: <isting Rules Fhe Suitability Rule "rt. 6, /art 9, /S: <isting Rules (eneral reDuire3ents ) "rt. 666, /art ", /S: <isting Rules !a& ,nderwriter de2inition; duties; due diligence !b& Frans2er agent de2inition; duties and obligations !c& 6ssue >anager !d& @ull disclosure !e& @ull 0ay3ent o2 shares !2& >ini3u3 nu3ber o2 directors !g& O22ering 0rice !h& O22ering 0ros0ectus; red herring 0ros0ectus !i& <odg3ent o2 shares !J& <ock)u0 o2 shares , /S: <isting Rules

Sec. ..11

Re0ort on 1.- to 1.% (Registration; reJection, sus0ension and revocation o2 registration&

.. >ethods o2 initial listing "rt. 666, /art ..1. ..2. ....

/ri3ary o22ering !initial 0ublic o22ering or 6/O& Secondary o22ering <isting by way o2 introduction

+. @irst 9oard listing "rt. 666. /art =, /S: <isting Rules -. Shares issued 0ursuant to rights o22ering; stock dividends %rou" Re"ort &: Re0ort on 2 to -, inclusive !<isting&

1. S0ecial rules 2or co30anies engaged in 3ining; 0etroleu3 and renewable energy !i& /hili00ine >ineral Re0orting ode 2or Re0orting o2 :;0loration Results, >ineral Resources and Ore Reserves ) >ain 0rinci0les: "rt. 66!+&: trans0arency, 3ateriality; co30etence ) =e2inition o2 o30etent /erson, "rt. 666!1?&

See /S: <isting Rules

4 /S: Rule ) Su00le3ental <isting and =isclosure ReDuire3ents 2or /etroleu3 and renewable energy co30anies $. >ini3u3 /ublic Ownershi0 !>/O& rule #. Fa;ation o2 shares listed and traded on the /S: Sec. 12$, C6R (rou0 Re0orts: #: (: 5: 0: 'oreign ownershi" rules )ac*door listing +a,ation and the -inimum .ublic /wnershi" Rule .-RC1 rules on disclosure for "etroleum com"anies1 Shariah !ii&

I%. $egulati n # !re-need !lans SR Sec. 11 Su0ervision and regulation trans2erred to 6nsurance o33ission !R" %#2%& %. $e! rt rial re&uirements 1. Who are subJect to re0ortorial reDuire3ents SR Sec. 1$.2; 1#; 2. 2. Fy0es o2 re0orts ) SR Sec. 1$; Rule 1$ !a& 1$)" re0ort !"nnual Re0ort&; Rule 1$.1!2&!"&!1& !b& 1$)G re0ort !Guarterly Re0ort; Rule 1$.1!2&!"&!2& !c& 1$) re0ort ! urrent re0ort; what 3ust be re0orted see .7i8 o2 this outline !d& 1$)< re0ort !re0ort on inability to 2ile& !e& 1#)" re0ort ) bene2icial owners o2 -K or 3ore !SR Sec. 1#; Rule 1#& !2& 2." and 2.9 re0orts ) directors, o22icers, bene2icial owners o2 1?K or 3ore .. =isclosure !a& 9asic 0rinci0le /rea3ble, SR ; /S: =isclosure Rules, Sec. 1 !b& >aterial in2or3ation; 3aterial non)0ublic in2or3ation ) Rule ..1!6&; /S: =isclosure Rules, Sec. +, +.1, +.2, +.., +.+; Sec. 2$.2, SR !c& 'ow disclosure is 3ade !i& Fo the S: !ii& Fo the /S: Odisy syste3 !iii& Fo the 0ublic See: S: v. 6nter0ort Resources or0oration, et al., -1$ S R" .-+ !Oct. 1, 2??#&. 9asic v. <evinson, +#- ,.S. 22+ !1%##& Rivilla v. 6nter3ediate "00ellate ourt , 1$- S R" $$. !1%#%& ,nion 9ank v. S: , .-# S R" +$% !2??1&

%I. 'r tecti n # s(are( lder interests 1. Fender O22ers SR Sec. 1%; Rule 1% See: :> O v. Cational <i2e, -2% S R" .-- !2??$& !a& =e2inition !b& Rationale !c& >andatory tender o22ers !Rule 1%.27"87987 87=8& !d& :;e30tions 2ro3 3andatory tender o22er !Rule 1%..7"8798&

5 !e& 9uy back o2 shares Rule 1%.+7"8 to 7:8 !2& @iling and other reDuire3ents Rule 1%.1 et seD. 2. /ro;y solicitation SR Sec. 2?; Rule 2? !a& 6n2or3ation State3ent !@or3 2?)6S& !b& @or3 o2 0ro;y Rule 2?.!c& =istribution to shareholders %rou" Re"ort 2: 3nformation Statement and "ro,4 solicitation Sec. 2.

.. Fransactions o2 =irectors, O22icers and 0rinci0al stockholders SR !a& Re0orting reDuire3ents !i& SR Sec. 2..1 !ii& /S: =isclosure rules Sec. 1..1, 1..2 !b& Short swing 0ro2its; short sales ) SR See: S3olowe v. =elendo %rou" Re"ort 8: Sec. 2..2; 2...; 2..+

or0oration, 1.1 @.2d 2.-

Short swing "rofits

%II. )raud* mani!ulati n* insider trading %rou" Re"ort 5: -ani"ulative devices and "ractices 6 SRC Sec.&(.1

1. >ani0ulative devices and 0ractices !a& reating 2alse or 3isleading a00earance o2 active trading ) SR Sec. 2+.1!a& !b& Series o2 transactions intended to raiseLde0ress 0rices SR Sec.2+.1!b& !i& 43aking the close5 !ii& 40ainting the ta0e5 !iii& 4sDueeEing the 2loat5 !iv& 4hy0e and du305 !v& 4boiler roo3 o0erations5 !c& =isse3ination o2 2alse or 3isleading in2or3ation SR Sec. 2+.1!c& !d& @alse or 3isleading state3ents with res0ect to 3aterial 2acts SR 2+.1!d& !e& @i;ing, 0egging or stabiliEing the 0rice o2 securities SR Sec. 2+.1!e& See: S: 2. 6nsider trading !a& Who is an insiderM ) SR Sec. ..# !b& What constitutes 3aterial in2or3ationM See Sec. A!.& o2 this outline Rule ..1!6&; Rule 1+.1; /S: =isclosure Rules, Sec. +.. B +.+; Sec. 2$.2, SR !c& 6nsiderNs duty to disclose when trading SR Sec. 2$; /S: =isclosure Rules 1..1, 1..2 See: S: v. 6nter0ort Resources et al., -1$ S R" .-+ !Oct. 1, 2??#& v. ourt o2 "00eals, 2+1 S R" $.# !1%%-&

6 ,nion 9ank v. S: , .-# S R" +$% !2??1& %III. Inde!endent direct rs 1. 2. .. +. =e2inition SR Sec. .#; SR Rule .#.2 ) .#.-; ( ode "rt. 1!e&; Guali2ications and disDuali2ications SR Rule .#.1; 7cooling off "eriod8 ReDuire3ent 2or inde0endent directors SR Sec. .# Co3ination and election S: >e3o ircular 11, Series o2 2??2

I+. ,ncerti#icated securities See: SR Sections +.; +..1; +..2, +...; SR Sec. ++ %rou" Re"ort 19: :ncertificated shares and scri"less trading

1. Rationale 2or uncerti2icated securities 2. 'ow scri0less trading works .. Frans2ers o2 uncerti2icated shares; evidentiary value )records o2 securities inter3ediaries SR Sec. +...; SR Sec. ++ +. oncerns re scri0less trading and the need 2or a direct registry syste3 !a& /ro;y solicitation and cor0orate actions !b& /revention o2 2raud +. Sel#-regulat r" rgani-ati ns 1. Fhe /hili00ine Stock :;change SR Sec. .. to Sec. .$ 2. Others brokers and dealers; trans2er agents; custodians; etc. SR +I. . r! rate / vernance the 4(ood 'ousekee0ing Seal5 1. 2. .. +. -. 1. $. =e2inition ( ode "rticle 1!a& Who are covered by the (overnance ode See 0rea3ble to ( ode Why cor0orate governance is essential (;nron$ /rinci0les See O: = or0orate (overnance /rinci0lesor0orate (overnance best 0ractices See /S: or0orate (overnance (uidelines1 :ssential 9oard co33ittees See ( ode; see also S: >e3o ircular + !2?12& "nnual or0orate (overnance Re0ort !" (R& S: website Sec. .%.1

+II. S!ecial Acc unting rules 1. SR Sec. 1#; Rule 1#; /hili00ine @inancial Re0orting Standards !/@RS& +he -ar* to -ar*et rule

%rou" Re"ort 11:

5 6

"vailable on the O: = website See /S: website

+III. Lia0ilities # r vi lati n # S$. 1. ivil liability SR Sec. -$ to 1., inclusive 2. "d3inistrative and cri3inal liabilities SR Sec. -1 to --, inclusive +I%. T(e Securities and 12c(ange . mmissi n 3S1.4 Sec. -.1!a& to -.1!n&; SR Sec. -.2; SR Sec. -. to -..+

1. /owers and 2unctions SR

See: :> O v. Cational <i2e, -2% S R" .-- !2??$& S: v. 6nter0ort Resources or0oration, et al., -1$ S R" .-+ !2??#& (S6S v. ourt o2 "00eals -#- S R" 1$% !2??%& /"SFR" v. ourt o2 "00eals, -.1 S R" 11 !2??$& /hili00ine Stock :;change v. ourt o2 "00eals, 2#1 S R" 2.2 !1%%$& 2. o30osition; Duali2ications o2 hair3an and o33issioners; ter3 o2 o22ice; chie2 e;ecutive o22icer; salaries; 3eetings; authority to delegate SR Sections +.1 to +. to the RF

.. Frans2er o2 Jurisdiction over intra)cor0orate dis0utes 2ro3 the S:

See S0eed =istribution, 6nc. v ourt o2 "00eals, +2- S R" 1%1 !2??+& 6ntestate :state o2 "le;ander Fy v. ourt o2 "00eals, .-1 S R" 111 !2??1& "ndres et al v. uevas et al., +1? S R" .# !2??-& alleJa v. /anday, +#. S R" 1#? !2??1& Orendain v. 9@ 'o3es, -?1 S R" .+% !2??1& HuJuico et al. v. Guia3bao, et al., -1. S R" 2+. !*anuary 2%, 2??$& 9aviera v. /aglinawan, -1- S R" 1$? !2??$& onsuelo >etal or0oration v. /lanters 9ank, --- S R" +1- !2??#& S: v. 6nter0ort Resources or0oration, et al., -1$ S R" .-+ !2??#& +. 6nde3ni2ication and res0onsibilities o2 o33issioners SR Sec. 1