December30,2003

AMENDEDIMPLEMENTINGRULESANDREGULATIONSOFTHESECURITIESREGULATION
CODE

SRCRULE1
TitleofRules
These Rules shall be referred to as the "Amended Implementing Rules and Regulations of
theSecuritiesRegulationCode"orAmendedSRCRules.
SRCRULE2
InterpretationofRules
Any doubt in the interpretation of these Rules shall be resolved by the Commission in a
mannerwhichwouldestablishasociallyconsciousfreemarketthatregulatesitself,encouragethe
widestparticipationofownershipinanenterprise,enhancethedemocratizationofwealth,promote
the development of the capital market, protect investors, ensure full and timely disclosure of
material information, and/or minimize, if not eliminate, insider trading and other fraudulent or
manipulativedevicesandpracticeswhichcreatedistortionsinthefreemarket.
SRCRULE3
DefinitionofTermsUsedintheRulesandRegulations
1.

As used in the rules and regulations adopted by the Commission under the Code, unless
thecontextotherwiserequires:
A.

Beneficialownerorbeneficialownershipmeansanypersonwho,directlyor
indirectly,throughanycontract,arrangement,understanding,relationshipor
otherwise,hasorsharesvotingpower,whichincludesthepowertovote,orto
directthevotingofsuchsecurityand/orinvestmentreturnsorpower,which
includesthepowertodisposeof,ortodirectthedispositionofsuch
securityprovided,however,thatapersonshallbedeemedtohaveanindirect
beneficialownershipinterestinanysecuritywhichis:
i.

heldbymembersofhisimmediatefamilysharingthesamehousehold

ii.

heldbyapartnershipinwhichheisageneralpartner

iii.

heldbyacorporationofwhichheisacontrollingshareholderor

iv.

subjecttoanycontract,arrangementorunderstandingwhichgiveshim
votingpowerorinvestmentpowerwithrespecttosuch
securitiesprovidedhowever,thatthefollowingpersonsorinstitutions
shallnotbedeemedtobebeneficialownersofsecuritiesheldbythemfor
thebenefitofthirdpartiesorincustomerorfiduciaryaccountsinthe
ordinarycourseofbusiness,solongassuchshareswereacquiredby
suchpersonsorinstitutionswithoutthepurposeoreffectofchangingor
influencingcontroloftheissuer:
a.

abrokerdealer

b.

aninvestmenthouseregisteredundertheInvestmentHousesLaw

c.

abankauthorizedtooperateassuchbytheBangkoSentralng
Pilipinas

d.

aninsurancecompanysubjecttothesupervisionoftheOfficeof
theInsuranceCommission

e.

aninvestmentcompanyregisteredundertheInvestmentCompany
Act

f.

apensionplansubjecttoregulationandsupervisionbytheBureau
ofInternalRevenueand/ortheOfficeoftheInsuranceCommission
orrelevantauthorityand

g.

agroupinwhichallofthemembersarepersonsspecifiedabove.
Allsecuritiesofthesameclassbeneficiallyownedbyaperson,

regardlessoftheformsuchbeneficialownershiptakes,shallbe
aggregatedincalculatingthenumberofsharesbeneficiallyowned
bysuchperson.
Apersonshallbedeemedtobethebeneficialownerofasecurityif

thatpersonhastherighttoacquirebeneficialownership,within
thirty(30)days,including,butnotlimitedto,anyrighttoacquire,
throughtheexerciseofanyoption,warrantorrightthroughthe
conversionofanysecuritypursuanttothepowertorevokeatrust,
discretionaryaccountorsimilararrangementorpursuantto
automaticterminationofatrust,discretionaryaccountorsimilar
arrangement.
B.

BillofExchangeisanunconditionalorderinwritingaddressedbyoneperson
toanother,signedbythepersongivingit,requiringthepersontowhomitis
addressedtopayondemandoratafixedordeterminablefuturetimeasum
certaininmoneytoorderortobearer.

C.

CodemeanstheSecuritiesRegulationCode.

D.

CommissionmeanstheSecuritiesandExchangeCommission.

E.

Controlisthepowertogovernthefinancialandoperatingpoliciesofan
enterprisesoastoobtainbenefitsfromitsactivities.Controlispresumedtoexist
whentheparentowns,directlyorindirectlythroughsubsidiaries,morethanone
halfofthevotingpowerofanenterpriseunless,inexceptionalcircumstances,it
canbeclearlydemonstratedthatsuchownershipdoesnotconstitutecontrol.
Controlalsoexistsevenwhentheparentownsonehalforlessofthevoting
powerofanenterprisewhenthereis:

F.

i.

Powerovermorethanonehalfofthevotingrightsbyvirtueofan
agreementwithotherinvestors

ii.

Powertogovernthefinancialandoperatingpoliciesoftheenterprise
underastatuteoranagreement

iii.

Powertoappointorremovethemajorityofthemembersoftheboardof
directorsorequivalentgoverningbodyor

iv.

Powertocastthemajorityofvotesatmeetingsoftheboardofdirectors
orequivalentgoverningbody.

Derivativeisafinancialinstrumentwhosevaluechangesinresponsetothe
changeinaspecifiedinterestrate,securityprice,commodityprice,foreign
exchangerate,indexofpricesorrates,acreditratingorcreditindex,orsimilar
variableorunderlyingfactor.Itrequiresnoinitialorlittlenetinvestmentrelative
toothertypesofcontractsthathavesimilarresponsestochangesinmarket
conditions.Itissettledatafuturedate.Thistermshallinclude,butnotlimited,to
thefollowing:
1.

Optionsarecontractsthatgivethebuyertheright,butnottheobligation,

tobuyorsellanunderlyingsecurityatapredeterminedprice,calledthe
exerciseorstrikeprice,onorbeforeapredetermineddate,calledthe
expirydate,whichcanonlybeextendedbytheCommissionupon
stockholders'approval.

G.

H.

2.

Calloptionsarerightstobuy.

3.

Putoptionsarerightstosell.

4.

Warrantsarerightstosubscribeorpurchasenewsharesorexisting
sharesinacompanyonorbeforeapredetermineddate,calledthe
expirydate,whichcanonlybeextendedinaccordancewiththe
Commissionrulesandregulationsand/ortheExchangerules.Warrants
generallyhavealongerexerciseperiodthanoptionsandareevidenced
bywarrantcertificates.

Aninvestmentcontractmeansacontract,transactionorscheme(collectively
contract)wherebyapersoninvestshismoneyinacommonenterpriseandis
ledtoexpectprofitsprimarilyfromtheeffortsofothers.
1.

Aninvestmentcontractispresumedtoexistwheneverapersonseeksto
usethemoneyorpropertyofothersonthepromiseofprofits.

2.

Acommonenterpriseisdeemedcreatedwhentwo(2)ormoreinvestors
"pool"theirresources,creatingacommonenterprise,evenifthe
promoterreceivesnothingmorethanabroker'scommission.

Longtermcommercialpapermeansanevidenceofindebtednessofanyperson
withamaturityofmorethanthreehundredsixtyfive(365)days.Thetermshall
include,butnotlimitedto,bondsandnotes.

I.

MaterialFact/Informationmeansanyfact/informationthatcouldresultina
changeinthemarketpriceorvalueofanyoftheissuer'ssecurities,orwould
potentiallyaffecttheinvestmentdecisionofaninvestor.SeeRule14(1)fora
nonexclusiveenumerationofwhatconstitutesmaterialfactorinformation.

J.

MemberofanExchangemeansanybrokerdealerwhohastheright,pursuant
toExchangerules,totradeonthatExchange.

K.

Nonproprietaryshareorcertificateisanevidenceofinterestorprivilegeover
acertainpropertyofacorporationinviewoftheamountpaidbytheholderfor
thesaidshare/certificate.Whiletheholderisentitledtotheuseoftheproperty,
hehasnorightoverdividendsoroftheassetsofthecompanyuponliquidation
thereof.

L.

Proprietaryshareorcertificateisanevidenceofinterestorparticipationor
privilegeinacorporationwhichnotonlyentitlestheholdertoenjoytheuseofa
specificpropertybutalsotodividendsorearningsofsaidcompany.Upon
liquidationofthecompany,aholderofaproprietaryshareshallhave
proportionateownershiprightoveritsassets.

M.

PublicCompanymeansanycorporationwithaclassofequitysecuritieslisted
onanExchangeorwithassetsinexcessofFiftyMillionPesos
(P50,000,000.00)andhavingtwohundred(200)ormoreholders,atleasttwo
hundred(200)ofwhichareholdingatleastonehundred(100)sharesofaclass
ofitsequitysecurities.

N.

PublicOfferingmeansarandomorindiscriminateofferingofsecuritiesin
generaltoanyonewhowillbuy,whethersolicitedorunsolicited.Anysolicitation
orpresentationofsecuritiesforsalethroughanyofthefollowingmodesshallbe

presumedtobeapublicoffering:
i.

Publicationinanynewspaper,magazineorprintedreadingmaterialwhich
isdistributedwithinthePhilippinesoranypartthereof

ii.

Presentationinanypublicorcommercialplace

iii.

Advertisementorannouncementinanyradioortelevision,orinany
onlineoremailsystemor

iv.

Distributionand/ormakingavailableflyers,brochuresoranyoffering
materialinapublicorcommercialplace,ormailingthesameto
prospectivepurchasers.

O.

Reportingcompanymeansacorporationwhichhassoldaclassofits
securitiespursuanttoaregistrationunderSection12oftheSRC,orapublic
companyasdefinedundersubparagraph(M)above.

P.

Rulesandregulationsreferstoallrulesandregulationsadoptedbythe
CommissionpursuanttotheCode,includingtheformsforregistration,reports
andaccompanyinginstructionsthereto.

Q.

SectionreferstoasectionoftheCode.

R.

SelfRegulatoryOrganizationorSROmeansanorganizedExchange,
registeredclearingagencyoranyorganizationorassociationregisteredasan
SROunderSection39oftheCodetoenforcecompliancewithrelevant
provisionsoftheCodeandrulesandregulationsadoptedthereunder,and
mandatedtomakeandenforceitsownrules,whichhavebeenapprovedbythe
Commission,bytheirmembersand/orparticipants.Itisanorganizationthat
enforcesfair,ethicalandefficientpracticesinthesecuritiesandcommodity
futuresindustries,includingsecuritiesandcommoditiesexchanges.

S.

Shorttermcommercialpapermeansanevidenceofindebtednessofany
personwithamaturityofthreehundredandsixtyfive(365)daysorless.

T.

Transferagentmeansanypersonwhoengagesonbehalfofanissuerof
securities,oritselfasanissuerofsecurities,in:
i.

countersigningstockcertificatesuponissuance

ii.

monitoringtheissuanceofsuchsecuritieswithaviewtowardpreventing
unauthorizedissuance,afunctioncommonlyperformedbyaperson
calledaregistrar

iii.

registeringthetransferofsuchsecurities

iv.

exchangingorconvertingsuchsecuritiesand/or

v.

transferringrecordownershipofsecuritiesbybookkeepingentrywithout
physicalissuanceofsecuritiescertificates.

2.

Unlessotherwisespecificallystated,thetermsusedintherulesandregulationsshallhave
themeaningdefinedintheCode.

3.

AruleorregulationwhichdefinesatermwithoutexpressreferencetotheCodeortothe
rulesandregulations,ortoaportionthereof,definessuchtermforallpurposesasusedin
the Code and in the rules and regulations, unless the context specifically requires
otherwise.
SRCRULE3.6
DefinitionofClearingAgency

1.

Clearingagencymeans any person that provides a facility to a Broker dealer, salesman,

associated person of a Broker dealer or another clearing agency and whose facility
performsanyorallofthefollowingactivities:
A.

makesdeliveriesinconnectionwithtransactionsinsecurities

B.

reducesthenumberofsettlementsofsecuritiestransactionsorallocates
securitiessettlementresponsibilitiesand

C.

providesforthecentralhandlingofsecuritiessothattransfers,loans,pledges
andsimilartransactionscanbemadebybookkeepingentry,orotherwise,to
facilitatethesettlementofsecuritiestransactionswithoutphysicaldeliveryof
securitiescertificates.

2.

AsusedinthisRule,"facility"includesaclearingagency'ssystems,processesorservices
andallthetangibleorintangiblepropertiesnecessarytooperatesuchsystem,processesor
services,whetherwithinorwithoutitsspecificphysicallocation,forpurposesofperforming
anyorallactivitiessetforthinparagraph1ofthisRule.

3.

AregisteredclearingagencymayperformonlytheactivityoractivitiesthattheCommission
haspreviouslyapproved.
SRCRULE3.7
DefinitionofFacilityofanExchange

Facility of an Exchange includes systems, processes or services, tangible or intangible

property, whether or not in a specific physical location or in an Exchange, for the purpose of
effecting transactions between buyers and sellers in a securities trading market, and conveying
anyinformationrequiredbytheparticipantstoeffectsuchtransactions.
SRCRULE4
SecuritiesandExchangeCommission
These Rules shall be implemented by the Commission as a collegial body composed of a
Chairpersonandfour(4)Commissioners.
1.

The Commission has five (5) principal departments, each to be headed by a director. Its
core function of capital market regulation shall be performed by the Market Regulation
Department, Corporation Finance Department, and Nontraditional Securities and
Instruments Department. Its company registration and enforcement functions shall be
performed by the Company Registration and Monitoring Department and Compliance and
EnforcementDepartment,respectively.
A.

TheMarketRegulationDepartmentdevelopstheregistrationcriteriaforall
marketparticipantsandsupervisesthemtoensurecompliancewithregistration
requirementsandendorsesinfractionsoftheCodeandrulesandregulationsto
theComplianceandEnforcementDepartment.

B.

TheCorporationFinanceDepartmentregisterssecuritiesbeforetheyare
offeredforsaleorsoldtothepublicandensuresthatadequateinformationis
availableaboutthesaidsecurities.Italsoensuresthatinvestorshaveaccessto
allmaterialdisclosuresregardingthesaidofferingandthesecuritiesofpublic
companies.ThedepartmentalsomonitorscompliancebyissuerswiththeCode
andrulesandregulationsadoptedthereunderandendorsesinfractionsthereof
totheComplianceandEnforcementDepartment.

C.

TheNontraditionalSecuritiesandInstrumentsDepartmentregistersand
licensesnontraditionalsecuritiesandinstrumentsincluding,butnotlimitedto,
preneedplans,commodityfuturescontracts,proprietaryornonproprietary
membershipcertificatesandothersimilarinstruments.Itmonitorscompliance
withrelatedrulesandendorsesinfractionsthereoftotheComplianceand
EnforcementDepartment.

2.

3.

D.

TheCompanyRegistrationandMonitoringDepartmentregistersdomestic
corporations,partnershipsandassociations,includingrepresentativeoffices
andforeigncorporationsintendingtodobusinessinthePhilippines.Italso
supervisesandmonitorssuchentitiesrelativetotheircompliancewithlaws,
rulesandregulationsadministeredbytheCommission.

E.

TheComplianceandEnforcementDepartmentensurescompliancebyall
marketparticipants,issuersandindividuals,andtakesappropriateenforcement
actionagainstthemforlegalinfractionoftheCodeandotherrelevantlaws,rules
andregulationsimplementedbytheCommission.

The Commission shall have support services departments, namely Human Resource and
AdministrativeDepartment,EconomicResearchandInformationDepartmentandFinancial
ManagementDepartment.
A.

TheHumanResourceandAdministrativeDepartmentisresponsibleforall
activitiesrelatingtopersonnelandhumanresourcemanagement,including
benefits,traininganddevelopment.Italsohandlesthecentralreceiving,records
management,generaladministrativeandmaintenanceservicesofthe
Commission.

B.

TheEconomicResearchandInformationDepartmentprovidesinvestmentand
economicresearch,analysisandadvicetotheCommission.Itisalsothelead
technicalsupportgroupoftheCommissionforsoftwaredevelopment,database
management,hardwareprocurement,andestablishmentandmaintenanceofa
communicationnetwork.

C.

TheFinancialManagementDepartmentmanagestheinternalfinancesofthe
Commissionwhichincludesbudgeting,accountingandcashmanagement.

TheCommissionshallhavespecialoffices,namelytheOfficeoftheGeneralCounseland
theOfficeoftheGeneralAccountant.
A.

TheOfficeoftheGeneralCounsel,headedbytheGeneralCounsel,shallserve
astheleadlegaladvisertotheCommission.Italsoservesaslegalliaisonforthe
Commissionwithothergovernmentagencies,selfregulatoryorganizationsand
foreigngovernmentregulatorsandagencies.Itoverseesnonenforcement
litigationsandappealstotheCommissionenbanc.Itlikewiseoverseesthe
officeoftheCommissionSecretary.

B.

TheOfficeoftheGeneralAccountant,headedbytheGeneralAccountant,
advisestheCommissionandtheprivatesectorintheareaofaccounting
standardsandonissuesofaccountingtreatmentforpublicofferingsand
disclosures.Italsocoordinateswithanyboardorcouncilinthedevelopmentof
accountingstandardsforthePhilippinesanditscapitalmarket.

4.

The Commission shall have Extension Offices in key cities, each to be headed by a
Director.TheExtensionOfficesshallperformcompanyregistration,supervision,monitoring
and other delegated functions of the Commission within its geographical jurisdiction. The
Directors shall execute the programs of the Commission in their respective geographical
jurisdictions,subjecttothesupervisionoftheCommission.

5.

TheCommissionshallholdregularmeetingsatleastonceaweekonadayandtimefixed
by it. Special meetings may also be called as often as may be necessary by the
Chairperson or upon the request of three (3) Commissioners. In such cases, the
Commissioners shall be given notice of the meeting, and the presence of three (3)
Commissioners shall constitute a quorum. In the absence of the Chairperson, the most
seniorCommissionerpresentshallactasthepresidingofficerofthemeeting.

6.

The Commission may, for purposes of efficiency, delegate any of its functions to an
individualCommissioner,anydepartmentorofficeoftheCommissionoranystaffmember

oftheCommissionexceptitsrevieworappellateauthorityanditspowertoadopt,alterand
supplementanyruleorregulation.
7.

TheCommission,motupropriooruponapetitionfiledbyaninterestedparty,mayreview
any order, resolution, decision or action of any of its departments, offices, individual
Commissioner,orstaffmemberoftheCommission.
ThepetitionforreviewshallbefiledwiththeOfficeoftheGeneralCounselwithinfifteen(15)

daysfromreceiptoftheorder,resolution,decisionoranydocumentevidencingtheaction
takenwhichisthesubjectofthereview.Thepetitionshallcontain,amongotherthings,its
factualandlegalbasisandshallbesignedbythepetitionerorcounsel.
SRCRULE5.1(a)
SupervisionOverRegisteredCorporations
AsusedinthisRule,theword"supervision"isinterpretedtomeanasfollows:
1.

The business operations of corporations which are grantees of secondary licenses or

franchisesbythisCommission,suchasbutnotlimitedtofinancingcompanies,investment
companies, investment houses, preneed companies, broker/dealers and exchanges, as
wellaspubliccompanies,shallbeunderthedirectsupervisionofthisCommission,i.e.:
a.

submissionofreports(monthly,quarterly,operational,annual,etc.)requiredin
thedifferentlawsgoverningthetypeofactivityengagedinbythese
corporationsand

b.

compliancewithprovisionsoftheCorporationCodeincludingthoseprovisions
requiringsubmissionofdocumentstoeffectcompliance.

Additionally, the Commission exercises regulatory authority over said companies except

unregistered/unlisted public companies. For corporations with registered/listed issues,

compliance with registration requirements and the conditions imposed by the Commission
fortheirregistrationshalllikewisebeunderitsdirectsupervision.
2.

3.

For all other business operations of companies with certificates of registration with the
Commission as corporations but not requiring a secondary license from the Commission,
the extent of its supervision and monitoring shall be limited to their compliance with the
CorporationCode,i.e.:
a.

submissionoffinancialstatements

b.

submissionofGeneralInformationSheets(GIS)

c.

compliancewithprovisionsintheirbylawson:
i.

numberofdirectors

ii.

qualifications,compensationofdirectors

iii.

holdingofmeetings,etc.

d.

declarationofdividends

e.

inspectionofbooksand

f.

otherprovisionsoftheCoderequiringsubmissionofdocumentstoeffect
compliance.

The business operations of corporations which are grantees of secondary licenses of

franchises of other government agencies such as but not limited to banking and quasi
banking institutions, building and loan associations, trust companies and other financial
intermediaries, insurance companies, public utilities, educational institutions, and other
corporations governed by special laws, shall not be under the direct supervision of this
Commission, but under the direct supervision of the concerned government agency
grantingsuchsecondarylicenseorfranchise.TheextentoftheCommission'ssupervisory

powers over such corporations shall be limited to those mentioned in Item No. 2 hereof,
exceptifitisareportingcompanyunderSec.17.2oftheCode.
4.

Notwithstandingtheforegoing,theCommission,asprovidedinSection5oftheCodeand
theeffectiveprovisionofPD902A,shallhavethepowertodoanyandallactstocarryout
the effective implementation of the laws it is mandated to enforce, i.e., constitute a
ManagementCommitteeappointreceiversissueCeaseandDesistOrderstopreventfraud
or injury to the public and such other measures necessary to carry out its role as a
regulator.

5.

All complaints regarding the operations of a company shall be directed to its primary
regulator.However,incaseswheretheCommissionandanotheragencyarebothprimary
regulators, e.g. investment houses with quasibanking function, any complaint can be
lodgedwitheitheragency.Bothregulatorsshallcoordinatetheiraction.
SRCRULE5.1(e)

ClarificationofCommissionPowerstoTakeOveranExchange
ProceduresforimplementingtheCommission'spowertosuspendortakeoveranExchange
aresetforthinSRCRule40.5,Paragraph1.
SRCRULE6.2
1.

RulesofConductforCommissioners,OfficersandEmployees
TheCommissioners,includingtheChairperson,officersandemployeesoftheCommission
(hereinafter collectively referred to as officers or officer), in the execution of their duties
owetheirundividedloyaltytotheCommission.Theyshallobservethehigheststandardsof
honesty,integrityandgoodfaithintheperformanceoftheirduties.
A.

Officersshallnotpursueprivateactivitiesinanymannerwhichmayconflictwith
theirduties.Theyshallsubordinatethoseactivitieswhich,althoughnotin
conflictwiththeirduties,willrequiretimeandefforttotheprejudiceoftheir
dutiesattheCommission.

B.

Everyofficerwhohasdiscretionaryauthorityshallbefreefromanyconflicting
interestorinfluenceofsuchnatureandimportancewhichwouldmakeitdifficult
forhimtoprovidehisbesteffortsandloyaltytotheCommission.

2.

The interest of officers shall include the interest of his or her spouse, children under the
ageofeighteen(18)andtrustsforthebenefitofhimself,hisorherspouseorchildren.

3.

OfficersshallprovidetheCommissionwithcompleteinformationwithrespecttoanyactual
or conflicting interest by completing SEC Form 6 and submitting such form to the
Commission Secretary no later than thirty (30) days from the effective date of this Rule.
NewofficersshallfillupthisformandsubmitthesametotheCommissionSecretarythirty
(30)dayspriortothefirstdayoftheiremployment.

4.

Even if not specifically required to be disclosed in SEC Form 6, officers shall report any
othercircumstanceswhich,intheirjudgment,areregardedasbeingofpossibleconcernto
the Commission. It is to such officer's advantage, as well as the Commission's, that any
unclear situation be reported in order that a policy judgment can be made. Questions of
conflict will be referred to the Office of the General Counsel. If the Office of the General
Counsel determines that such officer can not properly retain his outside interest or
relationship while employed by the Commission, the Office of the General Counsel (after
advising those to whom the officer reports to of the circumstances) shall require action to
eliminate the conflict, such as the disposition by the officer of his conflicting interest or
relationship,orthenarrowingofresponsibilitiesoftheofficer.

5.

SECForm6shallbekeptcurrentandaccurate.Anychangeintheinformationcontained
therein shall be reported and filed with the Commission Secretary on SEC Form 6A no
laterthanten(10)daysfromthedateofsuchchange.

6.

Setforthbelowisadescriptionofsometypesofactivitieswhichmaygiverisetoaconflict
ofinterestinviolationofthisRule:
A.

Allofficerships,directorships,trusteeshipsorpartnershipinterestsinany
organizationorassociation,whetherregisteredwiththeCommissionornot,
exceptincharitableorcivicorganizations

B.

Meaningfulinterestinanysecurityorinvestmentinanycorporation,
partnershiporassociationregisteredundertheCode,exceptinsportsclub,
social,charitableorcivicorganization

C.

Thereceiptofcompensation,wages,bonuses,benefitsorprivilegeswith
monetaryvaluefromanycorporation,partnership,orassociationregisteredwith
theCommissionorfromanypersonorenterprisewhich,thoughnotregistered
withtheCommission,doesbusinesswiththeCommissionasasupplier,
contractororthelike

D.

DuringtheirtermofofficeoremploymentwiththeCommissionandforaperiod
ofoneyearafterresignation,retirementorseparationfromsuchofficeor
employment:

E.

i.

acceptemploymentasanofficer,employee,consultant,counsel,broker,
agent,trusteeornomineebyanypersonorinanyenterpriseregulated
bytheCommissionundertheCode

ii.

engageinprivatepracticeoftheirprofessionwheresuchpractice
conflictsortendstoconflictwiththeirofficialfunction(e.g.whensuch
practiceisinconnectionwithanymatterbeforetheofficeofthe
Commissionwheresuchofficerworksorusedtowork)

iii.

recommendanypersontoanypositioninaprivateenterprisewhichhas
aregularorpendingofficialtransactionwiththeofficewheresuchofficer
worksorusedtowork.

Solicitationoracceptanceofanygift,loan,orotherbenefitfromany
corporation,partnershiporassociationregistered,applyingorcontemplating
registrationwiththeCommission,includinganypersonorfirm,thoughnotso
registered,applyingorcontemplatingregistrationand/orhavingcurrentor
prospectivedealingswiththeCommissionasasupplierorcontractororthelike,
iftheacceptancewouldinfluenceorwouldcreatetheappearanceofinfluencing
himtoactotherthansolelyinthebestinterestoftheCommission.
i.

Anygifthavingmorethananominalvalue,evenifgivenonoccasionsof
rejoicingorcelebrationsuchasbirthdays,anniversariesorChristmas,
shallnotbepermitted.

ii.

Eachofficershouldnotborrowmoneyfromsubordinatesandfromthose
entitieswhichhedirectlyregulates,exceptfromfinancialinstitutionsat
prevailingmarketrates.

iii.

Noentertainmentshouldbeacceptedbyanyofficerofakindoramount
whichwouldinfluenceorwouldcreatetheappearanceofinfluencinghim
toactotherthansolelyinthebestinterestoftheCommission.
SRCRULE7.2
PeriodicReviewofCommissionStructure

TheCommissionshallconduct,onceeverytwo(2)years,areviewofitsorganizationand
structuretoachievethegoalsoftheCodeandmoreefficientlyandeffectivelyexerciseitspowers
and functions thereunder, without prejudice to its power to conduct yearly merit reviews and
provideincreasesincompensationbasedonproductivityandefficiency.

SRCRULE8.1
RequirementtoFileRegistrationStatement(RS)[formerly,SRCRule8]
1.

2.

FilingofRegistrationStatementandEffectivityofOffering
A.

Nosecurities,exceptofaclassexemptunderSection9oftheCodeorunless
soldinanytransactionexemptunderSection10thereofandtherules
thereunder,shallbesoldordistributedbyanypersonorentitywithinthe
PhilippinesunlesssuchsecuritiesaredulyregisteredwiththeCommissionon
SECForm121andtheregistrationstatementhasbeendeclaredeffectiveby
theCommission.Noinformationrelatingtoanofferingofsecuritiesshallbe
disseminatedunlessaregistrationstatementhasbeenfiledwiththeCommission
andthewrittencommunicationproposedtobereleasedcontainstherequired
informationunderSRCRule8.3,Paragraph1.

B.

IfthesecuritieswhicharethesubjectoftheRSareintendedtobelistedinan
Exchange,acopyoftheRSandallotherpertinentdocumentsincludingall
amendmentstheretoshallbefiledwiththatExchange.Two(2)copiesofthe
applicationforlistingshallalsobefiledwiththeCommission.

C.

ThesaleofthesecuritiessubjectoftheRSshallbecommencedwithintwo(2)
businessdaysfromthedateoftheeffectivityoftheRSandshallbecontinued
untiltheendoftheofferingperiodoruntilthesalehasbeenterminatedby
actionoftheissuer.Theregistrantmaybegrantedexemptionfromthis
requirementuponsufficientjustificationthatcompliancetherewithwilldefeatits
offeringobjective.

D.

Awrittennotificationofcompletionorterminationoftheofferingshallbefiled
withtheCommissionwithinthree(3)businessdaysfromsuchcompletionor
termination,indicatingthereinthenumberofsecuritiessold.

ShelfRegistration
If the remaining registered but unsold securities shall be offered after the completion or

terminationmentionedunderparagraph(1)(D)above,anupdatedRSshallbefiledwiththe
Commissionpriortosaidofferingorsale.
3.

ProspectusDeliveryRequirements
A.

ApreliminaryprospectusissubmittedbyaregistranttotheCommissionaspart
ofaregistrationstatementthatisnotyetrenderedeffectiveundertheSecurities
RegulationCode.AfinalprospectusissubmittedtotheCommissionaspartofa
registrationstatementthathasbeenrenderedeffectiveorthathasbeen
recommendedtoberenderedeffectiveundertheCode.

B.

SecuritiesrequiredtoberegisteredpursuanttoSections8and12oftheCode
shallnotbeofferedforsaleorsoldunlessaprospectusoranyinformation
material,whichhasbeenfiledwiththeregistrationstatementintheformand
containingtheinformationhereinafterdescribed,iswidelydisseminatedand
sufficientcopiesthereofhavebeenmadeavailablesothatallwhodesiretohave
acopymayobtainone.

C.

InadditiontotherequirementsofthisRule,aprospectus,includinga
preliminaryprospectus,shallcontaininformationasrequiredbySRCRule12.1
andSECForm121andshallbepreparedinaccordancewiththerequirements
ofSRCRule72.1.Theinformationcontainedthereinshallbewordedinplain
languagewhichisunderstandablebyanordinaryperson.

D.

Apreliminaryprospectus,whichhasbeenfiledwiththeregistrationstatement
requiredbySections8and12oftheCode,maybecirculatedtopotential

investorspriortotheeffectivenessoftheregistrationstatementifthefollowing
requirementshavebeenmet:
i.

itmeetsalltherequirementsforaprospectuscontainedinparagraphB
hereofabove

ii.

itcontainsthefollowingstatementinboldfaceprint,atleast12pointtype
prominentlydisplayed:
AREGISTRATIONSTATEMENTRELATINGTOTHESESECURITIESHAS

BEENFILEDWITHTHESECURITIESANDEXCHANGECOMMISSION,
BUTHASNOTYETBEENDECLAREDEFFECTIVE.NOOFFERTO
BUYTHESECURITIESCANBEACCEPTEDANDNOPARTOFTHE
PURCHASEPRICECANBERECEIVEDUNTILTHEREGISTRATION
STATEMENTHASBECOMEEFFECTIVETHEREBY,ANDANYSUCH
OFFERMAYBEWITHDRAWNORREVOKED,WITHOUTOBLIGATION
ORCOMMITMENTOFANYKIND,ATANYTIMEPRIORTOTHE
NOTICEOFITSACCEPTANCE.ANINDICATIONOFINTERESTIN
RESPONSEHERETOINVOLVESNOOBLIGATIONORCOMMITMENT
OFANYKIND.THISPROSPECTUSSHALLNOTCONSTITUTEAN
OFFERTOSELLORBECONSIDEREDASOLICITATIONOFAN
OFFERTOBUY.

E.

F.

iii.

itistheonlysellingdocumentutilizedinthepreofferingperiod,withthe
exceptionthattheinformationcontainedinSRCRule8.3maybe
disseminatedinwholeorinparttosummarizetheoffering

iv.

itsuseissuchthatwidedisseminationisassured

v.

sufficientcopiesaremadeavailablesothatallwhodesiretohaveacopy
mayobtainoneand

vi.

itcontainsastatementwhetherthesecurityisbeingofferedin
connectionwithadistributionbytheissuerorbyasecurityholder,or
both,andwhethertheissuerepresentsnewfinancingorrefinancing,or
both.

Apreliminaryorfinalprospectusshallbepresumedtohavebeenwidely
disseminatedifcopieshavebeendistributedinitiallyandadditionalcopieshave
beenfurnishedpromptly,uponrequest,toatleastthefollowing:
i.

eachparticipantinthedistribution(e.g.,underwritersandbrokers)

ii.

themainandextensionofficesoftheCommission

iii.

anExchange,ifthesecuritieswillbelistedthereon

iv.

twenty(20)ormorepersonswhoarenotqualifiedbuyersunderSection
10.1(l)oftheCode.

NoticeofAvailabilityofProspectusandPreliminaryProspectus
i.

Allparticipantsinthedistributionofanofferingofsecuritiestothepublic
shall,wheninquiriesaremadeastotheoffering,informinterested
personsoftheavailabilityofpreliminaryprospectusesandfinal
prospectusesandprovidethemwithcopiesifrequested.

ii.

Anoticeshallbeplacedonthefrontofthesubscriptionagreement
distributedinconnectionwiththeofferinginforminginterestedpersons
thattheyareentitledtoreceiveacopyofapreliminaryand/orfinal
prospectusiftheysodesireandhowandwhereonecanbeobtained.

iii.

Informationrequiredinparagraphs(i)and(ii)aboveconcerningwhere
thepreliminaryandfinalprospectusesmaybeobtainedshallincludeat
leastthefollowing:addressesofextensionandmainofficesofthe
Commission,anyExchangewhereinthesecuritiesmaybelisted,the
issuercompany,thetelephonenumberandtheaddressofthecontact
person.Astatementshallalsobemadethatpreliminaryandfinal
prospectusesareavailablefromallunderwritersandbrokersparticipating
inthedistribution.

G.

Theuseofsellingdocumentsotherthanthefinalprospectusduringtheoffering
periodisprohibited,exceptthattheinformationcontainedinSRCRule8.3may
bedisseminatedinwholeorinparttosummarizetheoffering.

H.

Apreliminaryorfinalprospectusshallnotbeusedunlessallinformation
containedthereinareuptodateandaccuratelyreflectthetermsoftheoffering
andtheconditionofthecompany.Thus,untilsuchtimeasappropriate
amendmentsaremadetheretoandhavebeenfiledwiththeCommissionunder
SRCRule14,theuseofapreliminaryorfinalprospectusandtherighttosell
andofferforsalemaybesuspendedunderSection15oftheCodewhenanyof
thefollowingeventsoccurs:

I.

i.

thereisamaterialchangeinanyinformationcontainedtherein(including
butnotlimitedto,theoccurrenceofamaterialeventwhichwouldbe
requiredtobereportedonSECForm17C)

ii.

thefinancialstatementscontainedthereinareovertwohundredtwenty
five(225)daysold.

FormatofProspectus
i.

Theinformationrequiredintheprospectusneednotfollowtheorderofthe
itemsorotherrequirementsinPartIofSECForm121withthe
exceptionofItems1and2.However,theinformationshallbecomplete
andshallnotbepresentedinamannerthatmaymisleadthereader
thereoforrendertherequiredinformationincomprehensible.

ii.

Allinformationincludedintheprospectusmustbeproperlycaptionedor
headedinordertoreasonablyindicatecoveredsubjectmatter.The
informationshallbedividedintoreasonablyshortparagraphsorsections
(withtheexceptionoffinancialstatementsandtabulardata).

iii.

Exceptastoinformationrequiredintabularformandfinancial
statements,theinformationincludedintheprospectusshallnotbe
expressedincondensedorsummarizedform.Referencemaybemade
toinformationinotherpartsoftheprospectusinsteadofrepeatingthe
sameinformationintheprospectus.

iv.

Eachprospectususedaftertheeffectivedateoftheregistration
statementshallbedatedasoftheeffectivityoftheprospectus.An
amendedorrevisedprospectususedthereaftershallbearthedateofits
issuance.

v.

Allinformationthatisrequiredtobeincludedintheprospectusshallbe
clearlyunderstandablewithouttheneedtorefertoSECForm121orto
thegeneralrulesandregulations.Thegoalofregistration(disclosurefor
thebenefitofinvestors)involves,amongotherthings,theuseoflanguage
thatcanbeunderstoodbythepersonstowhomitisaddressed.Failureto
uselanguagethatisclearandunderstandabletotheinvestormaydefeat
thepurposeoftheprospectus.

SRCRULE8.3
1.

2.

WrittenCommunicationNotDeemedanOfferforSale
Anotice,circular,advertisement,letter,orothercommunicationdoesnotconstituteanoffer
forsaleinviolationofSection8oftheCodeifitispublishedortransmittedtoanyperson
after a registration statement has been filed and contains any or all of the following
information:
A.

thenameoftheissuerofthesecurity

B.

thefulltitleofthesecurityandtheamountbeingoffered

C.

abriefindicationofthegeneraltypeofbusinessoftheissuer

D.

thepriceofthesecurityor,ifthepriceisnotknown,themethodofits
determinationortheprobablepricerangeasspecifiedbytheissuerorthe
managingunderwriter

E.

inthecaseofadebtsecuritywithafixed(noncontingent)interestprovision,
theyieldor,iftheyieldisnotknown,theprobableyieldrange,asspecifiedby
theissuerorthemanagingunderwriter

F.

thenameandaddressofthesenderofthecommunicationandthefactthathe
isparticipating,orexpectstoparticipate,inthedistributionofthesecurity

G.

thenamesoftheunderwriters

H.

theapproximatedateuponwhichtheproposedsaletothepublicisanticipated
tocommence

I.

whetherthesecurityisbeingofferedthroughrightsissuedtoexistingsecurity
holders,and,ifso,theclassofsecuritiestheholdersofwhichwillbeentitledto
subscribe,thesubscriptionratio,theactualorproposedrecorddate,thedate
uponwhichtherightswereissuedorareexpectedtobeissued,theactualor
anticipateddateuponwhichtheywillexpire,andtheapproximatesubscription
price,oranyoftheforegoing

J.

withrespecttoanyclassofdebtsecurities,anyclassofconvertibledebt
securitiesoranyclassofpreferredstock,thesecurityratingorratings
assignedtotheclassofsecuritiesbyanycreditratingagencyrecognizedor
accreditedbytheCommissionandthenameofsuchratingagency/ieswhich
assignedsuchrating/s.

EverycommunicationusedpursuanttothisRuleshallcontainthefollowing:
A.

Ifaregistrationstatementhasnotyetbecomeeffective,thefollowingstatement
inboldfaceprominenttype:
AREGISTRATIONSTATEMENTRELATINGTOTHESESECURITIESHASBEEN

FILEDWITHTHESECURITIESANDEXCHANGECOMMISSION,BUTHAS
NOTYETBECOMEEFFECTIVE.THESESECURITIESMAYNOTBESOLD
NOROFFERSTOBUYTHESAMEBEACCEPTEDPRIORTOTHETIMETHE
REGISTRATIONSTATEMENTBECOMESEFFECTIVE.THIS
COMMUNICATIONSHALLNOTCONSTITUTEANOFFERTOSELLORBE
CONSIDEREDASOLICITATIONOFANOFFERTOBUY.
B.

Astatementwhetherthesecurityisbeingofferedinconnectionwitha
distributionbytheissuerorbyasecurityholder,orboth,andwhethertheissue
representsnewfinancingorrefinancingorboth

C.

Thename/sandaddressesofaperson/sfromwhomawrittenprospectus,
whichaccordinglymeetstherequirementsofSection12oftheCode,maybe
obtained.

SRCRULE9.2
1.

2.

ExemptSecurities
Any evidence of indebtedness issued by a financial institution itself that has been duly
licensed by the Bangko Sentral ng Pilipinas to engage in banking/quasibanking activity
shallbeexemptfromregistrationunderSection8.1oftheCodeprovidedthatthepurchase
and sale of such security shall not be considered exempt from the coverage of the
provisionsoftheCodeonantifraud,civilliabilityorothers.
Theregistrationrequirementsshallnotlikewiseapplytoanyofthefollowing:
A.

EvidenceofindebtednessissuedtotheBangkoSentralngPilipinas(BSP)
underitsopenmarketand/orrediscountingoperations

B.

Evidenceofindebtednessissuedtothefollowingprimaryinstitutionallenders:
banks,includingtheirtrustaccountswhereinthebanktrusteeisgranted
discretionarypowersintheinvestmentdispositionofthetrustfunds,investment
housesincludingtheirtrustaccountswhereintheinvestmenthousetrusteeis
granteddiscretionarypowersintheinvestmentdispositionofthetrustfunds,
trustcompanies,financingcompanies,investmentcompanies,preneed
companies,nonstocksavingsandloanassociations,buildingandloan
associations,venturecapitalcorporations,insurancecompanies,government
financialinstitutions,pawnshops,pensionandretirementfundsapprovedbythe
BIR,educationalassistancefundsestablishedbythenationalgovernment,and
otherentitiesthatmaybeclassifiedasprimaryinstitutionallendersbytheBSP,
inconsultationwiththeSECprovidedallsuchevidenceofindebtednessshall
onlybenegotiatedorassignedtoanyoftheaforementionedprimaryinstitutional
lendersortheDevelopmentBankofthePhilippineswithrespecttoprivate
developmentbanksinrelationwiththeirrediscountingprivilegesprovided
furtherthatincaseofnonbankswithoutunderwritinglicenses,suchnegotiation
orassignmentshallbethroughbanksornonbankslicensedtobean
underwriterorasecuritiesdealerprovidedfinally,thatinnocaseshallsaid
instrumentbenegotiatedorassignedtononqualifiedinvestors

C.

Billsofexchangearisingfromabonafidesaleofgoodsandserviceswhichare
distributedand/ortradedbybanksorinvestmenthousesdulylicensedbySEC
andBSPthroughanorganizedmarketproperlyconventionedandgovernedby
rulesapprovedbytheappropriateregulatorybody

D.

Evidenceofindebtednesse.g.shortorlongtermcommercialpapers,meeting
thefollowingconditions:
i.

Issuedtonotmorethannineteen(19)noninstitutionallenders

ii.

Payabletoaspecificperson

iii.

Neithernegotiablenorassignableandshallbeheldontomaturityand

iv.

InanamountnotexceedingFiftyMillionPesos(P50,000,000.00)orsuch
higheramountastheCommissionmayprescribebyresolution.
SRCRULE10.1
ExemptTransactions[formerly,SRCRule101]

1.

DisclosuretoInvestors
AnypersonclaimingexemptionunderSection10.1oftheCodeshallprovidetoanypersonto

whomitoffersforsaleorsellssecuritiesinrelianceonsuchexemptionawrittendisclosure
containingthefollowinginformation:
i.

TheprovisionofSection10.1oftheCodeunderwhichexemptionfrom

registrationisclaimed
ii.

WhethertheCommission'sconfirmationthatsuchofferorsalequalifiesasan
exempttransactionhasbeenobtainedand

iii.

Thefollowingstatementinboldface,prominenttype:
THESECURITIESBEINGOFFEREDORSOLDHEREINHAVENOTBEEN

REGISTEREDWITHTHESECURITIESANDEXCHANGECOMMISSION
UNDERTHESECURITIESREGULATIONCODE.ANYFUTUREOFFEROR
SALETHEREOFISSUBJECTTOREGISTRATIONREQUIREMENTSUNDER
THECODEUNLESSSUCHOFFERORSALEQUALIFIESASANEXEMPT
TRANSACTION.
2.

ExemptTransactionsNotRequiringNotice
NonoticeofexemptionorfeeshallberequiredforanytransactioncoveredbySection10.1

of the Code except those covered by subparagraphs (k) and (l) or sale to not more than
nineteen(19)personsandtoqualifiedbuyers,respectively.
3.

ExemptTransactionsRequiringNotice
A.

NoticeofexemptiononSECForm101shallberequiredinanofferingor
distributionofsecuritiesunderSection10.1(k)and(l)oftheCode.

B.

TheissuershallfilewiththeCommissionanoticeofexemptionfromthe
registrationrequirementsunderSection8oftheCodeonSECForm101,
including,asanexhibitthereto,allpertinentinformationrequiredtobefurnished
totheinvestorspursuanttothisparagraph,withinten(10)daysafterthesaleof
thesecuritieswhicharesubjectthereto.Nofilingfeeshallberequiredforthe
saidnotice.

C.

PrivatePlacementsunderSection10.1(k)oftheCode
i.

AprimafaciepresumptionofcircumventionofSections8and12ofthe
Codeshallarisewhenthenumberofnonqualifiedinvestorsshallexceed
nineteen(19)withinone(1)year.Theissuershallbeliableforpenaltyin
accordancewiththeScaleofFinesoftheCommission,withoutprejudice
tootheractionswhichmaybetakenagainsttheissuer.

ii.

Iftheinitialpurchaser/sshallresellsaidsecuritiestomorethannineteen
(19)nonqualifiedinvestors,Sections8and12oftheSRCshallapply,
notwithstandingtheexemptionoftheirissuances,unlesssuchsucceeding
saleshallqualifyasanexempttransaction.

iii.

ExemptivereliefunderSection10.1(k)(PrivatePlacement)shallbe
subjecttothefollowingtermsandconditions:
a.

Theissuerclaimingsuchreliefshallnotengageinanyformof
generalsolicitationoradvertisinginconnectiontherewith

b.

Securitiessoldinanysuchtransactionmayonlybesoldto
personspurchasingfortheirownaccount

c.

Salemaybemadetonomorethannineteen(19)"nonqualified"
buyers.Acorporation,partnershiporotherentityshallbecounted
asonebuyerprovided,however,thatiftheentityisorganizedfor
thespecificpurposeofacquiringthesecuritiesofferedandisnot
aqualifiedbuyerunderSection10.1(l)oftheCode,theneach
beneficialownerofequitysecuritiesintheentityshallcountasa
separatebuyerunderthisRule

d.

Theissuerprovidesanypersontowhomtheyofferforsaleorsell

securitiespursuanttheretowiththefollowinginformation:
1)

exactnameoftheissueranditspredecessor,ifany

2)

addressofitsprincipalexecutiveoffice

3)

placeofincorporation

4)

exacttitleandclassofthesecurity

5)

parorissuevalueofthesecurity

6)

numberofsharesortotalamountofsecuritiesoutstanding
asoftheendoftheissuer'smostrecentfiscalyear

7)

nameandaddressofthetransferagent

8)

natureoftheissuer'sbusiness

9)

natureofproductsorservicesoffered

10)

D.

natureandextentoftheissuer'sfacilities

11)

nameofthechiefexecutiveofficersandmembersofthe
boardofdirectors

12)

issuer'smostrecentfinancialstatementsforeachofthe
twoprecedingfiscalyearsorsuchshorterperiodasthe
issuer(includingitspredecessor)hasbeeninexistence

13)

whetherthepersonofferingorsellingthesecuritiesis
affiliated,directlyorindirectly,withtheissuer

14)

whethertheofferingisbeingmadedirectlyorindirectlyon
behalfoftheissuer,oranydirector,officerorpersonwho
ownsdirectlyorindirectlymorethantenpercent(10%)of
theoutstandingsharesofanyequitysecurityoftheissuer
and,ifso,thenameofsuchpersonand

15)

informationrequiredunderparagraph1ofthis
Rule.Provided,however,thatwheretheissuerisareporting
companyunderSection17oftheCode,acopyofitsmost
recentannualreport(SECForm17A)maybeusedto
provideanyoftherequiredinformation.

OfferorSaleofSecuritiestoQualifiedBuyersunderSection10.1(l)ofthe
Code
Iftheinitialqualifiedbuyer/sshallreselltheirsecuritiestomorethannineteen(19)

nonqualifiedbuyers/investors,Sections8and12oftheCodeshallapply.
4.

ApplicationforConfirmationorDeclarationofExemption
A.

IfaconfirmationofexemptionshallbeobtainedfromtheCommission,aduly
accomplishedSECForm101shallbefiledwiththecorrespondingfilingfee.

B.

Incaseswhichinvolvedistributionofsecuritiesbywayofstockdividend,the
Commissionshalldeterminethesufficiencyoftheretainedearningsofthe
issuercompanypriortoissuingaconfirmationthereto.

C.

Wheretheconsiderationfortheofferedsecuritiesisotherthanactualcash,a
requestforconfirmationofexemptionfromregistrationunderSection10ofthe
Codeshalldeemtoincludeanapplicationforapprovalofvaluationrequired
underSection62oftheCorporationCodeofthePhilippines,orviceversa.

5.

ExemptCommercialPaperTransactions
Anissuerofcommercialpapersunderanexempttransactionshall:

A.

FileaNoticeorApplicationforConfirmationofExemption(SECForm101)
priortoissuancethereof.Saidapplicationshallbeaccompaniedbythe
prescribedfilingfeesandincludeadisclosureofthefollowingfinancialratios:
CurrentRatio=

CurrentAssets

CurrentLiabilities

Cash,receivablesandmarketablesecurities

CurrentLiabilities

Netincomeafterincometax

NetSalesorrevenues

Netincomeafterincometax

TotalStockholders'Equity

AcidTestRatio=

NetProfitMargin=

ReturnonEquity=

InterestService
ChargeRatio=

Debttoequityratio=

Netincomebeforeinterestexpense

InterestExpense

TotalLiabilities

Stockholders'Equity

B.

Indicateinboldlettersonthefaceoftheinstrumentthewords:
"NONNEGOTIABLE/NONASSIGNABLE"

C.
6.

7.

Thatanyissuerwithoutstandinglongtermcommercialpapersshalllikewisefile
theprescribeddisclosurestatementandquarterlyreportsonsuchborrowings.

OtherRequirementsandLimitations
A.

ExemptivereliefunderSection10.1(c)(IsolatedTransaction)oftheCodeshall
notbeavailabletoanissuerofsecuritieswhichshallnotbeconsideredasan
"owner"thereof.

B.

InconnectionwithatransactionunderSection10.1(i)oftheCode,anyfee
paidpursuanttotherequirementsoftheCorporationCodemaybeappliedin
satisfactionoffeesowedinrelationtoanapplicationforconfirmationof
exemption.

C.

TheCommissionshallnotbeprecludedfromtakingwhateveractionitmay
deemappropriateonanyapplicationforconfirmationeveniffiledaftertheoffer
orsaleofthesecuritieswithoutprejudicetotheimpositionofpenaltieswhen
warrantedbythesituation.

BurdenofProofthatSuchExemptionisAvailable
A.

Unlessconfirmationoftheavailabilityofsuchexemptionisappliedforunder
paragraph4ofthisRule,anypersonclaiminganexemptionunderSection10

hastheburden,ifchallenged,toestablishthattheexemptionisavailable.The
Commissionmaychallengesuchexemptionatanytime.
B.

Apresumptionthatanexemptionisnotavailablemayarisefromthefailureto
fileanoticeasrequiredbyparagraph3ofthisRule.Failuretofilesuchnotice
shallalsosubjectapersonclaiminganexemptionunderSection10tosanctions
undertheCode.

8.

ThesaleorofferforsaleofasecurityinanytransactionexemptunderSection10shallnot
beexemptfromantifraud,civilliabilityorotherprovisionsoftheCode.

9.

In view of the objective of full and fair disclosure under the Code, exemptive relief under
Section 10 of the Code shall not be available to any issuer or other persons for any
transaction or chain of transactions that, although in technical compliance with the Code
andthisRule,shallbeapartofaplanorschemetoevadetheregistrationprovisionsofthe
Code.Insuchcases,registrationundertheCodeshallberequired.
SRCRULE11
DefinitionofCommodityFuturesContracts

1.

Commodityfuturescontractmeansacontractprovidingforthemakingortakingdeliveryat
aprescribedtimeinthefutureofaspecificquantityandqualityofacommodityorthecash
value thereof, which is customarily offset prior to the delivery date, and includes
standardized contracts having the indiciaof commodities futures, commodity options and
commodityleverage,ormargincontracts.

2.

Commoditymeansanygoods,articles,services,rightsandinterests,includinganygroup
orindexofanyoftheforegoing,inwhichcommodityinterestscontractsarepresentlyorin
thefuturedealtin.

3.

Forwardmeansacontractbetweenabuyerandasellerwherebythebuyerisobligatedto
takedeliveryandthesellerisobligedtodeliverafixedamountofanunderlyingcommodity
atapredeterminedpriceanddate.Paymentinfullisdueatthetimeofdelivery.

4.

WithoutprejudicetoapplicableBangkoSentralngPilipinasrulesandcirculars,thepublic
trading of commodities futures contracts and pertinent Commission rules shall remain
suspendeduntilfurtherorderedotherwisebytheCommission.
SRCRULE12.1

RequirementsforFilingsPursuanttotheSecuritiesRegulationCodeandtheCorporationCode
ofthePhilippines[formerly,SRCRule12]
1.

2.

ThisRulesetsforththerequirementsapplicabletothecontentsofanissuer'snonfinancial
statementportionsofthefollowing:
A.

Registrationstatementsforthesaleand/ordistributionofsecuritiespursuantto
theprovisionsofSections8and12oftheCodeandSRCRule8.1thereunder.
RegistrationStatementsunderSection12oftheCodeshallbefiledonSEC
Form121

B.

Prospectusestobeusedinconnectionwiththepublicdistributionofsecurities
pursuanttoSection8oftheCodeandSRCRule8.1paragraph3thereunder

C.

PeriodicandotherreportsrequiredtobefiledwiththeCommissionunder
Section17oftheCodeasprovidedinSRCRule17whichshallbemadeon
SECForms17Q,17A,17C,17EXor17L,asappropriate,unlessexempt
fromtheprovisionsthereofand

D.

InformationStatement(SECForm20IS)requiredunderSection20ofthe
CodeandSRCRule20.

ReportsfiledonSECForm17AandSECForm17CshallbedeemedtosatisfySection
141 and Section 26 of the Corporation Code of the Philippines, respectively reports

provided to security holders pursuant to SRC Rule 20 shall be deemed sufficient

compliancewithSection75oftheCorporationCodeofthePhilippines.
3.

In addition to the requirements of this Rule, the filing of forms with the Commission is
governedbytheprovisionsofSRCRule72.1undertitle"GeneralRulesandRegulationsFor
Filing of SEC Forms With the Securities and Exchange Commission." The definitions
containedinthatRuleandSRCRule38,totheextentthattheyarenotdefinedin"AnnexB"
shallassumethesamemeaningofsimilartermsasusedherein.

4.

InformationrequiredtobedisclosedunderthisRuleissetforthin"AnnexC".

5.

Definitionsoftermsusedintheformsdescribedinparagraph1ofthisRulearesetforthin
"AnnexB".

6.

RequirementsforRegistrationofCommercialPapers
A.

Thisruleshallapplytocommercialpapersissuedbycorporationstothepublic,
theofferorsaleofwhichisrequiredtoberegisteredundertheCode.

B.

Forpurposesofthisrule,acreditratingagency(CRA)meansanycorporation
principallyandregularlyengagedinthebusinessofperformingcreditevaluation
ofcorporationsandbusinessprojectsorofdebtissueswiththeintentionof
assessingtheoverallcreditworthinessorofascertainingthewillingnessand
abilityoftheissuertopayitsfinancialobligationsastheyfalldue,andwhich
assessmentistranslatedbycreditratingsperiodicallyandpubliclyannounced.

C.

Theconditionsforregistrationofcommercialpapersarethefollowing:
i.

FilingofaregistrationstatementunderSECForm121,inaccordance
withSRCRules8.1and12.1.

ii.

Theissuershallenterintoafirmcommitmentunderwritingagreementfor
thecommercialpaperwithauniversalbankoraninvestmenthouseor
anyotherfinancialinstitutionwhichisdulylicensedundertheInvestment
HousesLawprovidedthatiftheunderwriterispartofagroupcomposed
ofsuchinstitutions,theyshallagreeonasyndicatemanagerwhoshall
actonbehalfofandberesponsibletothegroupandwhoseactionsshall
bebindingthereto.

iii.

Exceptforissuanceamountingtonotmorethantwentyfivepercent
(25%)oftheissuer'snetworthorwherethereisanirrevocablecommitted
creditlinewithabankcoveringonehundredpercent(100%)ofthe
proposedissuance,acommercialpaperissueshallberatedbyarating
agencyaccreditedbytheCommission,inaccordancewiththefollowing
rules:
a.

Confidentialityofinformation
Allinformationreceivedbyacreditratingagency(CRA)froman

issuershallbekeptconfidential,exceptforthosewhich:
1)

ArepubliclydisclosedbytheRateeorIssueritselfpriorto
orsubsequenttothereceiptofsuchinformationbythe
CRA

2)

Havebecomegenerallyknowninthetradeorbythepublic
throughnofaultornegligenceorfaultoftheCRA

3)

HavebeenlawfullydisclosedtotheCRAbyathirdparty.
Ifanyofficer,directororstaffofaCRAcomesinto

possessionofnonpublicmaterialinformationaboutthe
issuerwhosesecuritiesarebeingrated,he(andallother

staffmembers,officers/directors)shallbedisallowedto
tradeinthatissuer'ssecurities,ormaynotdisclosesuch
informationnorwithholdanyratingrecommendationonthe
relevantissueruntilthereasonfortheratingissatisfied.
b.

MonitoringofIssuersWhoseSecuritiesHaveBeenRated
Toensurethataratingisaccurateandwithbestobjectivity,aCRA

shallmonitoronacontinuingbasiseachissuer,ifanissuerrating
wasgiven,oreachissue,foranissuerating.TheCRAshallraise
orlowerratingstoreflectsignificantchangesinthe
creditworthinessoftheissuerorinthecreditqualityoftheissue.
c.

d.

Change,suspensionorwithdrawalofrating
1)

Aratingmaybechanged,suspendedorwithdrawnasa
resultofchangesin,unavailabilityornonsubmissionof,
information,misleadingstatementsoractionsoftheissuer,
orforotherrelevantormaterialcircumstanceswhichmay
bedeterminedbytheCommission.

2)

Acreditratingagencyshalladviseanissuerinadvanceof
anyproposedchangeintheratingprovided,however,that
acreditratingagencymaywithdrawaratingwithoutprior
noticebasedonlackofinformationand/orreceiptof
materialadverseinformationand/orifthereisacompelling
reasontomakeanychangeinratingfortheinformationand
protectionofinvestorsand/orbasedonotherrelevantor
materialcircumstancesastheCommissionmaydetermine.

3)

Thecreditratingagencyneednotgettheapprovalofthe
issuertodowngradeitsratingontheissueroranissue.

4)

Issuersshallnotsuppress,curtailorotherwisepreventa
ratingchangeunderpainofsanctionsundertheCode.

Ratingcriteria
Ratingsshallbebasedonthefollowingconsiderations:

1)

natureandprovisionsofthedebtobligation

2)

likelihoodofdefaultbyanissuer

3)

protectionaffordedby,andrelativepositionof,the
obligationintheeventofabankruptcy,reorganizationor
otherarrangementunderthebankruptcylaw,andother
factorsaffectingcreditors'rights

4)

economicrisk

5)

industryrisk

6)

marketpositionoftheissuer

7)

businessdiversificationoftheissuer

8)

managementandstrategy

9)

financialrisks

10)

capitalstructure/leverage

11)

financialflexibilityand

12)
e.

compliancewithleadingpracticesandprincipleson
corporategovernance.

Applicationforaccreditation
Toapplyforaccreditation,acreditratingagencyshall:

1)

Beastockcorporation.

2)

HaveaminimumpaidupcapitalofatleastTenMillion
Pesos(P10,000,000.00).

3)

SubmittotheCommissionthefollowing:
i.

listofshareholdersandtheircorporateaffiliations

ii.

listofotherbusinessactivities,ifany

iii.

copiesofthecompany'sArticlesofIncorporation
andByLaws

iv.

astatementpertainingtoownershipstructureand
possibleconflict/sofinterest

v.

names,professionalqualificationandindependence
ofstaffinvolvedintheratingdecision("rating
specialists")

vi.

awrittencodeofconductwhichinsuresthe
independenceoftheratingspecialistsandtherating
agencyfromtheissuersitisrating

vii.

disclosureofaffiliations,training,assistanceor
supportitreceivesfrominternationalratingagencies,
ifany

viii.

ratingscales,criteria,measurements,symbolsand
thelike,whichithasinuse

ix.

operatingprocedures,ratingpolicies,ratingcriteria
andotherrationaleusedinarrivingatarating

x.

copyofmodelwrittenagreementwithissuersand

xi.

ManualonCorporateGovernance.

4)

Anapplicantmayrequestconfidentialityoftheforegoing
informationexceptitsoperatingprocedures,ratingpolicies
andratingcriteria.

5)

Withinsixty(60)daysfromreceiptofawrittenapplication
foraccreditationontheprescribedSECForm,theSEC
shalleitherapproveregistrationoutrightorschedulea
hearingtoresolveissueswhichmayresultinsuch
registrationbeingdeniedbasedonconcern/sthatthe
Commissionmaydeemimportant.

6)

Allapplicationsforaccreditationshallbeaccompaniedby
aninitialfilingfeeofFiftyThousandPesos(P50,000.00)or
suchamountastheCommissionmaydetermine.

7)

Theaccreditationthusgrantedshallcontinuetobeeffective
untilrevokedbytheCommission.However,anannualfeeof
TenThousandPesos(P10,000.00)orsuchamountasthe

Commissionmaydetermine,shallbepaidyearlyatleast
fortyfive(45)dayspriortotheanniversarydateofits
accreditation.Ifsuchannualfeeisnotpaid,theregistration
ofsuchpersonshallbesuspendeduntilpaymentismade,
providedthatifthesameisnotpaidpriortothethirtieth
(30th)dayaftertherequiredpaymentdate,such
accreditationshallbeautomaticallyterminatedandany
issuerwhichhasbeenratedbysuchratingagencyshallbe
requiredtoobtainanewcreditratingwithinthirty(30)days
afternotificationbysuchagencyofsuchtermination.
8)

Allaccreditedcreditratingagenciesshallensurethatthe
informationsetforthintheirapplicationform,andall
documentsappendedthereto,arecurrent,trueandcorrect.
Anychangetosuchinformationshallbefiledwiththe
Commissionnolaterthanten(10)businessdaysfromthe
occurrenceofsuchchange.

9)

Failuretoprovideaninformedandobjectiveassessmentof
anissuer'screditqualityoranyviolationoftheforegoing
rulesshallbeasufficientground,afterduenoticeand
hearing,fortherevocationorsuspensionofthe
accreditationofaratingagency.

10)

Nopersonorentityshallunderpainofsanctionsunderthe
Codeholditselfoutasanaccreditedcreditratingagencyor
otherwiseregulatedinprovidingcreditratingservicesunless
ithasbeenaccreditedbythisCommissionunderthisrule.

D.

Theissuershallcomplywithsuchothertermsandconditionsthatthe
Commissionmayimposefromtimetotimeintheexerciseofitsmandateto
protecttheinvestors.

E.

Theissuershallcomplywiththeconditionsimposedfortheregistrationofits
commercialpapersduringtheeffectivityoftheregistrationstatementcovering
saidsecurities.Noncompliancetherewithshallbeasufficientground,after
noticeandhearing,fortherevocationorsuspensionofsaidregistration.

F.

TermofRegistrationandReissuance

G.

i.

Registrationofshorttermcommercialpapersshallbevalidforone(1)
yearoranylesserperiodandmayberenewedannuallywithrespectto
theunissuedbalanceoftheauthorizedamountuponshowingthatthe
issuerhasstrictlycompliedwiththeSRCandapplicablerules,including
thisrule,andhaspaidallrequiredfeesProvided,however,thatany
applicationforrenewalofregistrationshallbefiledatleastfortyfive(45)
dayspriortotheexpirydate.

ii.

Registrationoflongtermcommercialpapersshallbeaclosedend
processwherebytheissuedportionoftheauthorizedamountmayno
longerbesubjectofreissuancetothepublicunlessreappliedfor
registrationinaccordancewiththisRule.

Pretermination
i.

Longtermcommercialpapers,exceptbonds,whichhavematurityperiod
offive(5)yearsormoreshallnotbepreterminatedbytheissuerorthe
lenderwithinsevenhundredthirty(730)daysfromissuedate.

ii.

Preterminationshallincludeoptionalredemption,partialinstallmentsand

amortizationpaymentshowever,installmentsandamortizationpayments
maybeallowedifsostipulatedintheloanagreement.
H.

I.

Default
i.

Ifanissuerofshorttermcommercialpapersfailstopayinfullany
interestduethereon,ortheprincipalupondemandatmaturitydate
appearingthereon,saidissuershall,withinthenextbusinessdayafter
suchfailure,notifyinwritingitsunderwriter/sellingagentandthe
Commissionofsuchfailureandthelattershallforthwithissueaformal
CeaseandDesistOrderenjoiningboththeissuerandthe
underwriter/sellingagentfromfurtherofferingforsalethesubject
commercialpapers.

ii.

Ifanissueroflongtermcommercialpapersfailstopayinfullanyinterest
duethereon,ortheprincipalupondemandatmaturitydatestated
thereon,saidissuershall,withinthenextbusinessdayaftersuchfailure,
notifyinwritingitsunderwriter/sellingagentandtheCommissionofsuch
failure.Intheeventthatthefailureoccurswithintheoneyeareffectivity
ofthepermit,theCommissionshallissueaformalCeaseandDesist
Orderenjoiningboththeissuerandtheunderwriter/sellingagentfrom
furtherofferingforsalethesubjectcommercialpapers.

iii.

Inbothcases,anissuerofcommercialpaperswhichisapubliclylisted
companyshall,withinthenextbusinessdayaftertheaforementioned
failure,informinwritingtheExchangeofsuchfailure.

RegistrationFees
Thefilingfeeshallbebasedonthetotalamountofcommercialpapersproposed

tobeissuedandshallbesubjecttoadiminishingfeeininverseproportionin
accordancewiththetablepresentedinSECForm121.
J.

CompliancewithQuasiBankingRequirements
Nothingintheserulesshallbeconstruedasanexemptionfromorawaiverof

applicableBSPrequirementsgoverningtheperformanceofquasibanking
functionsoffinancialintermediariesdulyauthorizedtoengageinsuchactivities.
Assuch,allapplicationscoveringtheregistrationofcommercialpapersthat
shallbeissuedforrelendingpurposesshallbeendorsedbytheCommissionto
theBSP.Otherwise,onlyCommissionapprovalshallbenecessary.
7.

RequirementsforRegistrationofDerivatives
A.

Warrants
i.

Definitions
a.

"WarrantCertificate"meansthecertificaterepresentingthe
righttoaWarrant,whichmaybedetachableornot,dulyissuedby
theIssuertotheWarrantholder.

b.

"WarrantInstrument"meansthewrittendocumentordeed
containingthetermsandconditionsoftheissueandexerciseofa
Warrant,whichtermsandconditionsshallinclude:
1.

themaximumunderlyingsharesthatcanbepurchased
uponexercise

2.

theexerciseperiod

3.

suchothertermsandconditionsastheCommissionmay

require.

ii.

iii.

c.

"DetachableWarrant"meansaWarrantthatmaybesold,
transferredorassignedtoanypersonbytheWarrantholder
separatefrom,andindependentof,thecorrespondingBeneficiary
Securities.

d.

"NondetachableWarrant"meansaWarrantthatmaynotbe
sold,transferredorassignedtoanypersonbytheWarrantholder
separatefrom,andindependentof,theBeneficiarySecurities.

e.

"BeneficiarySecurities"meansthesharesofstockandother
securitiesoftheIssuerwhichformthebasisoftheentitlementina
Warrant.

f.

"UnderlyingShares"meanstheunissuedsharesofa
corporationwhichmaybepurchasedbytheWarrantholderupon
theexerciseoftherightgrantedundertheWarrant.

Registration
a.

UponproperregistrationofitswarrantsunderSections8and12
oftheCodeandSRCRules8.1and12.1,acorporationmayoffer
andissuesuchsecuritiestothepublic.

b.

TheregistrationoftheWarrantsshallincludeitsunderlying
shares.

c.

Theissuershalldiscloseinitsregistrationstatementthetermsand
conditionsofthewarrantplanincludingcomputationaldatarelative
thereto.

d.

ApersonproposingtoofferWarrantstothepublicshallfileSEC
Form121withtheprescribedfilingfee.Notwithstandingthe
Warrantshavingnoissuevalue,thefilingfeeforthesameshallbe
FiftyThousandPesos(P50,000.00)inadditiontothefeeswhich
maybedueontheunderlyingshares.

FormandContentandOtherRequirementsofWarrantCertificates
a.

AllWarrantsauthorizedforissuancebytheCommissionshallbe
evidencedbyWarrantCertificateswhichshallbesignedbythe
President(orsuchotherofficerasmaybedulyauthorizedbythe
BoardofDirectors)andtheCorporateSecretaryoftheIssuer.

b.

IncaseofDetachableWarrants,theWarrantCertificateshallstate
thefollowingonitsface:"TheWarrantcontainedhereindoesnot
byitselfrepresentanyshareofstock,butarighttopurchase
sharesofstockoftheIssuerunderthetermsandconditions
hereincontained".

c.

IncaseofNondetachableWarrants,therightgrantedunderthe
Warrantshallbedescribedinthestocktransferorinstrument
evidencingtheBeneficialSecurities.AWarrantCertificateorthe
stockcertificateorinstrumentevidencingtheBeneficialSecurities
wherethenondetachableWarrantisdescribedshallalsostatethe
following(whetheronitsfaceoronitsreverseside):
1)

Thewarrantcertificatenumber

2)

Theparorissuevalue,classandnumberofthe
correspondingunderlyingshares

iv.

3)

Theexerciseprice,ortheformulaforcomputingthesame,
oradjustmentsthereto

4)

TheexerciseperiodandtheexpirydateoftheWarrant

5)

Theprocedurefortheexercise

6)

ThesummaryoftheprovisionscontainedintheWarrant
Instrumentand

7)

Exchangeratioorthenumberofunderlyingshareswhich
maybepurchasedbyeachWarrantholder.

ExercisePeriod
WarrantholdersmayexercisetherightgrantedunderaWarrantwithinthe

periodsetbythecompanyanddisclosedinitsregistrationstatement.No
extensionofsaidperiodshallbeallowed.
v.

vi.

ExercisePrice
a.

TheExercisePriceshallbeatapricefixedatthetimeof
registration,orcomputedusingthestatedformula,anddisclosed
bythecompanyinitsregistrationstatement.

b.

TheExercisePriceshallbepaidinfulluponexercise,andshallnot
belessthantheparvalueoftheunderlyingsharesornotlessthan
FivePesos(P5.00)pershare,iftheunderlyingsharesarewithout
parvalue.

c.

TheExercisePriceshallbeadjustedonlyiftheWarrantInstrument
providesfor(i)theconditionsunderwhichadjustmentsinExercise
Pricecanbemadeand(ii)theformulaunderwhichtheadjusted
ExercisePricecanbedetermined.TheExercisePricemaybe
adjustedonlyinanyofthefollowingcircumstancesoccurringafter
theissuanceoftheWarrant:
1)

achangeintheparvalueoftheunderlyingshares

2)

adeclarationofstockdividends

3)

anofferingofadditionalsharesatapricedifferentfromthe
originalexerciseprice

4)

amerger,consolidationorquasireorganization

5)

adispositionofasubstantialportionoftheassetsofthe
corporationand

6)

suchothersimilarinstancesasmaybeapprovedbythe
Commission.

WarrantsRegistryBook
AnycorporationauthorizedtoissueWarrantsshallhaveaWarrants

RegistryBookmaintainedbythedesignatedWarrantsRegistrarwhoshall
bepreferablytheStockandTransferAgentoftheIssuer.Uponthe
exerciseoftherightgrantedunderaWarrant,anotationtothiseffect
shallbedulyrecordedintheWarrantsRegistryBook,andthepurchase
oftheUnderlyingSharesshallberecordedintheStockandTransfer
BookoftheIssuer.Anysale,transfer,orassignmentofaWarrantmust
bedulyrecordedintheWarrantsRegistryBook,includingthenamesof
thetransferorandtransferee,thenumberofWarrantstransferredand

thenumberofUnderlyingSharescoveredbysaidtransfer.Unless
recordedintheWarrantsRegistryBook,thetransferofWarrantsshall
notbebindingontheIssuer.
vii.

TransferabilityofWarrants
AllregisteredWarrantsshallbetransferablewithoutneedofapprovalfrom

theCommission.IncaseofNondetachableWarrants,theyshallbe
transferredonlytogetherwiththeBeneficialSecurities.
viii.

ListingRequirements
WarrantsauthorizedforissuancebytheCommissionmaybelistedinan

exchangetogetherwiththeBeneficiarySecuritiesunderexistingrulesfor
listingofsecurities,andundersuchotherrulesastheexchangemay
adoptandapprovedbytheCommissionprovided,however,thatthe
WarrantsshallbeautomaticallydelisteduponthelapseoftheExercise
Period.Warrantsissuedbylistedcompaniesarerequiredtobelisted.
B.

Options
i.

NocorporationshallgrantorofferanyOptiontothepublicunlessthe
sameisregisteredinaccordancewithSections8and12oftheCode
andSRCRules8.1and12.1,exceptwhensaidsecurityisexemptfrom
registrationunderSections9and10oftheCode.

ii.

TheregistrationoftheOptionsshallincludeitsunderlyingshares.

iii.

ApersonproposingtoofferanyOptiontothepublicshallfileSECForm
121,withtheprescribedfilingfeebasedontheaggregateissuepriceof
theOptionsandtheunderlyingshares.NotwithstandingtheOptions
havingnoissuevalue,thefilingfeeforthesameshallbeFiftyThousand
Pesos(P50,000.00)inadditiontothefeeswhichmaybedueonthe
underlyingshares.

iv.

Theissuershalldiscloseinitsregistrationstatementthetermsand
conditionsoftheOptionplanincludingcomputationaldatarelativethereto.
ThePlanshallbesubmittedasexhibittotheregistrationstatement.

v.

InconsideringregistrationofstockOptions,theCommissionshallbe
guidedbythefollowing:
a.

Stocksgrantedtostockholdersproportionatelywiththeir
shareholdingsmaybeallowed.

b.

StockOptionsmaybegrantedtoemployeesorofficialswhoare
notmembersoftheboardsubjecthowevertoareviewofthe
schemebytheboardandsubjecttoapprovalbythestockholders,
pursuanttothepolicyofthegovernmenttowidencorporatebase
andtodistributecorporateprofitswiderandmoreequitably.

c.

StockOptionsgrantedtopersonswhoarenotstockholdersmay
begrantedonlyuponshowingthattheBoardhasbeenduly
authorizedtograntthesamebyitscharterorbyaresolutionofthe
stockholdersowningatleasttwothirds(2/3)ofalltheoutstanding
capitalstock,votingornonvoting,excludingtreasurystock.

d.

StockOptionsgrantedtodirectorsormanaginggroupsandits
officersmustbeapprovedinameetingofstockholdersowningat
leasttwothirds(2/3)ofalltheoutstandingcapitalstock,votingor
nonvoting,excludingtreasurystock.CertificationbytheCorporate

Secretaryastothenumberofsharesrepresentedinsaidmeeting
andthenumberofvotescastfororagainstthegrantofoptional
rightstothedirectorsormanaginggroupsanditsofficersshallbe
submitted.
e.

C.

8.

ExerciseofOptionsmustbedonewithintheperiodsetbythe
companyanddisclosedinitsregistrationstatement.

vi.

EverycorporationgrantingOptionsshallmaintainanOptionRegistry
BookwhereallOptionsgrantedincludingtransfersshallberecordedwith
theentriesshowingthenameofpersontowhomtheOptionisgranted,
thebasisorauthorityforsuchgrant,thedategranted,thenumberof
shares,thepricepershare,theexercisedate,thetotalcostandofficial
receiptnumber.

vii.

NounderlyingsharesforstockOptionsshallcomefromthetreasury
sharesoftheissuercompany.

OtherTypesofDerivatives
i.

Allcompaniesproposingtoissuederivativestothepublic,unlesscovered
bytheRulesonFuturesMarket,shallfilearegistrationstatementunder
SECForm121,inaccordancewithSRCRules8.1and12.1.

ii.

Suchregistrationstatementshallincludefinancialstatementspreparedin
accordancewiththeGenerallyAcceptedAccountingPrinciples(GAAP)
inthePhilippinesandtheapplicableInternationalAccountingStandards
onFinancialInstruments.

iii.

Itshalllikewiseincludeadescriptionofthecompany'sfinancialrisk
managementobjectivesandpolicies,includingitspoliciesforhedging.
Eachmajortypeofforecastedtransactionshallbeprovidedinits
prospectus.

Additional registration
Shares/Certificates
A.

requirements

for

Proprietary

and

NonProprietary

TheregistrantshallclearlyindicateinitsArticlesofIncorporation,ByLawsand
prospectusthefollowing:
i.

Adescriptionofthenatureandtypeoftheshares/certificates,rightsand
privilegesoftheholdersthereofparticularlytheirrightoverthefacilitiesof
theClub

ii.

Thecertificatesorsharesshallbeissuedwithinsixty(60)daysfromthe
dateoffullpaymentofthesame

iii.

TheClubshallqualifytheprospectiveclubmembersbeforeactual
sale/transferoftheshare/certificateisexecuted.

B.

Theregistrantshallclearlyindicateinitsprospectusanundertakingthat,inthe
eventtheprojectortheunderlyingassetforwhichthesecuritiesaresoldisfor
whateverreasons,notcompletedasdisclosed,itshallrefundtheamountofthe
investmentofthepurchaserofthesecuritieswithinten(10)daysfromreceiptof
thewrittendemand.

C.

TheClubshall:
i.

Notcollectmembershipduesunlesstheprojectisfiftypercent(50%)
usableasindicatedintheprospectus,unlesstheClub'sbylawsprovidea
higherpercentageofusability

ii.

SubmittotheCommissionareportunderoathofanyincreaseinfees

andtherationaleforsaidincreasewithinthirty(30)daysfromBoard
approval
iii.

NotifyclubmembersofanyincreaseinfeesupontheBoard'sapproval
ofthesaidincreaseand

iv.

Causethepostingofpropernoticesandothercommunicationsonthe
chargingoffeesonbulletinboardssituatedatconspicuousplace/satthe
site,forthebenefitofsecondarymarkets.

D.

Theconditionsunderparagraph(C)shallbereflectedinthecompany's
prospectus.

E.

Thefollowingdocumentsshallbesubmittedwiththeregistrationstatementas
exhibitsthereof:
i.

CopyofSubscriptionAgreementcontainingtherequiredundertaking
underparagraph(B)above

ii.

CopyofaCreditLineAgreementwithareputabledomesticbank.Such
creditlineshallbeavailedofintheeventthataninsufficiencyoffundfor
thecompletionoftheprojectshalloccur.Thetermsofthecreditline
agreementshallbedisclosedintheprospectus

iii.

CopyofaCustodianship/EscrowAgreementwithareputablebank
coveringtheproceedsfromthesaleofsaidshares/certificates,providing
amongothers,thewithdrawalofthesameonlyuponpresentationofthe
company'sworkprogressreportand

iv.

CopyoftheEnvironmentalComplianceCertificatefromtheDepartment
ofEnvironmentandNaturalResourcescoveringthelocationofthe
project.
SRCRULE12.2

1.

2.

IncorporationbyReference
Exceptforinformationfiledasanexhibit,whichissubjecttotheprovisionsofparagraph3
hereof,orwhichisrequiredtobecontainedinaprospectuswhichissubjecttoparagraph
4 hereof, information may be incorporated by reference in answer, or partial answer, to
anyitemofaregistrationstatementfiledpursuanttoSRCRule8orreportfiledpursuantto
SRCRule17.1subjecttothefollowingprovisions:
A.

Financialstatementsincorporatedbyreferenceshallsatisfytherequirementsof
theformorreportinwhichtheyareincorporated.Financialstatementsorother
financialdatarequiredtobegivenincomparativeformfortwo(2)ormorefiscal
yearsorperiodsshallnotbeincorporatedbyreferenceunlessthematerial
incorporatedbyreferenceincludestheentireperiodforwhichthecomparative
dataaregiven

B.

Informationinanypartoftheregistrationstatementorotherreportsmaybe
incorporatedbyreferenceinanswer,orpartialanswer,toanyotheritemofthe
registrationstatementorotherreportand

C.

Copiesofanyinformationorfinancialstatementincorporatedintoaregistration
statementorotherreportbyreference,orcopiesofthepertinentpagesofthe
documentcontainingsuchinformationorstatements,shallbefiledasanexhibit
tothestatementorreport.

A material incorporated by reference shall be clearly identified in the reference by page,

paragraph,captionorotherwise.Whereonlycertainpagesofadocumentareincorporated
byreferenceandfiledasanexhibit,thedocumentfromwhichthematerialistakenshallbe

clearly identified in the reference. An express statement that the specified matter is
incorporated by reference shall be made at the particular place in the statement or report
where the information is required. A matter shall not be incorporated by reference in any
casewheresuchincorporationwouldrenderthestatementorreportincomplete,unclearor
confusing.
3.

4.

IncorporationofExhibitsbyReference
A.

AnydocumentorpartthereoffiledwiththeCommissionpursuanttotheCode
maybeincorporatedbyreferenceasanexhibittoanystatementorreportfiled
withtheCommissionbythesameoranyotherperson.Anydocumentorpart
thereoffiledwithanExchangepursuanttotheCodemaybeincorporatedby
referenceasanexhibittoanystatementorreportfiledwiththatExchangeby
thesameoranyotherperson.

B.

Ifanymodificationhasoccurredinthetextofanydocumentincorporatedby
referencesincethefilingthereof,theregistrantshallfilewiththereferencea
statementcontainingthetextofanysuchmodificationandthedatethereof.

Informationshallnotbeincorporatedbyreferenceinaprospectus.
SRCRULE12.5(b)

1.

2.

PublicationofNoticeofFiling
The registrant shall prepare and file with its registration statement a notification of such
filingwhichshallrecite:thataregistrationstatementforthesaleofthesubjectsecurityhas
been filed with the Commission that the registration statement is open to inspection by
interestedpartiesduringbusinesshoursattheCommissionand,thatcopiesthereofshall
be furnished everyone requesting the same for a reasonable cost. Said notice shall be
signed by the Director of the Corporation Finance Department or any officer duly
designated by the Commission. The issuer shall, upon or before filing, publish the
notification, at its own expense, in two (2) newspapers of general circulation in the
Philippines, once a week for two (2) consecutive weeks. The required format for this
publicationappearsas"AnnexA".
As part of its registration statement, the registrant shall submit to the Commission an
affidavit of publication with a copy of the notice that was published, or with a copy of
the proforma notice to be published, containing an attestation that such publication has
beenorwillbeundertakenimmediately.
SRCRULE13
SuspensionorRevocationofRegistrationofSecurities
(formerly,SRCRule13ObligationofIssuersWhereRegistrationofSecuritiesHasBeen
SuspendedorRevokedDuringaPublicOffering)

1.

If during a public offering, the Commission, after due notice and hearing, revokes the
effectivityofaregistrationstatementunderSection13oftheCode,orsuspendsregistration
underSection15thereof:
A.

TheCommissionshallpublishanoticeoftheorderofrevocationorsuspension
inanewspaperofgeneralcirculationinthePhilippinesand/orpostonthe
Commission'swebsitealongwithastatementthattheofferinginitscurrentform
hasbeencancelledandthattheissuer,subjecttosuchorder,oranyperson
actingonbehalfoftheissuerinthedistributionofthesubjectsecuritiesandhas
inhispossessionanypaymentforthepurchaseofsecurities,pursuantto
paragraph3hereofifapplicable,hasthedutytoreturnanyandallpayments
madebypurchasersofthesubjectsecuritieswithinten(10)daysofsuch
publication,andsimultaneouslyfurnishtheissueracopyofthisnotice.

B.

Uponreceiptofanoticeunderparagraph1(A)above,theissuerandall
personsactingonitsbehalfinthedistributionofthesubjectsecuritiesshall

immediatelyterminatetheofferingandreturnanyandallpaymentsreceived
frompurchaserswithinten(10)daysafterthenoticeisfirstpublished.
2.

If the public offering is already terminated and the Commission, after due notice and
hearing,revokestheeffectivityoftheregistrationstatementunderSection13oftheCode,
orsuspendsregistrationunderSection15thereof,theCommissionshallpublishanoticeof
the order of revocation or suspension in a newspaper of general circulation in the
Philippinesand/orpostintheCommission'swebsite.

3.

If a registration statement which on its face is incomplete or inaccurate in any material

respect and/or includes any untrue statement of a material fact and/or omits to state a
material fact required to be stated therein or that is necessary to make the statements
therein not misleading, has not yet become effective, the issuer shall amend the same in
accordance with SRC Rule 14. If the said registration statement has already become
effective, such registration shall be suspended or revoked by the Commission in
accordancewithparagraph1ofthisRule.

4.

VoluntaryRevocation
A.

AnApplicationfortheVoluntaryRevocationofRegistrationofSecuritiesshall
beeffectedbyfilingthefollowing:
i.

VerifiedPetitionforRevocationofRegistrationandPermittoSell
SecuritiestothePublic

ii.

BoardResolutionapprovingsaidrevocation,certifiedunderoathbythe
CorporateSecretaryandattestedtobythePresidentoroneperforming
similarfunction

iii.

ListofStockholdersindicatingtheirrespectiveshareholdingsasofthe
latestdate

iv.

ProposedNoticeofFilingofPetitionforVoluntaryRevocationof
RegistrationofitsSecurities,recitingthefactssupportingthesaidpetition
andthatthesameissubjecttotheapprovaloftheCommissionand

v.

CopyofOfficialReceiptrepresentingpaymentoffilingfeeintheamount
ofFiveThousandPesos(P5,000.00)orsuchamountastheCommission
maydetermine.

B.

TheCommissionmayimposesuchotherrequirementsorconditionsasitmay
deemnecessary.ThesamemayincludeanOrdertoproduceallthebooksand
papersofthepetitionerandtoadministeroathsto,andexamineitsofficersor
otherpersonsconnectedtherewith.

C.

Procedures
i.

Uponpresentationofthedocumentsrequiredforvoluntaryrevocationof
registrationofsecurities,theNoticeofFilingofPetitionforVoluntary
RevocationshallbeimmediatelypublishedbytheCommission,atthe
expenseofthepetitioner,onceinanewspaperofgeneralcirculation

ii.

Ifafterfifteen(15)businessdaysfromtheaforesaidpublication,the
Commissionfindsthatthepetitiontogetherwithallotherpapersand
documentsattachedthereto,isonitsfacecompleteandthatnoparty
standstosufferdamagethereby,itshallprepareanOrderrevokingsaid
Registration,withoutprejudicetothefilingofclaimsfordamages,bythe
affectedpersonsorstockholders,withtheregularcourtsofjustice.

iii.

TheOrderofRevocationshallbepublishedonce,inanewspaperof
generalcirculation,attheexpenseofthecompanyand/oruploadedatthe
SECWebsite.

5.

TheOrderofRevocationshallnotexemptthecompanyfromitsreportingobligationsunder
Section17.2oftheSecuritiesRegulationCode.
SRCRULE14
AmendmentstotheRegistrationStatementandProspectus

1.

2.

ForpurposesofthisRule,materialinformationshallinclude,butnotlimitedto,thefollowing:
A.

Anyeventortransactionwhichincreasesorcreatesariskontheinvestments
oronthesecuritiescoveredbytheregistration

B.

Increase/decreaseinthevolumeofthesecuritiesbeingofferedatanissue
pricehigher/lowerthantherangesetanddisclosedintheregistrationstatement
andwhichresultstoaderogationoftherightsofexistingsecurityholders,as
maybedeterminedbytheCommission

C.

Majorchangeintheprimarybusinessoftheregistrant

D.

Reorganizationofthecompany

E.

Changeintheworkprogramoruseofproceeds

F.

Loss,deteriorationorsubstitutionofthepropertyunderlyingthesecurities

G.

Significantortenpercent(10%)ormorechangeinthefinancialconditionor
resultsofoperationoftheregistrantunlessareporttothateffectisfiledwiththe
Commissionandfurnishedtheprospectivepurchaser

H.

Classification,declassificationorreclassificationofsecuritieswhichresultsto
derogationofrightsofexistingsecurityholders,asmaybedeterminedbythe
Commission.

If a registration statement or a prospectus on file with the Commission under the Code
becomesincompleteorinaccurateinanymaterialrespectoriftheissuerwantstochange
anymaterialinformationtherein,theissuershall:
A.

fileanamendmenttotheregistrationstatementwiththeCommissionexplaining
allproposedchangeswhichshallbereviewedbytheCommissionin
accordancewithSection14oftheCode

B.

wheretheregistrationstatementhasbeendeclaredeffectivebythe
Commission,publishanoticeoftheproposedamendment/s,includingthe
reasonstherefor,intwo(2)newspapersofgeneralcirculationinthePhilippines
statingthattheofferinginitscurrentformhasbeencancelled

C.

ifthechangesshallresulttoaderogationofrightsofexistingsecurityholders
orpurchasersofsubjectsecuritieswhohavepaidaportionofthesellingprice
thereof,theissuershallincludeintheabovementionedpublicationanofferto
rescindalltransactionsthathavebeencompletedforsaletodate,without
makinganydeductionpursuanttoparagraph(D)belowandwaitforthirty(30)
daysforpurchaserstorespondtotherescissionofferbeforeinitiationofthe
amendedofferingand

D.

wheretheconditionsunderparagraph(C)arepresent,purchasersmay,within
thirty(30)daysfromthedateofsuchnotification,renouncetheirpurchaseof
securities.Whereupontheissuer,oranypersonactingonbehalfoftheissuer
inconnectionwiththedistributionofsaidsecurities,shall,withinten(10)days
fromreceiptofnotificationofsuchelection,returnthecontributionspaidby
suchpurchaserswithoutmakinganydeduction.Purchaserswhodecidenotto
renouncetheirpurchaseofsecuritiesshallbesubjecttothetermsofthe
amendedoffering.

E.

Incaseofanincreaseinthevolumeorofferingpriceofsecuritiestoalevel

higherthantherangepreviouslydisclosedbythecompany,theamended
registrationstatementorprospectusshallbeaccompaniedbyafilingfeebased
onthedifferencebetweenthehighestaggregateamountperoldrangeandthe
totalamountbasedonnewvolumeorprice.Foramendmentsotherthanthe
offeringprice,theminimumfilingfeefortheamendedregistrationstatementor
prospectusshallbeTenThousandPesos(P10,000.00)orsuchamountasthe
Commissionmaydetermine.
3.

If after commencement of a public offering, the Commission becomes aware that the
prospectus is on its face incomplete or inaccurate in any material respect, or there is a
material omission therefrom, the Commission may require an issuer to comply with
paragraph2aboveorsuspendorrevokeitsregistrationunderSection13or15oftheCode
andSRCRule13.

4.

If,duringapublicoffering,aninformationotherthanmaterialinformationintheprospectus
changes,theissuershallfileareportonSECForm17Cofthenewinformation/changes
withtheCommissionpriortomakingsuchchangesintheregistrationstatement,explaining
all proposed changes thereto. Unless, within twenty (20) days from receipt of such
changes, the Commission provides a written response to the issuer regarding such
disclosure,theproposedchangesshallbedeemedtobepartoftheoriginaldisclosure.

5.

Every amendment to a registration statement shall be signed by the persons specified in

Section 12.4 of the Code or by any executive officer duly authorized by the Board of
Directors.Thefinalregistrationstatementandthefinalprospectusshall,however,besigned
byallrequiredsignatoriesunderSection12.4oftheCode.

6.

There shall be filed with the Commission one (1) complete, unmarked copy of every
amendment, including exhibits and other papers and documents filed as part of the
amendment and one (1) additional copy, marked to indicate clearly and precisely, by
underlining or in some other appropriate manner, the changes effected in the registration
statement by the amendment. Four (4) copies of the final prospectus and final amended
registration statement shall be duly signed by required signatories and filed with the
Commission.

7.

A copy of every amendment relating to a certified financial statement shall include the
consent of the certifying accountant to the use of his certificate in connection with the
amendedfinancialstatementintheregistrationstatementorprospectusandtobeingnamed
ashavingcertifiedsuchfinancialstatement.

8.

ThedateonwhichamendmentsareactuallyreceivedbytheCommissionshallbethedate
of filing thereof if all of the requirements of the Code, and rules adopted thereunder with
respecttosuchfiling,havebeencompliedwith.
SRCRULE16

TransitionRuleforPreNeedPlans
Rules and related Commission circulars governing preneed plan companies and persons
involved in the sale and distribution of preneed plans adopted under the Securities Regulation
Codeshallcontinueinforceandeffectuntilsaidrulesareamended,modifiedorreplacedbynew
rulesadoptedundertheCode.
SRCRULE17.1
ReportorialRequirements
(formerly,SRCRule17RequirementstoFileAnnual,Quarterly,Current,Predecessorand
SuccessorReports)
1.

ReportingandPublicCompanies
Thereportorialprovisionsofthisparagraphshallapplytoreportingandpubliccompanies,as

definedunderSRCRule3.However,theobligationofacompany,whichhassoldaclassof
itssecuritiespursuanttoaregistrationunderSection12oftheCodeshallbesuspendedfor

anyfiscalyearifasofthefirstdayofanysuchfiscalyear,ithaslessthanonehundred
(100)holdersofsuchclassofsecuritiesandtheCommissionisdulynotifiedofthesame.
Suchsuspensionshallonlybeavailedofaftertheyearsaidregistrationbecomeseffective.
A.

Everyissuersetforthinparagraph1hereof,shallfilewiththeCommission:
i.

AnannualreportonSECForm17Aforthefiscalyearinwhichthe
registrationstatementwasrenderedeffectivebytheCommission,andfor
eachfiscalyearthereafter,withinonehundredfive(105)daysafterthe
endofthefiscalyear.

ii.

AquarterlyreportonSECForm17Q,withinfortyfive(45)daysafterthe
endofeachofthefirstthreequarters(3)ofeachfiscalyear.Thefirst
quarterlyreportoftheissuershallbefiledeitherwithinfortyfive(45)
daysaftertheeffectivedateoftheregistrationstatementoronorbefore
thedateonwhichsuchreportwouldhavebeenrequiredtobefiledifthe
issuerhadbeenrequiredpreviouslytofilereportsonSECForm17Q,
whicheverislater.

iii.

1.

2.

Thedisclosurerequiredbyparagraph1(A)(iii)(1)aboveshallbe
madebytheissuer:

3.

iv.

acurrentreportonSECForm17C,asnecessary,tomakeafull,
fairandaccuratedisclosuretothepublicofeverymaterialfactor
eventthatoccurs,whichwouldreasonablybeexpectedtoaffect
investors'decisionsinrelationtothosesecurities.Intheeventa
newsreportappearsinthemediainvolvinganallegedmaterial
event,acurrentreportshallbemadewithintheperiodprescribed
herein,inordertoclarifysaidnewsitem,whichcouldcreate
publicspeculationifnotofficiallydeniedorclarifiedbythe
concernedcompany.

a.

promptlytothepublicthroughthenewsmedia

b.

iftheissuerislistedonanExchange,tothatExchange
withinten(10)minutesafteroccurrenceoftheeventand
priortoitsreleasetothepublicthroughthenewsmedia,
copyfurnishedtheCommission

c.

totheCommissiononSECForm17Cwithinfive(5)days
afteroccurrenceoftheeventbeingreported,unless
substantiallysimilarinformationasthatrequiredbyForm
17ChasbeenpreviouslyreportedtotheCommissionby
theregistrant.

Anillustrative,nonallinclusive,listofeventswhichshallbereported
pursuanttothisparagraphiscontainedinSECForm17C.Merely
becauseaneventdoesnotappearinthatlistdoesnotmeanthatit
doesnothavetobereportedif,infact,itismaterial.

Inadditiontotheabovereports,issuersofregisteredcommercialpapers
shallfilethefollowingintheformprescribedbytheCommissionuntilall
theoutstandingcommercialpapershavebeenpaid:
1.

Monthlyreports(M10140)oncommercialpapertotal
issuances/outstandingasattheendofeachmonth,tobe
submittedwithinten(10)businessdaysfollowingtheendofthe
referencemonth

2.

Alistofissuances,outstandingbalanceandmaturingcommercial
papersasattheendofeachquarter,toformpartoftherequired

SECForm17Q.
Theobligationtofilereportsunderthisitemshallnotbesuspended

evenwhenthenumberofholdersoftheissuer'scommercial
papersshallbereducedtolessthanonehundred(100).
B.

AnydisclosuresignedandfiledwiththeCommissionandtheExchangewhere
thesecuritiesoftheissuerarelisted,orreleasedinmassmedia,inthepersonal
capacityofanydirector,executiveofficerorasubstantialstockholder(as
definedunderSRCRule38.1)directorindirect,ofanissuershallbe
consideredaspartofanyreportmentionedinparagraph1(A)(iii)hereofand
deemedasanofficialfilingofsuchcompanyifitdoesnotdenythesubject
informationwithintwo(2)daysfromthefiling/releaseoftheaforementioned
disclosure.Anymisleadingstatement,misrepresentationoromissionofa
materialfactthereinshallbethejointresponsibilityoftheissuerandthe
reportingdirector,officerorsubstantialstockholder.

C.

Anownerofmorethanfivepercent(5%)ofthevotingrightsofalisted
companyoranyrelatedpartythereof,whoholdsmaterialinformationwhich
maymateriallyaffectsuchcompanymayberequiredbytheCommissionto
disclosesuchinformationwithintheperiodprescribedunderparagraph1(A)(iii)
ofthisRule.Failuretoprovidetherequiredinformationshallsubjectsaid
stockholdertosanctionsapplicabletoviolationsofthisRule.

D.

EveryissuerhavingsecuritiesregisteredwiththeCommissionshallfilean
annualreportonSECForm17Aforeachofitspredecessorswhichhad
securitiesregisteredwiththeCommissioncoveringthelastfullfiscalyearofthe
predecessorpriortotheregistrant'ssuccession,unlesssuchreporthasbeen
filedbythepredecessor.Suchannualreportshallcontaintheinformationthat
wouldberequirediffiledbythepredecessor.

E.

Intheeventthatanonreportingissuer(inconnectionwithsuccessionby
merger,consolidation,exchangeofsecuritiesoracquisitionofassets)issues
equitysecuritiestoholdersofequitysecuritiesissuedbyareportingissuer,the
nonreportingissuershallassumethesameobligationasthereportingissuerto
filereportspursuanttoSection17oftheCode,andthenonreportingissuer
shallfilesuchreportsonthesameformsasthereportingissuer.

F.

NotificationofInabilitytoFileOnTimeAllorAnyRequiredPortionofSEC
FORM17Aor17Q
i.

Ifalloranyrequiredportionofanannualreport(SECForm17A)or
quarterlyreport(SECForm17Q)requiredtobefiledpursuanttoSection
17oftheCodeandSRCRule17.1thereunderisnotfiledwithinthe
periodprescribedforsuchreport,theissuershall,nolaterthanthedue
dateforsuchreport,filewiththeCommissionand,ifapplicable,withthe
Exchangewhereanyclassofitssecuritiesarelisted,aSECForm17L
whichshallcontainadisclosureinreasonabledetailofitsinabilitytofile
thereporttimelyandthereasonstherefore.Allinformationwhichare
availableonthedateoftherequiredfilingshallbefiled.

ii.

Withrespecttoanyreportorportionofanyreportdescribedin
paragraph(A)abovewhichisnottimelyfiledbecausetheissueris
unabletodosowithoutunreasonableeffortorexpense,suchreportshall
bedeemedtobefiledontheprescribedduedateforsuchreportif:
1.

TheissuerfilesSECForm17Lincompliancewithparagraph(i)
hereofand,whenapplicable,furnishestheexhibitrequiredby
paragraph(iii)hereof

2.

3.

TheissuerrepresentsinSECForm17Lthat:
a.

Thereason(s)causingtheinabilitytofiletimelycouldnotbe
eliminatedbytheissuerwithoutunreasonableeffortor
expenseand

b.

EitherthesubjectannualreportonSECForm17A,or
portionthereof,willbefilednolaterthanthefifteenth
calendardayfollowingtheprescribedduedate,orthe
subjectquarterlyreportonSECForm17Q,orportion
thereof,willbefilednolaterthanthefifthcalendarday
followingtheprescribedduedateand

Thereport/portionthereofisactuallyfiledwithintheperiod
specifiedbyparagraph1(A)hereof.

iii.

Ifparagraph(ii)aboveisapplicableandthereasonthesubject
report/portionthereofcannotbefiledtimelywithoutunreasonableeffortor
expenserelatestotheinabilityofanyperson,otherthantheissuer,to
furnishanyrequiredopinion,reportorcertification,SECForm17Lshall
haveattachedasanexhibitastatementsignedbysuchpersonstatingthe
specificreasonswhysuchpersonisunabletofurnishtherequired
opinion,reportorcertificationonorbeforethedatesuchreportmustbe
filed.

iv.

Notwithstandingparagraph(ii)above,aregistrationstatementfiledon
SECForm121pursuanttoSRCRule8.1,theuseofwhichispredicated
ontimelyfiledreports,shallnotbedeclaredeffectiveuntilthesubject
reportisactuallyfiledpursuanttoparagraphAhereof.

v.

IfSECForm17Lfiledpursuanttoparagraph(ii)aboverelatesonlytoa
portionofasubjectreport,theissuershall:
1.

Filethebalanceofsuchreportandindicateonthecoverpage
thereofwhichdisclosureitemsareomittedand

2.

Include,ontheupperrightcorneroftheamendmenttothereport
whichincludesthepreviouslyomittedinformation,thefollowing
statement:
"ThefollowingitemswerethesubjectofSECFORM17Land
areincludedherein:(ListItemNumbers)"

2.

IssuersofExemptSecurities
A.

Issuersofexemptcommercialpapersshallfilethefollowing
i.

Monthlyreports(M2301)withinten(10)daysaftertheendofthe
month

ii.

Quarterlyreports(QEPSfornonbanksandQ2301forbanks)within
fortyfive(45)daysaftertheendofthequarter,respectively.

B.

IssuersshallfurnishBSPcopiesofsaidreports.

C.

Underwritersorissuersofcommercialpapersshallfileanannualinformation
statement(SECForm85181)oncommercialpapertransactionsonorbefore
January30ofeachyear.AfeeofTenThousandPesos(P10,000.00)shallbe
paidinconnectiontherewith.
SRCRULE18.1
ReportstobeFiledby5%BeneficialOwners

(paragraphs6,7&8deleteddisclosurerequirementsincorporatedtoSECForm23A/B)
1.

TheprovisionsofthisRuleshallapplytoanypersonwhodirectlyorindirectlyacquiresthe
beneficial ownership of more than five percent (5%) or such lesser per centum as the
Commissionmayprescribe,ofanyclassofequitysecuritiesofacompanythatsatisfiesthe
requirementsofSubsection17.2oftheCode.

2.

Anypersonwhoqualifiesunderparagraph1ofthisRuleshall,withinfive(5)businessdays
aftersuchacquisition,submittotheIssuer,theExchangewherethesecurityistraded,and
totheCommissionaswornstatementcontainingtheinformationrequiredbySECForm18
A.

3.

A.

ApersonrequiredtofileareportonSECForm18Amay,inlieuthereof,filewith
the Commission, within fortyfive (45) days after the end of the year in which such
person became so obligated, copies of a short form report on SEC Form 18AS
includingallexhibits,andsendonecopyofsuchreporttotheissuerofthesecurity
atitsprincipalexecutiveofficeandtoeachExchangewherethesecurityislistedfor
trading provided, that the percentage of the class of equity security beneficially
ownedasoftheendofthecalendaryearismorethanfivepercent(5%),andthat:
i.

suchpersonhasacquiredsuchsecuritiesintheordinarycourseof
businessandnotwiththepurposenorwiththeeffectofchangingor
influencingthecontroloftheissuer,norinconnectionwithorasa
participantinanytransactionhavingsuchpurposeoreffect

ii.

suchpersonis:

iii.

B.

4.

a.

AbrokerordealerregisteredundertheCode

b.

AbankauthorizedtooperateassuchbytheBSP

c.

AninsurancecompanysubjecttothesupervisionoftheInsurance
Commission

d.

AninvestmenthouseregisteredundertheInvestmentHousesLaw

e.

AninvestmentcompanyregisteredundertheInvestmentCompany
Act

f.

ApensionplansubjecttoregulationandsupervisionbytheBIR
and/ortheInsuranceCommissionor

g.

Agroupwhereallofthemembersarepersonsspecifiedabove,
and

suchpersonhaspromptlynotifiedanyotherpersononwhosebehalfit
holds,onadiscretionarybasis,securitiesexceedingfivepercent(5%)of
theclass,ofanyacquisitionortransactiononbehalfofsuchother
personwhichmightbereportablebythatpersonunderSection18.1(a)of
theCode.

AnypersonwhohasreportedanacquisitionofsecuritiesonSECForm18AS
butthereafterceasestobeapersonspecifiedinparagraph3(A)(i)or3(A)(ii)
(a)through(g)ofthisRuleshallfilewithinthree(3)businessdaysthereaftera
swornstatementonSECForm18Aintheeventsuchpersonisabeneficial
owneratthattimeofmorethanfivepercent(5%)oftheclassofequity
securities.

A person, in determining the amount of outstanding securities of a class of equity

securities, may rely upon information set forth in the issuer's most recent quarterly or
annualreport,andanycurrentreportsubsequenttheretounlessheknowsorhasreasonto
believethattheinformationcontainedthereinisinaccurate.

5.

ForpurposesofSection18oftheCode,"beneficialowner"shallhavethesamedefinition
assetforthinSRCRule3,providedthat:
A.

Apersonwho,intheordinarycourseofbusiness,isapledgeeofsecurities
underawrittenagreementshallnotbedeemedtobethebeneficialownerof
suchpledgedsecuritiesuntilthepledgeehastakenallnecessarystepswhich
arerequiredtodeclareadefaultanddeterminesthatthepowertovoteorto
disposeortodirectthedispositionofsuchpledgedsecuritieswillbeexercised

B.

Apersonengagedinthebusinessofaninvestmenthousewhoacquireshis
securitiesthroughhisparticipationingoodfaithinafirmcommitment
underwritingshallnotbedeemedtobethebeneficialownerofsuchsecurities
untiltheexpirationofsix(6)monthsafterthedateofsuchacquisitionand

C.

Whentwo(2)ormorepersonsagreetoacttogetherforthepurposeof
acquiring,holding,votingordisposingofequitysecuritiesofanissuer,the
groupformedtherebyshallbedeemedtohaveacquiredbeneficialownership,
forpurposesofSection18oftheCode,asofthedateofsuchagreement,ofall
equitysecuritiesofthatissuerbeneficiallyownedbysuchpersons.
SRCRULE19
TenderOffers
[formerly,SRCRule19.1]

1.

Definitions
A.

Affiliatemeansanyperson,controlling,controlledby,orundercommoncontrol
withtheissuer.

B.

BeneficialownershallhavethesamemeaningassetforthinSRCRule3.

C.

Biddermeansanypersonwhomakesatenderofferoronwhosebehalfa
tenderofferismade.

D.

Commencementmeansthedateatenderofferisfirstpublished,sentorgiven
tosecurityholders.

E.

IssuermeansanyissuersubjecttoreportingobligationsunderSection17.2of
theCode.

F.

IssuerTenderOffermeansapubliclyannouncedintentionbyanissuerto
reacquireanyofitsownclassofequitysecurities,orbyanaffiliateofsuch
issuertoacquiresuchsecurities.

G.

Securityholdersmeanholdersofrecordandbeneficialownersofsecurities
thatarethesubjectofatenderoffer.

H.

Targetcompanymeansanyissuerofsecuritiesthataresoughtbyabidder
pursuanttotenderoffer.

I.

Tenderoffermeansapubliclyannouncedintentionbyapersonactingaloneor
inconcertwithotherpersons(hereinafterreferredtoas"person")toacquire
equitysecuritiesofapubliccompanyasdefinedinSRCRule3.

J.

Tenderoffermaterialsmean:(i)thebidder'sformaloffer,includingallthe
materialtermsandconditionsofthetenderofferandallamendmentsthereto(ii)
therelatedtransmittalletter(wherebysecuritiesofthetargetcompanywhichare
soughtinthetenderoffermaybetransmittedtothebidderoritsdepository)and
allamendmentstheretoand(iii)pressreleases,advertisements,lettersand
otherdocumentspublishedbythebidderorsentorgivenbythebidderto
securityholderswhich,directlyorindirectly,solicit,inviteorrequesttendersof
thesecuritiesbeingsoughtinthetenderoffer.

K.
2.

Terminationmeansthedateafterwhichsecuritiesmaynotbetendered
pursuanttothetenderoffer.

Mandatorytenderoffers
A.

Anypersonorgroupofpersonsactinginconcert,whointendstoacquirethirty
fivepercent(35%)1ormoreofequitysharesinapubliccompanyshall
disclosesuchintentionandcontemporaneouslymakeatenderofferforthe
percentsoughttoallholdersofsuchclass,subjecttoparagraph(9)(E)ofthis
Rule.
Intheeventthatthetenderofferisoversubscribed,theaggregateamountof

securitiestobeacquiredatthecloseofsuchtenderoffershallbe
proportionatelydistributedacrossbothsellingshareholderwithwhomthe
acquirermayhavebeeninprivatenegotiationsandminorityshareholders.

3.

B.

Anypersonorgroupofpersonsactinginconcert,whointendstoacquirethirty
fivepercent(35%)1ormoreofequitysharesinapubliccompanyinoneor
moretransactionswithinaperiodoftwelve(12)months,shallberequiredto
makeatenderoffertoallholdersofsuchclassforthenumberofsharesso
acquiredwithinthesaidperiod.

C.

Ifanyacquisitionofevenlessthanthirtyfivepercent(35%)wouldresultin
ownershipofoverfiftyonepercent(51%)ofthetotaloutstandingequity
securitiesofapubliccompany,theacquirershallberequiredtomakeatender
offerunderthisRuleforalltheoutstandingequitysecuritiestoallremaining
stockholdersofthesaidcompanyatapricesupportedbyafairnessopinion
providedbyanindependentfinancialadvisororequivalentthirdparty.The
acquirerinsuchatenderoffershallberequiredtoacceptanyandallsecurities
thustendered.

D.

InanytransactioncoveredbythisRule,thesaleofthesharespursuanttothe
privatetransactionshallnotbecompletedpriortotheclosingandcompletionof
thetenderoffer.Transactionswithanyoftheseller/sofsignificantblocksof
shareswithwhomtheacquirersmayhavebeeninprivatenegotiationsshall
closeatthesametimeanduponthesametermsasthetenderoffermadetothe
publicunderthisRule.Forparagraph(2)(B),thelastsalemeetingthethreshold
shallnotbeconsummateduntiltheclosingandcompletionofthetenderoffer.

ExemptfromMandatoryTenderOfferRequirement
A.

Themandatorytenderofferrequirementshallnotapplytothefollowing:
i.

anypurchaseofsharesfromtheunissuedcapitalstockprovidedthatthe
acquisitionwillnotresulttoafiftypercent(50%)ormoreownershipof
sharesbythepurchaser

ii.

anypurchaseofsharesfromanincreaseinauthorizedcapitalstock

iii.

purchaseinconnectionwithforeclosureproceedingsinvolvingaduly
constitutedpledgeorsecurityarrangementwheretheacquisitionismade
bythedebtororcreditor

iv.

purchasesinconnectionwithprivatizationundertakenbythegovernment
ofthePhilippines

v.

purchasesinconnectionwithcorporaterehabilitationundercourt
supervision

vi.

purchasesthroughanopenmarketattheprevailingmarketprice

vii.

mergerorconsolidation.

B.
4.

Purchasersofsharesintheforegoingtransactionsshall,however,complywith
thedisclosureandotherobligationsunderSRCRule18.1andSRCRule23.

TenderOfferbyanIssuer/BuyBack
A.

Areacquisitionorrepurchasebyanissuerofitsownsecuritiesshallonlybe
madeifsuchissuerhasunrestrictedretainedearningsinitsbookstocoverthe
amountofsharestobepurchased,andthesameispursuanttoanyofthe
followingpurposes:
i.

toimplementastockoptionorstockpurchaseplan

ii.

tomeetshorttermobligationswhichcanbesettledbythereissuanceof
therepurchasedshares

iii.

topaydissentingorwithdrawingstockholdersentitledtopaymentfor
theirsharesundertheCorporationCode

iv.

suchotherlegitimatecorporatepurpose/s.

Incaseofacquisitionpursuanttosubparagraph(i)or(ii)above,thesamemaybe

accountedforas"InvestmentinMarketableSecurities",inaccordancewith
InternationalAccountingStandards.
B.

Anyissueroranyofitsaffiliateswhichintendtoreacquireitsownsecurities
throughactiveandwidespreadsolicitationfromthestockholdersingeneraland
insubstantialamountofitsshares,shallcomplywithdisclosureandprocedural
requirementssetforthundersubparagraphs(C)and(D)below,andthe
precedingprovisionsofthisRule.

C.

Ifanissueroranaffiliatepublishes,sendsordisseminatesitstenderofferto
securityholdersbymeansofasummarypublicationinthemannerprescribed
inthisRule,thesummarypublicationshalldiscloseonlythefollowing
information:

D.

E.

i.

Theidentityoftheissueroraffiliatemakingthetenderoffer

ii.

Theamountandclassofsecuritiesbeingsoughtandthepricebeing
offered

iii.

Theinformationrequiredbyparagraph8ofthisRule

iv.

Astatementofthepurposeoftheissuertenderofferand

v.

Theappropriateinstructionforsecurityholdersonhowtoobtain
promptly,attheexpenseoftheissueroraffiliatemakingtheissuertender
offer,theinformationrequiredbyparagraph7oftheRule.

Untiltheexpirationofatleastten(10)businessdaysafterthedateof
terminationoftheissuertenderoffer,neithertheissuernoranyaffiliateshall
makeanyrepurchase,otherwisethanpursuanttothetenderofferof:
i.

Anysecuritywhichisthesubjectoftheissuertenderoffer,orany
securityofthesameclassandseries,oranyrighttorepurchasesuch
securitiesand

ii.

Inthecaseofanissuertenderofferwhichisanexchangeoffer,any
securitybeingofferedpursuanttotheexchangeoffer,oranysecurityof
thesameclassandseries,oranyrighttorepurchaseanysuchsecurity.

Thisruleshallnotapplyto:
i.

Callsorredemptionofanysecurityinaccordancewiththetermsand
conditionsofitsgoverninginstruments

ii.

Offerstorepurchasesecuritiesevidencedbyacertificate,orderformor
similardocumentwhichrepresentsafractionalinterestinashareof
stockorsimilarsecurity.

5.

Any person making a tender offer shall make an announcement of his intention in a
newspaper of general circulation, prior to the commencement of the offerProvided,
however,thatsuchannouncementshallnotbemadeuntilthebidderhastheresourcesto
implementtheofferinfull.AcopyofsaidnoticeshallbesubmittedtotheCommissionon
thedateofpublicationthereof.

6.

FilingRequirements
A.

7.

Nobiddershallmakeatenderofferunlessatleasttwo(2)businessdaysprior
tothedateofthecommencementofthetenderoffer,suchbidder:
i.

FileswiththeCommissioncopiesofSECForm191,includingallexhibits
thereto,withtheprescribedfilingfeesand

ii.

HanddeliversacopyofsuchSECForm191,includingallexhibits
theretotothetargetcompanyatitsprincipalexecutiveofficeandtoeach
Exchangewheresuchclassofthetargetcompany'ssecuritiesarelisted
fortrading.

B.

ThebiddershallfilewiththeCommissioncopiesofanyadditionaltenderoffer
materialsasexhibittoSECForm191and,ifamaterialchangeoccursinthe
informationsetforthinsuchSECForm,copiesofanamendmenttosuchform.
Copiesofsuchadditionaltenderoffermaterialsandamendmentsshallbehand
deliveredtothetargetcompanyandtoanyExchangeasrequiredabove.

C.

Thebiddershallreporttheresultsofthetenderofferbyfilingwiththe
Commission,notlaterthanten(10)calendardaysaftertheterminationofthe
tenderoffer,copiesofthefinalamendmentstoSECForm191.

DisclosureRequirementswithRespecttoTenderOffers
A.

Thebiddershallpublish,sendorgivetosecurityholdersinthemanner
prescribedunderparagraph9ofthisRule,areportcontainingthefollowing
information:
i.

Theidentityofthebidderincludinghis/itspresentprincipaloccupation

ii.

Theidentityofthetargetcompany

iii.

Theamountofclassofsecuritiesbeingsoughtandthetypeandamount
ofconsiderationbeingofferedtherefor

iv.

Thescheduledexpirationdateofthetenderoffer,whetherthetender
offermaybeextendedand,ifso,theproceduresforextensionofthe
tenderoffer

v.

Theexactdateswhensecurityholderswhodeposittheirsecuritieswill
havetherighttowithdrawtheirsecuritiespursuanttothisRuleandthe
mannerinwhichshareswillbeacceptedforpaymentandinwhich
withdrawalmaybeeffected

vi.

Ifthetenderofferisforlessthanallofthesecuritiesoftheclassandthe
bidderisnotobligatedtopurchaseallsecuritiestendered,theexactdate
oftheperiodduringwhichsecuritieswillbeacceptedonaproratabasis
underthisRuleandthepresentintentionorplanofthebidderwith
respecttothetenderofferintheeventofanoversubscriptionbysecurity
holders

vii.

Theconfirmationbythebidder'sfinancialadviseroranotherappropriate

thirdpartythatresourcesavailabletothebidderaresufficienttosatisfy
fullacceptanceoftheofferand
viii.
B.

8.

Ifanymaterialchangeoccursintheinformationpreviouslydisclosedto
securityholders,thebiddershalldisclosepromptlysuchchangeinthemanner
prescribedbythisRule.

DisseminationRequirements
A.

B.

9.

TheinformationincludedinSECForm191.

Abidderoranissuershalldisseminatethetenderofferbycomplyingfullywith
oneofthefollowingmethodsofdissemination:
i.

LongFormPublication.Thebiddershallpublishintwo(2)newspapersof
generalcirculationinthePhilippinesonthedateofcommencementofthe
tenderofferandfortwo(2)consecutivedaysthereaftertheinformation
requiredbyparagraph7(A)ofthisRuleor

ii.

SummaryPublication.Thebiddershallpublishintwo(2)newspapersof
generalcirculationinthePhilippinesonthedateofcommencementofthe
tenderofferandfortwo(2)consecutivedaysthereaftertheinformation
requiredbyparagraph7(A)(i)through(viii)ofthisRule,including
appropriateinstructionsforsecurityholdersonhowtoobtainpromptly,at
theexpenseofthebidder,theinformationincludedinSECForm191,
andfurnishpromptlyacopyofsuchformtoanysecurityholderwho
requestsacopyofsuchinformation.

Ifamaterialchangeoccursintheinformationpublished,sentorgivento
securityholders,thebiddershalldisseminatepromptlydisclosureofsuch
changeinamannerreasonablycalculatedtoinformsecurityholdersofsuch
change.

PeriodandMannerofMakingTenderOffer
A.

Thetenderoffer,unlesswithdrawn,shallremainopenuntiltheexpirationof:
i.

Atleasttwenty(20)businessdaysfromitscommencementprovided,
however,thatanoffershouldgenerallybecompletedwithinsixty(60)
daysfromthedatetheintentiontoacquireispubliclyannouncedor

ii.

Atleastten(10)businessdaysfromthedatethenoticeofachangein
thepercentageoftheclassofsecuritiesbeingsoughtorinthe
considerationofferedisfirstpublished,sentorgiventosecurityholders.

B.

Whereamandatorytenderofferisrequired,thebidderiscompelledtooffer
thehighestpricepaidbyhimforsuchsharesduringthepastsix(6)months.
Wheretheofferinvolvespaymentbytransferorallotmentofsecurities,such
securitiesmustbevaluedonanequitablebasis.

C.

Incaseofatenderofferotherthanbyanissuer,atargetcompanyshallnot
engageinanyofthefollowingtransactionsduringthecourseofatenderoffer,
orbeforethecommencementthereofifitsboardhasreasontobelievethatan
offermightbeimminent,exceptifsuchtransactionisinpursuanceofacontract
enteredintoearlier,orwiththeapprovalofshareholdersinageneralmeeting
or,wherespecialcircumstancesexist,Commissionapprovalhasbeenobtained:
i.

Issueanyauthorizedbutunissuedshares

ii.

Issueorgrantoptionsinrespecttoanyunissuedshares

iii.

Createorissue,orpermitthecreationorissueof,anysecurities
carryingrightsofconversioninto,orsubscriptionfor,shares

D.

Sell,disposeoforacquire,oragreetoacquire,anyasset,thevalueof
whichamountstofivepercent(5%)ormoreofthetotalvalueofassets
priortoacquisitionor

v.

Enterintocontractsotherwisedoneintheordinarycourseofbusiness.

Thebidderinatenderoffershallpermitsecuritiestenderedtobewithdrawn:
i.

Atanytimeduringtheperiodsuchtenderofferremainsopenand

ii.

Ifnotyetacceptedforpayment,aftertheexpirationofsixty(60)business
daysfromthecommencementofthetenderoffer.

E.

Ifthetenderoffershallbeforlessthanthetotaloutstandingsecuritiesofaclass
butagreaternumberofsecuritiesistenderedpursuantthereto,thebiddershall
beboundtotakeupandpayforthesecuritiesonaproratabasis,disregarding
fractions,accordingtothenumberofsecuritiestenderedbyeachsecurity
holderduringtheperiodsuchofferremainsopen.

F.

Intheeventthebidderinatenderoffershallincreasetheconsiderationoffered
afterthetenderofferhascommenced,suchbiddershallpaysuchincreased
considerationtoallsecurityholderswhosetenderedsecuritiesareacceptedfor
paymentbysuchbidder,whetherornotthesecuritiesweretenderedpriorto
thevariationofthetenderoffer'sterms.

G.

Thebidderinatenderoffershalleitherpaytheconsiderationoffered,orreturn
thetenderedsecurities,notlaterthanten(10)businessdaysafterthe
terminationorthewithdrawalofthetenderoffer.

H.

Notenderoffermaybemadeunless:

I.

10.

iv.

i.

Thetenderoffershallbeopentoallsecurityholdersoftheclassof
securitiessubjecttothetenderofferand

ii.

Theconsiderationpaidtoanysecurityholderpursuanttothetenderoffer
shallbethehighestconsiderationpaidtoanyothersecurityholderduring
suchtenderoffer.

Thebidderinatenderoffershallnotextendthelengthofatenderofferwithout
priorclearancefromtheCommissionandwithoutissuinganoticeofsuch
extensionbypressreleaseorotherpublicannouncement,whichnoticeshall
includedisclosureoftheappropriatenumberofsecuritiesdepositedtodateand
shallbeissuednolaterthanthescheduledoriginalexpirationdateoftheoffer.

TransactionsontheBasisofMaterial,NonPublicInformation
Ifapersonshallbecomeawareofapotentialtenderofferbeforethetenderofferhasbeen

publiclyannounced,suchpersonshallnotbuyorsell,directlyorindirectly,thesecuritiesof
thetargetcompanyuntilthetenderoffershallhavebeenpubliclyannounced.Suchbuying
orsellingshallconstituteinsidertradingunderSection27.4oftheCode.
11.

Withdrawal/LapseofTenderOffer
ExceptwiththeconsentoftheCommission,whereanofferhasbeenannouncedbuthasnot

becomeunconditionalinallrespectsandhasbeenwithdrawnorlapsed,neitherthebidder
nor any person who acted in concert with it in the course of the offer may, within six (6)
monthsfromthedateonwhichsuchofferhasbeenwithdrawnorlapsed,announceanoffer
for the target company nor acquire any securities of the target company which would
requiresuchpersontomakeamandatorytenderofferunderthisRuleandSection19.1of
theCode.
12.

Prohibitedpractices

 It shall be a fraudulent, deceptive or manipulative act or practice, in connection with any

tenderoffer:

13.

A.

toemployanydevice,schemeorartificetodefraudanyperson

B.

tomakeanyuntruestatementofamaterialfactortoomittostateamaterialfact
necessaryinordertomakethestatementsmade,inthelightofthe
circumstancesunderwhichtheyweremade,notmisleadingor

C.

toengageinanyact,practiceorcourseofbusinesswhichoperatesorwould
operateasafraudordeceituponanyperson.

Violation
If there shall be violation of this Rule by pursuing a purchase of equity shares of a public

company at threshold amounts without the required tender offer, the Commission, upon
complaint,maynullifythesaidpurchaseanddirecttheholdingofatenderoffer.Thisshall
bewithoutprejudicetotheimpositionofothersanctionsundertheCode.
SRCRULE20
DisclosurestoStockholdersPriortoMeeting
(formerly,SRCRule20TheProxyRule)
1.

ApplicabilityofSRCRule20
Forthepurposeofholdinganystockholders'meeting,theprovisionsofthisRuleshallapplyto

anycorporationenumeratedinSection17.2thatissubjecttothereportingrequirementsof
Section17oftheCodeandtoanypersonwhoshallsolicitvotesforastockholders'meeting
ofaparticularcorporation.
2.

Definitions
A.

B.

AsusedinthisRuleandSECForm20IS,thefollowingtermsshallhavethe
followingmeaning:
i.

EmployeeBenefitPlanmeansanypurchase,savings,option,bonus,
profitsharing,incentive,pensionorsimilarplanprimarilyforemployees,
directors,trusteesorofficers.

ii.

Entitythatexercisesfiduciarypowersmeansanyentitythatholds
securitiesinnomineenameorotherwiseonbehalfofabeneficialowner.

iii.

InformationstatementmeansthestatementrequiredbythisRule.

iv.

Proxyincludeseveryproxy,consentorauthorizationwithinthemeaning
ofSection20oftheCode.

v.

Recorddatemeansthedateonwhichtherecordholdersofsecurities
entitledtovoteatthemeetinginpersonorbywrittenconsentor
authorizationshallbedetermined.

Solicitation
i.

ii.

Thetermssolicitandsolicitationshallinclude:
a.

anyrequestforaproxyorauthorization

b.

anyrequesttoexecuteornottoexecute,ortorevoke,aproxyor
authorizationor

c.

thefurnishingofaformofproxyorothercommunicationto
securityholdersunderacircumstancereasonablycalculatedto
resultintheprocurement,withholdingorrevocationofaproxy.

Thetermsshallnotapplyto:

3.

a.

theperformancebyanypersonofministerialactsonbehalfofa
personsolicitingaproxyor

b.

anysolicitationmadeotherwisethanonbehalfoftheregistrant
wherethetotalnumberofpersonssolicitedisnotmorethan
nineteen(19).

ObligationsofaRegistrantProposingtoHoldaStockholders'Meeting
A.

Inconnectionwithanannualorothermeetingsofstockholders,theregistrant
shalltransmitawritteninformationstatementandproxyform(incaseofaproxy
solicitation)containingtheinformationspecifiedunderSECForm20IS,anda
managementreportunderparagraph(4)ofthisRule,ifapplicable,toevery
securityholderoftheclassthatisentitledtovote.

B.

Theproxyformshallbepreparedinaccordancewithparagraph(5)hereof.

C.

FilingRequirements
i.

Preliminarycopiesoftheinformationstatementandproxyformshallbe
filedwiththeCommissionatleastten(10)businessdayspriortothedate
definitivecopiesofsuchmaterialshallbefirstsentorgiventosecurity
holders.
TheregistrantshallcontacttheCommissionforanycommentonthe

preliminarymaterials.

4.

ii.

Atthetimeoffilingthepreliminaryinformationmaterial,theregistrant
shallpaytheCommissionthefeeofFiveThousandPesos(P5,000.00)or
suchotheramountastheCommissionmayprescribe.

iii.

Copiesofthedefinitiveinformationstatement,proxyformandallother
materials(ifany),shallbefiledwiththeCommissionpriortothedate
suchmaterial/sshallbefirstsentorgiventosecurityholders.One(1)
copyofsuchmaterialshallatthesametimebefiledwith,ormailedfor
filingto,anyExchangeinwhichanyclassofsecuritiesoftheregistrantis
listedfortrading.

iv.

Theinformationstatement,proxyformandthemanagementreportunder
paragraph(4)ofthisRule,ifapplicable,shallbedistributedtosecurity
holdersatleastfifteen(15)businessdaysfromthedateofthe
stockholders'meeting.

D.

Ifthesolicitationordistributionshallbemadepersonallyinwholeorinpart,
copiesofallwritteninstructionsorothermaterialswhichshalldiscussorreview,
orcommentuponthemeritsof,anymattertobeacteduponandwhichshallbe
furnishedbythepersonsmakingtheactualsolicitationfortheirusedirectlyor
indirectlyinconnectionwiththesolicitationshallbefiledwith,ormailedforfiling
to,theCommissionbythepersononwhosebehalfthesolicitationshallbemade
notlaterthanthedateanysuchmaterialisfirstsentorgiventosuchindividuals.

E.

Ifanyinformationstatementorformofproxyorothermaterials(ifapplicable)
filedpursuanttothisRuleshallbeamendedorrevised,copiesofsuchamended
orrevisedmaterialshallbefiledpursuanttothisRuleandshallbemarkedto
indicateclearlyandpreciselythechangeseffectedtherein.

ReporttobeFurnishedtotheStockholders
A.

Iftheinformationstatementshallrelatetoanannual(orspecialmeetinginlieu
oftheannual)meetingofstockholdersatwhichdirectorsshallbeelected,itshall
beaccompaniedorprecededbyamanagementreporttosuchstockholders
containingthefollowing:

5.

i.

Consolidatedauditedfinancialstatementsandinterimunauditedfinancial
statements(ifapplicable),asrequiredbySRCRule68,asamended

ii.

Informationconcerningdisagreementswithaccountantsonaccounting
andfinancialdisclosurerequiredbyPartIII(B)of"AnnexC"

iii.

Amanagement'sdiscussionandanalysisorplanofoperationrequired
byPartIII(A)of"AnnexC"

iv.

Abriefdescriptionofthegeneralnatureandscopeofthebusinessofthe
registrantanditssubsidiaries

v.

Identityofeachoftheregistrant'sdirectorsandexecutiveofficers
includingtheirprincipaloccupationoremployment,nameandprincipal
businessofanyorganizationbywhichsuchpersonsareemployed

vi.

Themarketpriceofanddividendsontheregistrant'scommonshares
requiredbyPartII(A)of"AnnexC"

vii.

Discussiononcompliancewithleadingpracticesoncorporate
governanceasrequiredbyPartVofAnnex"C"and

viii.

Anundertakinginboldfaceprominenttypetoprovidewithoutchargeto
eachpersonsolicited,onthewrittenrequestofanysuchperson,acopy
oftheregistrant'sannualreportonSECForm17Aandthenameand
addressofthepersontowhomsuchawrittenrequestistobedirected.
Atthediscretionofmanagement,achargemaybemadeforexhibits,
providedsuchchargeislimitedtoreasonableexpensesincurredbythe
registrantinfurnishingsuchexhibits.

B.

Anyinformationthatisrequiredtobedisclosedintheinformationstatement,
whichisalsocontainedintheregistrant'sannualreport,neednotbeprovidedin
thesaidstatement.Referencetothepageoftheannualreportshallbemade.

C.

Incaseofaspecialmeetingwheretheregistranthasalreadydistributedtoits
stockholdersitsannualreportonSECForm17Aforthefiscalyearpreceding
itsannualstockholders'meetingdate,itshallnolongerberequiredtocomply
withparagraph(A)aboveexceptwithrespecttothedisclosureofupdated
financialandnonfinancialinformation.

D.

Copiesofthemanagementreportfordistributiontosecurityholdersshallbe
filedwiththeCommissionpriortothedateonwhichsuchreportshallbefirst
sentorgiventosecurityholders.

E.

Thedistributionofmanagementreporttosecurityholdersisdeemedtosatisfy
Section75oftheCorporationCodeofthePhilippineswithrespecttopresenting
afinancialreportofoperationsincludingfinancialstatementstostockholdersat
theirregularmeeting.

RequirementsastoFormofProxyandDeliveryofInformationtoSecurityHolders
A.

Theformofproxyshall:
i.

indicateinboldfacetypeonwhosebehalfthesolicitationismade

ii.

provideaspecificallydesignatedblankspacefordatingtheproxycard

iii.

identifyclearlyandimpartiallyeachseparatematterintendedtobeacted
upon

iv.

beinwriting,signedbythestockholderorhisdulyauthorized
representativeand

v.

befiledwiththeCorporateSecretarybeforethescheduledmeeting.

B.

Meansshallbeprovidedintheproxyformwherebythepersonsolicitedis
affordedanopportunitytospecifybyboxesachoicebetweenapprovalor
disapprovalof,orabstentionwithrespectto,eachseparatematterreferredto
thereinasintendedtobeactedupon,otherthanelectiontooffice.Aproxymay
conferdiscretionaryauthoritywithrespecttomattersastowhichachoiceisnot
specifiedbythesecurityholderprovidedthattheformofproxystatesinbold
facetypehowitisintendedtovotethesharesrepresentedbytheproxyineach
suchcase.

C.

Aproxyformwhichprovidesfortheelectionofdirectorsshallsetforththe
namesofpersonsnominatedforelectionasdirectors.Suchformofproxyshall
clearlyprovideanyofthefollowingmeansforsecurityholderstowithhold
authoritytovoteforeachnominee:
i.

aboxoppositethenameofeachnomineewhichmaybemarkedto
indicatethatauthoritytovoteforsuchnomineeiswithheld

ii.

aninstructioninboldfacetypewhichindicatesthatthesecurityholder
maywithholdauthoritytovoteforanynomineebyliningthroughor
otherwisestrikingoutthenameofthenomineeor

iii.

designatedblankspacesinwhichtheshareholdermayenterthenames
ofnomineeswithrespecttowhomtheshareholderchoosestowithhold
authoritytovote.

D.

Anyproxyformwhichisexecutedbythesecurityholderinsuchmannerasnot
towithholdauthoritytovotefortheelectionofanynomineeshallbedeemedto
grantsuchauthority,providedthattheproxyformsostatesinprominentbold
facetype.

E.

Aproxymayconferdiscretionaryauthoritytovotewithrespecttoanyofthe
following:

F.

G.

i.

Mattersthataretobepresentedatthemeetingbutwhich,atareasonable
timebeforethesolicitation,arenotknowntothepersonsmakingthe
solicitationprovided,however,thataspecificstatementtothateffectis
madeintheinformationstatementorproxyform

ii.

Approvaloftheminutesofthepriormeeting

iii.

Theelectionofanypersontoanyofficeforwhichabonafidenominee
isnamedintheinformationstatementandsuchnomineeisunableto
serveorforgoodcausewillnotserveor

iv.

Mattersincidenttotheconductofthemeeting.

Noproxyshallconferauthority:
i.

tovoteforanypersontoanyofficeforwhichabonafidenomineeisnot
namedintheinformationstatementorinanymaterialattachedthereto

ii.

tovotewithrespecttomorethanonemeeting(andanyadjournment
thereof),unlessaspecificstatementismadeintheinformationstatement
andformofproxythattheproxyisvalidformorethanone
meeting.Provided,however,thatnoproxyshallbevalidandeffectivefor
aperiodlongerthanfive(5)yearsfromthedateoftheproxyor

iii.

toconsenttoorauthorizeanyactionotherthantheactionproposedto
betakenintheinformationstatementormattersreferredtoabove.

Theproxyformshallprovide,subjecttoreasonablespecifiedconditions,that
thesharesrepresentedbytheproxywillbevotedandthat,wheretheperson

solicitedspecifiesbymeansofaballotprovidedpursuanttothisRuleachoice
withrespecttoanymattertobeactedupon,theshareswillbevotedin
accordancewiththespecificationssomade.
H.

ProhibitionofCertainSolicitations
NopersonmakingasolicitationwhichissubjecttothisRuleshallsolicit:

6.

7.

i.

anyundatedorpostdatedproxyor

ii.

anyproxywhichprovidesthatitshallbedeemedtobedatedasofany
datesubsequenttothedateonwhichitissignedbythesecurityholder.

Obligations of Registrant to Provide a List of, or Mail Meeting Material/s to Security

Holders
A.

Whenarecordorbeneficialholderofsecuritiesoftheclassentitledtovoteat
themeetingmakesawrittenrequesttobeprovidedwithalistofstockholdersor
tomailthemeetingmaterial,theregistrantshallgranttherequesteitherby
providingthelistormailingthematerialstotherequestingstockholder.

B.

Iftheregistrantelectstomailthematerialsfortherequestingstockholder,the
registrantshall:
i.

advisetherequestingstockholderpromptlyofthenumberofrecord
holdersandbeneficialholderstowhomthematerialswillbesent

ii.

advisetherequestingstockholderoftheestimatedcostofmailingan
informationstatement,formofproxyorotherformsofcommunicationto
suchholdersand

iii.

mailthematerialstothestockholderswithreasonablepromptness.

ProvidingCopiesofMaterialforCertainBeneficialOwners
A.

Iftheregistrantorthesolicitorknowsthatsecuritiesofanyclassentitledtovote
atameetingwithrespecttowhichtheSECForm20ISbeingfurnishedareheld
ofrecordbyabroker,dealer,investmenthouse,votingtrustee,bank,
association,orotherentitythatexercisesfiduciarypowersinnomineenameor
otherwise,theregistrantorthesolicitorshallbyfirstclassmailorotherequally
promptmeans,inquireofsuchrecordholdersatleasttwenty(20)business
dayspriortotherecorddateofthemeeting:
i.

whetherotherpersonsarethebeneficialownersofsuchsecuritiesandif
so,thenumberofcopiesoftheinformationstatementnecessaryto
supplysuchmaterialtosuchbeneficialownersand

ii.

inthecaseofanannual(orspecialmeetinginlieuoftheannual)meeting
atwhichdirectorsaretobeelected,thenumberofcopiesofthe
managementreporttosecurityholdersnecessarytosupplysuchreport
tobeneficialownerstowhomsuchreportsaretobedistributedbysuch
recordholder.

B.

Theregistrantorthesolicitorshallsupply,inatimelymanner,eachrecord
holderofwhomtheinquiriesrequiredbyparagraph7(A)ofthisRulearemade
withcopiesoftheinformationstatementand/orthemanagementreportto
securityholdersinsuchquantities,assembledinsuchformandatsuch
place(s),astherecordholdermayreasonablyrequestinordertosendsuch
materialtoeachbeneficialownerofsecuritieswhoistobefurnishedwithsuch
materialbytherecordholder.

C.

Upontherequestofanyrecordholderthatissuppliedwiththeinformation
statementand/orannualreportstosecurityholderspursuanttoparagraph7(A)

ofthisRule,theregistrantshallreimbursetherecordholderforitsreasonable
expensesforcompletingthemailingofsuchmaterialtobeneficialowners.
8.

SpecialProvisionsApplicabletoSolicitationofVotesOtherThanbytheRegistrant
A.

Thisparagraphappliestoanysolicitationbyanypersonorgroupofpersons
otherthanbytheregistrant,withrespecttoanyitem/stobetakenupinan
annualorspecialstockholders'meeting.

B.

Notwithstandingtheprovisionsofparagraph3ofthisRule,asolicitationsubject
tothisRulemaybemadewithoutfurnishingthesecurityholderswithawritten
informationstatementonSECForm20IS,providedthat:
i.

Thefollowinginformationshallbesetforthinthecommunicationwhich
shallbeattachedanddistributedwiththeproxyformpreparedin
accordancewithparagraph(5)ofthisRule:
a.

Thenameofthesolicitorandpersonwhoshallshoulderthe
expenses,andthemodeofsolicitation

b.

Incaseofelectionofdirectors,thename/sofnominee/sincluding
hisbusinessexperienceforthepastfive(5)years,involvementin
legalproceedings,familyrelationshipwithanyothernominee,
incumbentdirectororofficer,andhisinterest,directorindirect,by
securityholdingsorotherwise

c.

Adiscussionofthereason/sforthesolicitationofvotesagainstthe
proposedaction/sbytheregistrant

d.

Abriefdescriptionofanysubstantialinterest,directorindirect,by
securityholdingsorotherwise,ofeachsolicitororparticipantto
thesolicitation,inanymattertobeacteduponatthemeetingand
includewithrespecttoeachsolicitorthefollowinginformation,ora
fairandaccuratesummarythereof:
1.

Nameandbusinessaddressofthesolicitor

2.

Presentprincipaloccupationoremploymentandthename,
principalbusinessandaddressofanycorporationorother
organizationinwhichsuchemploymentiscarriedon

3.

Amountofeachclassofsecuritiesoftheregistrantwhich
thesolicitorownsbeneficially,directlyorindirectly

4.

Amountofeachclassofsecuritiesoftheregistrantwhich
thesolicitorownsofrecordbutnotbeneficially

5.

Allsecuritiesoftheregistrantpurchasedorsoldbythe
solicitorwithinthepasttwoyears,thedatesonwhichthey
werepurchasedorsoldandtheamountpurchasedorsold
oneachdate

6.

Ifthesolicitoris,orwaswithinthepastyear,apartytoany
contract,arrangementorunderstandingwithanyperson
withrespecttoanysecurityoftheregistrant,including,but
notlimitedtojointventures,loanoroptionarrangements,
putsorcalls,guaranteesagainstlossorguaranteesof
profit,divisionoflossesorprofits,orthegivingor
withholdingofproxies.Ifso,namethepartiestosuch
contracts,arrangementsorunderstandingsandgivethe
detailsthereofand

7.

ii.

9.

10.

Amountofeachclassofsecuritiesofanyparentor
subsidiaryoftheregistrantwhichthesolicitorowns
beneficially,directlyorindirectly.

e.

Ifspeciallyengagedemployees,representativesorotherpersons
havebeenoraretobeemployedtosolicitsecurityholders,the(1)
materialfeaturesofanycontractorarrangementforsuch
solicitationandtheidentityoftheparties,(2)costoranticipated
costthereof,and(3)approximatenumberofsuchemployeesor
employeesofanyotherperson(namingsuchotherperson)who
willsolicitsecurityholdersand

f.

Thetotalamountestimatedtobespentandthetotalexpendituresin
furtheranceof,orinconnectionwiththesolicitationofsecurity
holders.

Allmatterstobetakenupinthemeetingshallbeconsideredand
reflectedintheproxyformanditsattachments.

C.

CopiesoftheproxyformwithitsattachmentsshallbefiledwiththeCommission
atleastfifteen(15)businessdayspriortothedatesuchmaterialsshallbe
distributed,sentorgiventoanysecurityholder.Thesolicitorshallcontactthe
Commissionforanycommentonthesaidmaterialsbeforesaiddistribution.

D.

AfilingfeeofTwoThousandPesos(P2,000.00)orsuchamountasthe
Commissionmaydetermine,foreachproxysolicitationotherthanbythe
registrant,shallbepaidtotheCommission.

FalseorMisleadingStatements
a.

NoinformationsubjecttothisRuleshallbemadecontaininganystatement
which,atthetimeandinthelightofthecircumstancesunderwhichitismade,
isfalseormisleadingwithrespecttoanymaterialfact,orwhichomitstostate
anymaterialfactnecessaryinordertomakethestatementsthereinnotfalseor
misleadingornecessarytocorrectanystatementinanyearliercommunication
withrespecttothesolicitationofaproxyforthesamemeetingorsubjectmatter
whichhasbecomefalseormisleading.

b.

Thefactthatastatementorothermaterialhasbeenfiledwithorexaminedby
theCommissionshallnotbedeemedafindingbytheCommissionthatsuch
materialisaccurateorcompleteornotfalseormisleading,orthatthe
Commissionhaspasseduponthemeritsoforapprovedanystatement
containedthereinoranymattertobeacteduponbysecurityholders.No
representationcontrarytotheforegoingshallbemade.

ObligationofRegistrantsinCommunicatingwithBeneficialOwners
a.

Iftheregistrantknowsthatsecuritiesofanyclassentitledtovoteatameeting
withrespecttowhichtheregistrantintendstosolicitproxies,consentsor
authorizationsareheldofrecordbyabroker,dealer,investmenthouse,voting
trustee,bank,association,orotherentitythatexercisesfiduciarypowersin
nomineenameorotherwise,theregistrantshallbyfirstclassmailorother
equallypromptmeans,inquireofsuchrecordholdersatleasttwenty(20)
businessdayspriortotherecorddateofthemeeting:
i.

whetherotherpersonsarethebeneficialownersofsuchsecuritiesandif
so,thenumberofcopiesoftheproxyandothersolicitingmaterial
necessarytosupplysuchmaterialtosuchbeneficialownersand

ii.

inthecaseofanannual(orspecialmeetinginlieuoftheannual)meeting
atwhichdirectorsaretobeelected,thenumberofcopiesofthe

managementreporttosecurityholdersnecessarytosupplysuchreport
tobeneficialownerstowhomsuchreportsaretobedistributedbysuch
recordholder.

11.

b.

Theregistrantshallsupply,inatimelymanner,eachrecordholderofwhomthe
inquiriesrequiredbythisparagraph10(a)aremadewithcopiesofthe
informationstatement,proxyform(ifapplicable),otherproxysolicitingmaterial,
and/orthemanagementreporttosecurityholders,insuchquantities,assembled
insuchformandatsuchplace(s),astherecordholdermayreasonablyrequest
inordertosendsuchmaterialtoeachbeneficialownerofsecuritieswhoisto
befurnishedwithsuchmaterialbytherecordholder.

c.

Upontherequestofanyrecordholderthatissuppliedwiththesaiddocuments
pursuanttothisparagraph10(b),theregistrantshallreimbursetherecord
holderforitsreasonableexpensesincompletingthemailingofsuchmaterialto
beneficialowners.

OtherProceduralRequirements
a.

AnnualMeeting
i.

RegularmeetingofstockholdersfortheelectionofDirectorsandOfficers
ofthecorporationshallbeheldannuallyonthedatefixedinthebylaws,
orifnotsofixed,onanydateinAprilasdeterminedbytheBoardof
Directors.Ifthedateoftheannualmeetingfallsonalegalholiday,the
annualmeetingshallbeheldinthenextsucceedingbusinessdaywhich
isnotalegalholiday.

ii.

Theannualstockholders'meetingshallbeheldinthecityormunicipality
wheretheprincipalofficeofthecorporationislocated,andifpracticable
intheprincipalofficeofthecorporation.MetroManilashall,forpurposes
ofsaidmeeting,beconsideredacityormunicipality.

iii.

Writtennotice,statingthedate,timeandplaceoftheannualmeeting
shallbesenttoallstockholdersofrecordatleasttwo(2)weekspriorto
thescheduledannualstockholders'meeting,unlessadifferentperiodis
requiredbythebylaws.Thedistributiontostockholdersofinformation
statement(SECForm20IS)withintheprescribedperiodunderthisRule
shallbesufficientcompliancewiththenoticerequirement.

iv.

Ifforanyjustifiableandvalidreason,theannualstockholders'meeting
hastobepostponed,thecorporationshallnotifytheCommissionin
writingofsuchpostponementwithinten(10)daysfromthedateofsuch
postponement.

v.

Nopostponementofannualstockholders'meetingshallbeallowedexcept
forjustifiablereasonstobestatedinwritingsignedunderoathbythe
PresidentorSecretaryofthecorporation.

vi.

TheCommissionenbancmay,motuproprio,oruponthewrittenrequest
ofanystockholder,directthecallingofanannualstockholders'meeting
underitssupervision,ifthecorporationfailsorrefusestocallsaid
meetingforanyjustifiablereason.

vii.

TheCommissionmaysenditsrepresentatives/observerstostockholders'
meetings,undersuchtermsandconditionsitdeemsappropriate.

viii.

Unlessotherwiseprovidedbythebylaws,thestockandtransferbook
shallbeclosedatleasttwenty(20)daysbeforethescheduleddateofthe
annualstockholders'meetingtoenablethecorporationtopreparealistof
stockholdersentitledtovote.

ix.

b.

Acopyofthelistofstockholdersentitledtovoteshallbemadeavailable
atthecompany'sprincipalofficeatleastfifteen(15)dayspriortothe
dateoftheannualstockholders'meetingandthecorporationshallfurnish
acopythereoftoanystockholderwhomayrequestthesameatthe
expenseofsaidstockholder.

Proxy
i.

Thecorporatebylawsshallbecontrollingindeterminingtheproper
proceduretobefollowedintheexecutionandacceptanceofproxies,
providedthattheminimumrequiredformalitiesprescribedunderSection
58oftheCorporationCodeandSRCRule20shallbecompliedwith.

ii.

Thenoticeofstockholders'meetingshallalsosetthedate,timeandplace
ofthevalidationofproxies,whichinnocaseshallbelessthanfive(5)
dayspriortotheannualstockholders'meetingtobeheld.Thepresence
ofanystockholderwhomaywishtobepresentinpersonorthrough
counselshallbeallowed.

iii.

Failuretoaffixdocumentarystampsshallnotaffectthevalidityofthe
proxy.Theonlyadverseeffectofsuchfailureisthatthesamecannotbe
recordedasapublicdocumentandcannotbeadmittedorusedas
evidenceinCourtuntiltherequireddocumentarystampisaffixedand
cancelled.

iv.

Unlessrequiredbythecorporatebylaws,aproxyneednotbenotarized.

v.

Ifthenameoftheproxyisleftinblank,thepersontowhomitisgivenor
theissuercorporationreceivingtheproxyisatlibertytofillinanyname
he/itchooses.

vi.

Ifadulyaccomplishedandexecutedproxyisundated,thepostmarkor,
ifnotmailed,itsactualdateofpresentationshallbeconsidered.

vii.

Aproxyexecutedbyacorporationshallbeintheformofaboard
resolutiondulycertifiedbytheCorporateSecretaryorinaproxyform
executedbyadulyauthorizedcorporateofficeraccompaniedbya
CorporateSecretary'scertificatequotingtheboardresolutionauthorizing
thesaidcorporateofficertoexecutethesaidproxy.

viii.

Ifthebylawsprovideforacutoffdateforthesubmissionofproxiesthe
sameshouldbestrictlyfollowed.Intheabsenceofaprovisionintheby
lawsfixingadeadline,proxiesshallbesubmittednotlaterthanten(10)
dayspriortothedateofthestockholdersmeeting.

ix.

Wherethecorporationreceivesmorethanone(1)proxyfromthesame
stockholderandtheyareallundated,thepostmarkdatesshallbe
considered.Iftheproxiesaremailedonthesamedate,theonebearing
thelatesttimeofdayofpostmarkiscounted.Iftheproxiesarenot
mailed,thenthetimeoftheiractualpresentationisconsidered.That
whichispresentedlastwillberecognized.

x.

Whereaproxyisgiventotwo(2)ormorepersonsinthealternativein
oneinstrument,theproxydesignatedasanalternatecanonlyactas
proxyintheeventofnonattendanceoftheotherdesignatedperson.

xi.

Wherethesamestockholdergivestwo(2)ormoreproxies,thelatestone
givenistobedeemedtorevokeallformerproxies.

xii.

Aproxyshallbevalidonlyforthemeetingforwhichitisintended.

xiii.

Executors,administrators,receiversandotherlegalrepresentativesduly
appointedbythecourtmayattendandvoteonbehalfofthestockholders
withoutaneedofanywrittenproxy.

xiv.

Ifthestockholderintendstodesignateseveralproxies,thenumberof
sharesofstocktoberepresentedbyeachproxyshallbespecifically
indicatedintheproxyform.Ifsomeoftheproxyformsdonotindicatethe
numberofshares,thetotalshareholdingsofthestockholdershallbe
talliedandthebalancethereof,ifany,shallbeallottedtotheholderofthe
proxyformwithoutthenumberofshares.Ifallareinblank,thestocks
shallbedistributedequallyamongtheproxies.Thenumberofpersonsto
bedesignatedasproxiesmaybelimitedbytheBylaws.

xv.

Incaseofsharesofstockownedjointlybytwo(2)ormorepersons,the
consentofallcoownersshallbenecessarytoappointorrevokeaproxy.

xvi.

Forpersonsowningsharesinan"and/or"capacity,anyoneofthem
mayappointandrevokeaproxy.

xvii.

ProxiesexecutedabroadshallbedulyauthenticatedbythePhilippine
EmbassyorConsularOffice.

xviii.

NomemberoftheStockExchangeandnobroker/dealershallgiveany
proxy,consentorauthorization,inrespectofanysecuritycarriedforthe
accountofacustomertoapersonotherthanthecustomer,withoutthe
expresswrittenauthorizationofsuchcustomer.Theproxyexecutedby
thebrokershallbeaccompaniedbyacertificationunderoathstatingthat
beforetheproxywasgiventothebroker,hehaddulyobtainedthewritten
consentofthepersonsinwhoseaccountthesharesareheld.

xix.

Aproxyshallnotbeinvalidatedonthegroundthatthestockholderwho
executedthesamehasnosignaturecardonfilewiththeCorporate
SecretaryorTransferAgent,unlessitcanbeshownthathe/shehad
refusedtosubmitthesignaturecarddespitewrittendemandtothateffect
dulyreceivedbythesaidstockholderatleastten(10)daysbeforethe
annualstockholders'meetingandelection.

xx.

Thereshallbeapresumptionofregularityintheexecutionofproxiesand
shallbeacceptediftheyhavetheappearanceofprimafacieauthenticity
intheabsenceofatimelyandvalidchallenge.

xxi.

Inthevalidationofproxies,aspecialcommitteeofinspectorsshallbe
designatedorappointedbytheBoardofDirectorswhichshallbe
empoweredtopassonthevalidityofproxies.Anydisputethatmayarise
pertainingthereto,shallberesolvedbytheSecuritiesandExchange
Commissionuponformalcomplaintfiledbytheaggrievedparty,orbythe
SECofficersupervisingtheproxyvalidationprocess.

xxii.

Allissuesrelativetoproxiesincludingtheirvalidationshallberesolved
priortothecanvassingofvotesforpurposesofdeterminingaquorum.

xxiii.

Allshareswhicharesubjectofacasewhereownershipisatissue,
shallbesetasideforpurposesofproxyvalidationunlessthereisacourt
appointedrepresentativewhoshallthenvoteonsaidshares.

xxiv.

AnyviolationofthisRuleonProxyshallbesubjecttotheadministrative
sanctionsprovidedforunderSection144oftheCorporationCodeand
Section54oftheSecuritiesRegulationCode,andshallrenderthe
proceedingsnullandvoid.

SRCRULE23
1.

ReportstobeFiledbyDirectors,OfficersandPrincipalStockholders
Everypersonwhoisdirectlyorindirectlythebeneficialowneroftenpercent(10%)ormore
ofanyclassofanysecurityofacompanywhichsatisfiestherequirementsofSubsection
17.2oftheCode,orwhoisadirectororanofficeroftheissuerofsuchsecurity,shall:
A.

withinten(10)daysaftertheeffectivedateoftheregistrationstatementforthat
security,orwithinten(10)daysafterhebecomessuchbeneficialowner,
directororofficer,subsequenttotheeffectivedateoftheregistrationstatement,
whicheverisearlier,fileastatementwiththeCommission,andwithan
ExchangeifthesecurityislistedonthatExchange,onForm23Aindicatingthe
amountofallsecuritiesofsuchissuerofwhichheisthebeneficialowner.

B.

withinten(10)daysafterthecloseofeachcalendarmonththereafter,ifthere
hasbeenanychangeinsuchownershipduringthemonth,fileastatementwith
theCommission,andwithanExchangeifthesecurityislistedonthat
Exchange,onForm23Bindicatinghisownershipatthecloseofthecalendar
monthandsuchchangesinhisownershipashaveoccurredduringthat
calendarmonthand

C.

notifytheCommissionifhisdirectorindirectbeneficialownershipofsecurities
fallsbelowtenpercent(10%),orifheceasestobeanofficerordirectorofthe
issuer.Afterfilingsuchnotification,heshallnolongerberequiredtofileForm
23B.

D.

Newlyappointedofficerwhohasnobeneficialownershipoverthesharesofthe
companyshallnotifytheCommissionofsuchfactwithintheabovestated
reportingperiod,otherwise,theobligationtofileSECForm23Ashallaccrue
againsthim.

2.

Indetermining,whetherapersonisthebeneficialowner,directlyorindirectly,ofmorethan
tenpercent(10%)ofanyclassofanyregisteredsecurity,suchclassshallbedeemedto
consistoftheamountofsuchclasswhichhasbeenissued,regardlessofwhetheranypart
ofsuchamountisheldbyorfortheaccountoftheissuerexceptthatforthepurposeof
determiningthepercentageofownershipofvotingtrustcertificateorcertificatesofdeposit
forsecurities,theclassofvotingtrustcertificateorcertificatesofdepositshallbedeemed
toconsistoftheentireamountofvotingtrustcertificatesorcertificatesofdepositissuable
in respect of the class of securities which may be deposited under the voting trust
agreementordepositagreementinquestion,whetherornotallofsuchclasshasbeenso
deposited.

3.

A person filing a statement pursuant to this Rule otherwise than as the direct beneficial
ownerofanysecurityshallspecifythenatureofhisbeneficialownershipinsuchsecurity.

4.

ApartnerwhoisrequiredunderthisRuletoreportinrespecttoanysecurityownedbythe
partnershipmayincludeinhisstatementtheentireamountofsuchsecurityownedbythe
partnershipandstatethathehasaninterestinsuchsecuritybyreasonofhismembership
inthepartnership,withoutdisclosingtheextentofsuchinterestorsuchpartnermayfilea
statementonlyastothatamountofsuchsecuritywhichrepresenthisproportionateinterest
inthepartnership,indicatingthatthestatementcoversonlysuchinterest.
SRCRULE24.1(b)1

1.

ManipulativePractices
It shall be unlawful for any person to make a bid or offer, or deal in securities, with the
intention, or if that bid, offer or dealing, has the effect or is likely to have the effect, of
creatingafalseormisleadingappearanceofactivetradinginanysecurityorwithrespect
tothemarketfor,orthepriceof,anysecurity.

2.

It shall be unlawful for any Broker Dealer, associated person or salesman of a Broker
Dealer (hereinafter collectively referred to as "registered person") to make a bid or offer
for, or deal in securities, on account of any other person where the registered person
intendstocreate,ortheregisteredpersonisawarethattheotherpersonintendstocreate,
or taking into account the circumstances of the order, the registered person reasonably
suspects that a person has placed the order with the intention of creating, a false or
misleadingappearanceofactivetradinginanysecurityorwithrespecttothemarketfor,or
thepriceof,anysecurity.

3.

In considering whether an order violates Section 24 of the Code, a Broker Dealer shall
consider:
i.

Whethertheorderorexecutionoftheorder,wouldmateriallyalterthemarket
for,and/orthepriceof,thesecurities

ii.

Thetimetheorderisenteredoranyinstructionsconcerningthetimeofentryof
theorder

iii.

Whetherthepersononwhosebehalftheorderisplaced,oranotherperson
whotheBrokerDealerknowstobearelatedpartyofthatperson,mayhavean
interestincreatingafalseormisleadingappearanceofactivetradinginany
securityorwithrespecttothemarketfor,orthepriceof,anysecurity

iv.

Whethertheorderisaccompaniedbysettlement,deliveryorsecurity
arrangementswhichareunusual

v.

Whethertheorderappearstobepartofaseriesoforders,whichwhenput
togetherwiththeorderswhichappeartomakeuptheseries,theorderorthe
seriesisunusualhavingregardtothemattersreferredtointhisparagraph3
and

vi.

Whetherthereappearstobealegitimatecommercialreasonorbasisinplacing
theorder,unrelatedtoanintentiontocreateafalseormisleadingappearance
ofactivetradinginorwithrespecttothemarketfor,orpriceof,anysecurity.
Failuretoconsiderthesefactorsshallraiseapresumptionthatthetransaction/s

is/aremanipulative.
4.

Setforthbelowareexamplesofprohibitedconduct.
i.

Engaginginaseriesoftransactionsinsecuritiesthatarereportedpubliclyto
givetheimpressionofactivityorpricemovementinasecurity(e.g.paintingthe
tape)

ii.

Buyingandsellingsecuritiesatthecloseofthemarketinanefforttoalterthe
closingpriceofthesecurity(markingtheclose)

iii.

Engagingintransactionswhereboththebuyandsellordersareenteredatthe
sametimewiththesamepriceandquantitybydifferentbutcolludingparties
(impropermatchedorders)

iv.

Engaginginbuyingactivityatincreasinglyhigherpricesandthenselling
securitiesinthemarketatthehigherprices(hypeanddump)orviceversa(i.e.
sellingactivityatlowerpricesandthenbuyingatsuchlowerprices)

v.

Engagingintransactionsinwhichthereisnogenuinechangeinactual
ownershipofasecurity(washsales)takingintoconsiderationinternalcontrol
systemsadoptedbythefirmstopreventmanipulativepractices

vi.

Takingadvantageofashortageofsecuritiesinthemarketbycontrollingthe
demandsideandexploitingmarketcongestionduringsuchshortagesinaway
astocreateartificialprices(squeezingthefloat)

5.

vii.

Disseminatingfalseormisleadingmarketinformationthroughmedia,including
theinternet,oranyothermeanstomovethepriceofasecurityinadirection
thatisfavorabletoapositionheldoratransactionand

viii.

Othertypesofprohibitedconductand/ormanipulativepracticeswhichinclude,
amongothers,thecreationoftemporaryfundsforthepurposeofengagingin
othermanipulativepractices.

Obligations imposed on registered persons under this rule apply in respect of all orders,
irrespectiveofthetradingsystemusedandwhetherexecutedornot.
SRCRULE24.1(d)
ManipulationofSecurityPricesDevicesandPractices

1.

AdvertisementsandCommunicationswiththePublic
A.

AllcommunicationsbyBrokerDealersorassociatedpersonsorsalesmenof
BrokerDealers(hereinafter"registeredpersons"),withthepublicshallbebased
onprinciplesoffairdealingandgoodfaithandshouldprovideasoundbasisfor
evaluatingthefactsinregardtoanyparticularsecurityorsecuritiesortypeof
security,industrydiscussed,orserviceoffered.Nomaterialfactorqualification
shallbeomittediftheomission,inthelightofthecontextofthematerial
presented,wouldcausetheadvertisingorsalesliteraturetobemisleading.

B.

Exaggerated,unwarrantedormisleadingstatementsorclaimsareprohibitedin
allpubliccommunicationsofregisteredpersons.Inpreparingsuchliterature,it
mustbeborneinmindbyregisteredpersonsthatinherentininvestmentarethe
risksoffluctuatingpricesandtheuncertaintyofdividends,ratesofreturnand
yield,andnoregisteredpersonshall,directlyorindirectly,publish,circulateor
distributeanypubliccommunicationthatheknows,orhadreasontoknow,
containsanyuntruestatementofamaterialfactorisotherwisefalseor
misleading

C.

Communicationswiththepublicshallnotcontainpromisesofspecificresults,
exaggeratedorunwarrantedclaims,orunwarrantedsuperlatives,unfounded
opinionsforwhichthereisnobasis,orforecastsoffutureeventswhichare
unwarranted,orwhicharenotclearlylabeledasforecasts.

D.

Injudgingwhetheracommunicationoraparticularelementofacommunication
maybemisleading,severalfactorsshouldbeconsidered,includingbutnot
limitedto:
i.

theoverallcontextinwhichthestatement/sis/aremade.Astatementmade
inonecontextmaybemisleadingeventhoughsuchastatementcouldbe
perfectlyappropriateinanothercontext.Anessentialtestinthisregardis
thebalanceoftreatmentofrisksandpotentialbenefits

ii.

theaudiencetowhichthecommunicationisdirected.Differentlevelsof
explanationordetailmaybenecessarydependingontheaudienceto
whichacommunicationisdirectedandtheabilityoftheregistered
persongiventhenatureofthemediaused,torestricttheaudience
appropriately.Ifthestatementsmadeinacommunicationwouldbe
applicableonlytoalimitedaudience,orifadditionalinformationmightbe
necessaryforotheraudiences,itshouldbekeptinmindthatitisnot
alwayspossibletorestrictthereadershipofaparticularcommunication
and/or
AacCHD

iii.

theclarityofthecommunication.Astatementordisclosuremadeinan
unclearmannercanresultinafailuretounderstandthestatement,orina
seriousmisunderstanding.Acomplexoroverlytechnicalexplanationmay

worsecauseevengreatermisunderstandingthantoscantinformation.
Likewisematerialdisclosurerelegatedtolegendsorfootnotesmaynot
generallyenhancethereader'sunderstandingofthecommunication.
2.

PublicationofTransactionsandQuotations
No Broker Dealer, or associated person or salesman of a Broker Dealer, shall publish or

circulate, or cause to be published or circulated, any notice, circular, advertisement,

newspaperarticle,investmentservice,orcommunicationofanykindthatpurportstoreport
any transaction as a purchase or sale of any security unless he believes that such
transactionwasabonafidepurchaseorsaleofsuchsecurityorthatitpurportstoquote
the bid price or asked price for any security, unless he believes that such quotation
representsabonafidebidfor,orofferof,suchsecurity.
3.

PaymenttoInfluenceMarketPrices
No Broker Dealer shall, directly or indirectly, give, permit to be given, or offer to give,

anything of value to any person for the purpose of influencing or rewarding the action of
suchpersoninconnectionwiththepublicationorcirculationinanynewspaper,investment
service, or similar publication, of any matter which has, or is intended to have, an effect
uponthemarketpriceofanysecurity,providedthatthisruleshallnotbeconstruedtoapply
toamatterwhichisclearlyidentifiableaspaidadvertising.
SRCRULE24.22
ShortSales[newprovision]
1.

DefinitionofShortSale
Theterm"shortsale"shallmeananysaleofasecuritywhichthesellerdoesnotownorany

salewhichisconsummatedbythedeliveryofasecurityborrowedby,orfortheaccountof
theseller.Apersonshallbedeemedtoownasecurityif:(1)heorhisagenthastitletoit
(2) he has purchased, or has entered into an unconditional contract, binding on both
partiesthereto,topurchaseitandhasnotyetreceivedit(3)heownsasecurityconvertible
intoorexchangeableforitandhastenderedsuchsecurityforconversionorexchange(4)
he has an option to purchase or acquire it and has exercised such option or (5) he has
rights or warrants to subscribe to it and has exercised such rights or warrantsprovided,
however, that a person shall be deemed to own securities only to the extent he has a net
longpositioninsuchsecurities.
2.

DeterminationofGoodDelivery
No broker or dealer shall accept a long sale order from a customer unless he has made a

determinationthatthecustomerownsthesecurityandwilldeliveringooddeliverableform
withinthree(3)businessdaysoftheexecutionoftheorder.Thedeterminationmustinclude
anotationontheorderticketatthetimetheorderistakenwhichreflectstheconversation
with the customer as to the present location of the securities, whether they are in good
deliverableform,andthecustomer'sabilitytomakedelivery.
3.

ExecutionofShortSale
Nobrokerordealershalluseanyfacilityofasecuritiesexchangetoeffectashortsaleofany

securityunless(1)atapricehigherthanthelastsaleor(2)atthepriceofthesaleifand
onlyifthatpriceisabovethenextprecedingdifferentsalepriceonsuchday.
4.

FailuretoDeliver
No person shall, directly or indirectly, by the use of any facility of a securities exchange,

effectashortsaleinasecurityregisteredorlistedonanysecuritiesexchange,wherethe
seller does not intend to make delivery of the securities within the period specified in the
contract.Failureonthepartofthesellertomakedeliveryonsuchdatewillbetakenbythe
Commission as prima facie evidence of the lack of intention on his part to make such
delivery.

5.

MandatoryCloseOut
A contract involving a short sale which has not resulted in a delivery by the Broker Dealer

withinthesettlementperiodmustbeclosedbytheBrokerDealerbypurchasingforcashor
guaranteed delivery securities of like kind and quantity on the next business day after
settlement date, unless such purchase cannot be effected within said period for justifiable
reasons in which case, notification in writing shall be made with the Exchange and the
Commission
6.

Directors,OfficersorPrincipalStockholders
No director, officer or principal stockholder of a corporation shall make a short sale in

securitiesofthecorporationinwhichheisadirector,officerorprincipalstockholder.
7.

OrderforShortSale
Uponreceivinganordertosellshort,thesameshouldbeindicatedonthesellingorderand

throughoutalltherecordspertinenttothesale.Priortoacceptanceofanyshortsaleorder,
the broker or dealer shall arrange to borrow the securities to make delivery by settlement
date.
8.

ExemptTransaction
Thisrulenotwithstanding,theExchangemayprohibitshortsellingintheExchangeindefinitely

or for such period of time as it may deem necessary or advisable for the protection of
investors, and the Commission may also prohibit short selling on any exchange as an
emergency measure or whenever the same is necessary or appropriate in the public
interestorfortheprotectionofinvestors.
SRCRULE24.23
ProhibitiononGuaranteesagainstLoss
No Broker Dealer or salesman shall guarantee a customer against loss in any securities
accountofsuchcustomercarriedbytheBrokerDealerorinanysecuritiestransactioneffected
bytheBrokerDealerwithorforthecustomer.
SRCRULE25.1
RegulationofOptionsTrading
[formerly,SRCRule25.1DefinitionofPut,Call,StraddleandOption]
1.

Except as provided in paragraph 3 of this rule, the terms Put, Call and Optionhave the
samemeaningsasdefinedinSRCRule3.1(d).

2.

Exceptasprovidedinparagraph3ofthisrule,Straddleinvolvesthepurchaseofanequal
numberofputoptionsandcalloptionsonthesameunderlyingsecurityatthesamestrike
price and maturity date. Each option may be exercised separately, although the
combinationofoptionsisusuallyboughtandsoldasaunit.

3.

The terms put, call, straddle, option, or privilege shall not include any registered warrant,
rightorconvertiblesecurity.
SRCRULE26.3
FraudulentTransactions
[formerly,SRCRules26.31and26.32]

1.

UseofInformationObtainedinFiduciaryCapacity
ABrokerDealer,associatedpersonorsalesmanofaBrokerDealer,apayingagent,transfer

agent,trustee,oranyotherpersonactinginasimilarfiduciarycapacity,whohasreceived
informationastotheownershipofsecurities,shallnotmakeuseofsuchinformationforthe
purposeofsolicitingormakingpurchases,salesorexchangesofsecuritiesor,exceptas
providedinSRCRule30.2,paragraph9,providesuchinformationtoanypersonwhodoes
notneedsuchinformationtofulfillhisresponsibilitiesundertheCode.

2.

ProhibitedRepresentations
Itshallbeunlawfulforany:

A.

Persontorepresentthathehasbeenregisteredasasecuritiesintermediary
withtheCommissionunlesssuchpersonisregisteredundertheCode.
RegistrationundertheCorporationCodeshallnotbedeemedtoberegistration
undertheCode

B.

BrokerDealertorepresentthattheregistrationoftheBrokerDealerunderthe
Code,orthefailureoftheCommissiontodeny,suspend,orrevokesuch
registration,indicatesinanywaythattheCommissionhaspasseduponor
approvedthefinancialstanding,business,orconductofsuchBrokerDealer,or
themeritsofanysecurityoranytransaction/sconductedthereby

C.

Persontorepresentthatasecurityisaparticulartypeofsecuritywhensuch
representationisinconsistentwithastateddefinitionundertheCodeorrulesor
regulationsadoptedthereunder,orinternationallyacceptedpractice.

D.

Persontorepresentthatasecuritytobesold,transferred,pledged,mortgaged,
encumbered,usedfordelivery,oranyotherpurposetoanotherentityoritself
hasbeenlegallyauthorizedbytherecordedownerwhensuchrepresentationis
nottrueanddocumentedinwritingatthetimeanddateitwasused.
SRCRULE28.1
RegistrationofBrokersandDealers
[formerlySRCRules28.11,2,3,4,5]

1.

RegistrationofBrokerDealer
A.

ApersonapplyingforregistrationasaBrokerDealerunderSection28shall
indicateintheapplicationformforregistration,orinanamendmentthereto:
i.

WhetherheisanExchangeTradingParticipantoraNonExchange
BrokerDealer

ii.

IfanExchangeTradingParticipant,whetheritisaclearingtrading
participantoranonclearingtradingparticipant

iii.

IfanExchangeTradingParticipant,whetherheshallengageinmarket
makingtransactions

iv.

IfanonExchangeBrokerDealer,whetherheisoperatingaseatfororis
usingthetradingrightsofanExchangememberTradingParticipant

v.

ForbothnonExchangememberBrokerDealerandExchangeTrading
Participant,whethertheyshalldealonlywithproprietaryshares,equity
securities,orfixedincome/debtsecurities,ortheyare
registered/licensedasgovernmentsecuritieseligibledealers(GSED).
Forpurposesofthissectionandsubsequentprovisionsthatreferto
thisclassification,thefollowingtermsareusedinterchangeablyandshall
havethesamemeaning:(1)"Exchangemember"withthatof"Exchange
TradingParticipant"and(2)"NonExchangeMember"withthatof"Non
ExchangeBrokerDealer."

B.

"Marketmakingtransactions"shallmeantransactionsinaparticular
security/ies:
i.

byaBrokerDealerwhichcomplieswiththeCommissionandExchange
rulesregardingitsdutyasamarketmaker

ii.

toensuretwowayquotes,provideliquidity,andmaintainafairand

orderlytradingmarkettherein.
C.

AnapplicantforregistrationasaBrokerDealershallbesolelyengagedinthe
businessofaBrokerDealer.

D.

EveryapplicationforregistrationasaBrokerDealershallbefiledonSECForm
28BDandbeaccompaniedbythefollowingpapersordocuments:
i.

AcontinuingauthorizationfortheCommission'sdulyauthorized
representativetoverifytheapplicant'sbankaccounts.Theauthorization
shallbeforallbankswhereinaccountsaremaintainedbytheBroker
DealerandshallbecontinuouswithregistrationbytheCommission

ii.

Proofofcompliancewithpaidupcapitalrequirementspursuantto
Paragraph1(E)(v)ofthisrule

iii.

CertifiedTrueCopyofvalidworkpermitofforeignerswhoare
employeesorofficersoftheapplicantcorporationdulyissuedbythe
DepartmentofLaborandEmployment(DOLE)oranyappropriate
agency

iv.

Copiesofidentitycards/passportsofthefollowing:
1.

Individualapplicants(salesman/associatedperson)

2.

Officers

3.

Directorsand

4.

Personswhocontrolmorethantenpercent(10%)ofaclassof
votingsecuritiesofcorporateapplicants.

v.

Writtensupervisionandcontrolprocedures,includingproceduresfor
establishingandmaintaininga"ChineseWall"pursuanttoSRC34.1,
paragraph2takingintoconsiderationtheapplicablerequirementsunder
theAntiMoneyLaunderingActof2001(RA9160,asamended)andthe
CodeofCorporateGovernance(SECMemorandumCircularNo.2,
Seriesof2002)

vi.

AscheduleofminimumcommissionchargesasrequiredbySRCRule
30.2,paragraph5

vii.

Calculationofnetcapitalrequirementsinaccordancewithparagraph
(E)(ii)ofthisRuleandSRCRule49.1,paragraph1oranyother
financialratio/measurewhichtheCommissionmayinthefuturemandate

viii.

CertifiedTrueCopyofeducational,professional/technicalorother
academicqualificationsofOfficers,AssociatedPersonsand
Salesmen
EaCSTc

ix.

Latestauditedfinancialstatement

x.

Whereapplicanthasbeeninexistenceformorethanoneyear,certified
copiesofincometaxreturnsforthetwoyearsprecedingdateof
application

xi.

Organizationchart,includingbranchoffices

xii.

Iftheapplicantisacorporation,acertifiedcopyofthefollowing
documentsunderoath,bythecorporatesecretary:
1.

Withrespecttoaforeigncorporation,certificatethattheboardof
directorshasauthorized,inaresolution,thePresidentand
Secretarytosignanirrevocableconsenttoserviceofprocess

upontheCommissionasservicetothecorporation

E.

2.

ArticlesofIncorporationindicatingthatthepurposeofthe
applicantistoengageinthebusinessofaBrokerDealer

3.

Boardresolutionattestingtoparticularscontainedinthe
application.

xiii.

Businessplanregardingproposedand/orcurrentoperations,including
projectedvolumeofbusiness.Suchplanshouldreflectapplicant'sability
andplanstoengageinaprofitablelevelofbusinessand

xiv.

Ayearlyschedule/timetableontheimplementationofthetraining
programforthestaff,whichspecifies,amongothers,thedescriptionof
thetrainingprogram,dateofimplementationandnameofparticipants.

TermsandConditionsforregistrationandsubsequentrenewaloflicense
(1)

(2)

ApplicabletoExchangeTradingParticipants
i.

MembershipingoodstandinginanExchangeprovided,
howeverthatanyapplicantwhoisnotamemberofanExchange
mayonlybegrantedregistrationconditioneduponfuture
membershipinanExchange

ii.

MembershiporparticipationinaTrustFundaccreditedbythe
CommissionunderSRCRule36.45(a)

iii.

WheretheBrokerDealerisaparticipantinaregisteredclearing
agency,fulfillmentofitsobligationtocontributetotheguarantee
fund

ApplicabletobothExchangeTradingParticipantsandNonExchange
BrokerDealers
iv.

NetCapitalintheamountofFiveMillionPesosorfivepercent
(5%)ofaggregateindebtednesswhicheverishigher,calculatedin
accordancewithSRCRule49.1,paragraph1forfirmsfalling
underparagraphs(v)(a)and(b)belowortheNetcapitalinthe
amountofTwoMillionFiveHundredThousand(P2.5Million)ortwo
andonehalfpercent(2.5%)ofhisaggregateindebtedness
whicheverishigherforfirmsfallingunderparagraph(v)
(c)provided,however,thattheCommissionmaysetadifferent
requirementforthosefirmsauthorizedtousetheRiskbased
capitaladequacymodel.
"RiskBasedCapitalAdequacyRequirement/Ratioshallrefertothe

minimumlevelsofcapitalthathastobemaintainedbyfirmswhich
arelicensed,orsecuringaBrokerDealerlicense,takinginto
considerationthefirmsize,complexityandbusinessrisk.Such
risksthatareconsideredindeterminingthecapitalrequirement
include,amongothers,Operational,Position,Counterparty,Large
Exposure,Underwriting,andMarginFinancingRisks."
v.

a.

UnimpairedpaidupcapitalofOneHundred(100)million
pesosforthefollowingtypesofBrokerDealers:
(1)

Firsttimeregistrantswhowillbeparticipatingina
registeredclearingagencyupontheeffectivityofthe
Code

(2)

ThoseacquiringthebusinessofexistingBroker

DealerfirmspursuanttoSRCRule28.1,paragraph2
andwillbeparticipatinginaregisteredclearing
agencyProvided,however,thattheCommissionmay
authorizealowercapitalizationforapplicantsnot
participatinginaregisteredclearingagency.

2.

OtherexistingBrokerDealerapplicantsnotmeetingtheOne
HundredMillion(P100,000,000.00)capitalizationandnotseeking
authorizationtoengageinmarketmakingtransactionsshall
maintainaTenMillionPesos(P10,000,000.00)unimpairedpaid
upcapitalandfiletherequiredsuretybondinlieuofthe100
MillionpesosasprescribedunderSRCRule28.1(5).

c.

UnimpairedpaidupcapitalofTwoMillionFiveHundred
ThousandPesos(P2,500,000.00)forapplicantsdealingpurelyin
proprietarysharesandwhoarenotholdingsecurities.

vi.

Registrationofeachbranchoffice

vii.

Atleastonetrainedandregisteredsalesmanateachregistered
branchoffice.Allsalesmenoftheapplicantshallapplyfor
registrationasasalesmanunderSRCRule28.1,paragraph4

viii.

AtleastoneregisteredAssociatedPerson.Anypersonwith
supervisoryresponsibilityfortheapplicantshallapplyfor
registrationasanAssociatedPersonunderSRCRule28.1,
paragraph4

ix.

Asufficientnumberofbackofficestaffatthemainofficeofthe
applicant

x.

Acomputerizedandeffectiverecordingandaccountingsystem

xi.

Separatebankaccountsforclientfunds

xii.

Separatebankaccountforfirmfunds

xiii.

Reporting,usingSECForm28BDAofchangesinthe
informationprovidedintheapplicationformtotheCommissionin
writingwithinseven(7)daysofsuchchanges

xiv.

CompliancewiththeprovisionsoftheCodeofCorporate
GovernanceandAntiMoneyLaunderingAct

xv.

Filingofreportsrequiredundertherulesandregulations,
includingbutnotlimitedtothefilingoftheManualsonGood
GovernanceandAntiMoneyLaunderingand

xvi.

AcertificateofMembershipingoodstandingfromaduly
accreditedorrecognizedbroker/dealerassociationand

xvii.
F.

b.

SuchotherrequirementswhichtheCommissionmayprescribe.

Everyregisteredbrokerdealershallapplyforissuanceofanannuallicensein
Novemberofeachyear.Uponfilingandpaymentoftherequiredannualfee,the
Commissionwillissueanewlicensewhichshallbeeffectiveforone(1)
yearprovided,however,thattheapplicantisclearedbytheCommissionand/or
theSROofallderogatoryreportsandcases.Thefilingandpaymentofthe
requiredannualfeeaftertheprescribedperiodwillbetreatedasanew
applicationandtheapplicantshallbechargedthefilingfeeofanewregistrant.

RegistrationofSuccessortoBrokerDealer

A.

IntheeventthataBrokerDealersucceedstoandcontinuesthebusinessof
anotherBrokerDealer,theregistrationofthepredecessorBrokerDealershall
bedeemedtoremaineffectiveforaperiodoffortyfive(45)daysfromdateof
saleorsuccessionastheregistrationofthesuccessorifthesuccessorwithin
thirty(30)daysaftersuchsuccession,(i)filesanapplicationforregistrationon
SECForm28BDandtheCommission,withinanequivalentperiod,approves
suchregistrationandsimultaneously(ii)publishesanoticeofsuchapplication
inanynewspaperofgeneralcirculationexpensesofwhichshallbebornebythe
successorbroker.

B.

Thefollowingareexamplesofthetypesofreorganizationsthatrequirethe
successorofaBrokerDealertofileanewapplication:

C.

3.

i.

Anentitypurchasesorassumessubstantiallyalloftheassetsand
liabilitiesofaBrokerDealer,and,aftersodoing,thesaidentitydecides
tooperatethebusinessoftheBrokerDealer

ii.

IftwoormoreregisteredBrokerDealersconsolidatetheirfirmsand
conducttheirbusinessthroughanewentitywhichassumessubstantially
alloftheassetsandliabilitiesofthepredecessorbrokerdealerthenew
entityshallfileacompleteapplicationonSECForm28BD,whilethe
predecessorfirmsshalleachberequiredtofileaRequestforWithdrawal
ofBusinessand/orCancellationofRegistrationasBrokerDealerunder
SRCRule28.1,paragraph3.

iii.

AnentityinvestsintheBrokerDealer,suchinvestmentresultingina
changeinthemanagementand/orownershipcontroloftheBroker
Dealer.

Notwithstandingparagraph2(A)ofthisRule,thesuccessormayfilean
amendmenttotheregistrationofthepredecessorBrokerDealeronSECForm
28BDAinsteadofanoriginalapplicationforregistration,withinthirty(30)days
afterthesuccessioninthefollowinginstances:
i.

Acorporatereorganizationorrestructuringthatdoesnotresultina
changeincontroloftheBrokerDealer.

ii.

Asuccessionresultingfromachangeintheformofbusiness,suchas
fromapartnershiptoacorporation.

WithdrawalofBusinessand/orCancellationofRegistrationasBrokerDealer
A.

TheRequestforWithdrawalofBusinessand/orCancellationofRegistrationas
aBrokerDealershallbefiledonSECForm28BDWinaccordancewiththe
instructionscontainedtherein.

B.

Arequesttowithdrawbusinessand/orcancelregistrationfiledbyaBroker
Dealershallbecomeeffectiveonthesixtieth(60th)dayafterthefilingthereof
withtheCommissionunlessanotherdatehasbeendeterminedbythe
Commissionforitseffectivity.Iftherequesttocancelregistrationisfiledwith
theCommissionatanytimesubsequenttothedateofissuanceofa
CommissionorderinstitutingproceedingspursuanttoSection29oftheCodeto
suspendorrevoketheregistrationofsuchBrokerDealer,orif,priortothe
effectivedateofthecancellationofregistration,theCommissioninstitutessuch
proceeding(s)toimposetermsandconditionsforitscancellation,therequestto
withdrawbusinessand/orcancelregistrationasbrokerdealershallnotbecome
effectiveexceptatsuchtimeanduponsuchtermsandconditionsasthe
Commissiondeemsnecessaryorappropriateinthepublicinterestorforthe
protectionofinvestors.

C.

SubsequenttofilingofsuchNoticeorRequesttowithdrawbusinessand/or
cancelregistration,theBrokerDealershallperformthefollowing:
i.

ii.

Thecompanywillexecutewithinfive(5)daysanaffidavitunderoath,
undertakingtocomplywiththefollowingconditions:
1.

Thecompanywillceasetosolicitnewbusinessandthatshouldthe
companyremaininoperativeforfive(5)years,itsCertificateof
Incorporationwillberevoked

2.

Thecompanywillnolongerexecuteordersfromclientswithinfive
(5)daysfromactualcessationofoperation

3.

ThetermsandconditionsoftheSuretyBondshallremaineffective
untilitsexpiration

4.

Therewillbenodisposalortransferofclients'securitiesto
successorbrokerwithouttheknowledgeorinstructionfromthe
client

5.

Thecompanywillcontinuallyinformtheclientofitscorporate
activitiesuntilthetransfertosuccessorbroker

6.

Thecompanywillpreserveforaperiodofnotlessthanfive(5)
yearsfromthedatetheExchangeand/ortheCommissionhas
approveditsoperationtocease,allrecordsrequiredtobe
maintainedpursuanttotheBooksandRecordsRule.Thecompany
shallinformtheExchangeandtheCommissionofthenamesand
residenceaddressesandcontactnumbersofatleasttwo(2)
person/sresponsibleforthesafekeepingofalltherecords,
reportinganychangeintheperson/sresponsible,ifthereisany.If
moneylaundering,criminaloradministrativecaseshavebeenfiled
incourtoraninvestigationisbeingconductedwhereinthe
customerisinvolvedorimpleadedasapartytothecaseor
investigation,thefilemustberetainedbeyondthefive(5)year
perioduntilitisconfirmedthatthecasehasbeenfinallybeen
resolvedorterminatedbythecourt

7.

ItshallbetheresponsibilityoftheComplianceOfficeror
AssociatedPersontooverseecompliancewiththerequirementsof
theCommissionand/orExchangerelativetotheclosureofits
business

FollowingthesubmissionofSECForm28BDWNoticeofWithdrawal
fromRegistration,thecompanyisgivenamaximumof45daystoeffect
thetransferofitsclients'securitiestothesuccessorbrokerduly
approvedbytheExchange(inthecaseofExchangeTrading
Participants)ortheCommission(inthecaseofNonExchangeBroker
Dealer)oranybrokerchosenbytheclient.Duringsuchperiodthe
followingrequirementsshallbecompliedwith:
1.

SubmittotheExchange(inthecaseofExchangeTrading
Participants)ortheCommission(inthecaseofNonExchange
BrokerDealer)foritsapprovaladraftletterinformingtheclientsof
theclosureofbusinessincludingtheproceduresthatitwill
undertaketoservicetheclientsandthecreditors

2.

Issuelateststatementofaccountstoindividualclientstogivethem
theopportunitytovalidatetheirstockpositionswiththecompany
includingtheirpayables

3.

SubmittotheExchange(inthecaseofExchangeTrading
Participants)ortheCommission(inthecaseofNonExchange
BrokerDealer)asummaryofclients'accountbalances

4.

Executeclients'instructionsonhowtoeffecttransfer/liquidatetheir
securitiesandcashpositions

5.

ProvidetheExchange(inthecaseofExchangeTrading
Participants)ortheCommission(inthecaseofNonExchange
BrokerDealer)withastatusreportofclients'complaintswiththe
correspondingaction/stakenand
SDAaTC

6.

SubmittotheExchange(inthecaseofExchangeTrading
Participants),copyfurnishedtheCommission,ortheCommission
(inthecaseofNonExchangeBrokerDealer)anundertakingtobe
accomplishedbythepersonsresponsibleinthesafekeepingofall
therecordsofthecompanypursuanttoAMLAandSRC'sIRR.

iii.

TheExchange(inthecaseofExchangeTradingParticipants)orthe
Commission(inthecaseofNonExchangeBrokerDealer),ifitdeems
necessary,willconductapostauditofthecompanytoensure
compliancewiththeaforementionedrequirementsaftertheendofthe
fortyfive(45)dayperiod.

iv.

Aftereffectingthetransferofclients'securitiestothesuccessorbroker
dulyapprovedbytheExchange(inthecaseofExchangeTrading
Participants)ortheCommission(inthecaseofNonExchangeBroker
Dealer)oranybrokeroftheirchoice,thecompanyisrequiredtosubmit
totheCommissionthefollowingdocuments:

v.

1.

Alist,executedunderoath,ofalltransfersofcustomeraccounts
fromthetimenoticeofcessationofbusinessorwithdrawalof
registrationhasbeencommunicatedtotheCommissionorthe
Exchange

2.

CertificateofGoodStandingfromtheCommission

3.

ClearancefromtheExchangethatthecompanyhasno
outstandingliabilitiestotheExchange

4.

ClearancefromtheExchange'sComplianceandSurveillance
Groupthatthecompanycansettleorhassettledallofitstrading
relatedliabilitiesandobligationspriortothedateofeffectivityof
theterminationofoperation

5.

Clearancefromtheregisteredclearingagencythatallobligations
havebeensettled,deliveredand/orsecuritiesintactandingood
controllocation

6.

CurrentoriginallicensesoftheBrokerDealer,salespersonsand
itsassociatedpersonand

7.

FilingofSECForm28Tforeachofthecompany'sassociated
person/sandsalesperson/s.

Notwithstanding,thefilingofthenoticeofcessationofoperationwiththe
Commission,theliabilitiesandobligationsofthecompanytothirdparties
shallcontinueuntilfullcompliancewithandsubmissionofthe
abovementionedconditions/requirements.Furthermore,theprimary
licenseofthecompanywillbecancelled/revokedshoulditremainnon
operationalforfiveyearspursuanttoSection22oftheCorporation

Code.
4.

RegistrationofSalesmenandAssociatedPersonsofBrokerDealers
A.

Apersonmaynotbeemployedasasalesmanorassociatedpersonofa
BrokerDealerunlessregisteredasasalesmanorassociatedpersonunderthis
Rule.TheBrokerDealermaybeallowedtoemploytraineesforaonetime,non
extendibleperiodofsix(6)monthsprovidedhoweverthat:
i.

Thetraineesaresupervisedbyaregisteredsalesman

ii.

Thetraineesarenotsolicitingclientsordealingdirectlywithclients

iii.

Thetraineesarenotreceivinganyformofcommissionorsalaryfromthe
BrokerDealerotherthanareasonableallowanceand

iv.

TheBrokerDealerimmediatelyinformstheCommissioninwritingofthe
hiringofsuchtrainees.
TheCommissionshallconsidertheattendantconditionstowarrantthe

determinationofcompliancewiththeaboverequirements.
B.

ForpurposesofthisRule:
i.

Salesmanshallrefertoanaturalpersonhiredtobuyandsellsecurities
onasalaryorcommissionbasisproperlyendorsedtotheCommissionby
theemployingBrokerDealer.Itshallalsoincludeanyemployeeofan
issuercompanywhosecompensationisdetermineddirectlyorindirectly
onsalesoftheissuer'ssecurities.

ii.

Associatedpersonshallmeananypersonemployedfulltimebythe
BrokerDealerwhoseresponsibilitiesincludeinternalcontrolsupervision
ofotheremployees,agents,salesmen,officers,directors,clerksand
stockholdersofsuchBrokerDealerforcompliancewiththeCodeand
rulesandregulationsadoptedthereunder.Hecannotperformotherduties
withoutCommissionapprovalandsubjecttotheconditionthatthebroker
dealerwillmaintaintheappropriateChineseWallbetweenthefunctions
ofanAssociatedPersonandthatofhisotherduties.

C.

Noticeofdiscontinuationofemploymentofasalesmanorassociatedperson
andthereasonstherefore,shallbeprovidedtotheCommissionbythe
employingBrokerDealerbyfilingSECForm28Tnolaterthanthirty(30)days
afterthediscontinuationofemployment.

D.

Everyapplicationforregistrationasasalesmanorassociatedpersonshallbe
filedonSECForm28S,orSEC28AP,respectively,verifiedunderoathbythe
BrokerDealerwhoistheemployerofthesalesmanorassociatedperson,be
accompaniedbytheprescribedfeeandthefollowingpapersanddocuments:
i.

Ifanapplicantisaforeigner,certifiedtruecopyofvalidworkpermitduly
issuedbytheDepartmentofLaborandEmployment(DOLE)orany
appropriateagency

ii.

Copiesofidentitycards/passportsofapplicant

iii.

Evidence,preferablyacertifiedtruecopy,thatsuchpersonhas
compliedwithapplicableexaminationrequirementsand/ormeetsother
educational,professionalortechnicalqualificationsand

iv.

WrittenevidencethataBrokerDealerhasagreedtoemploysuchperson
contingentuponsuchperson'sregistrationasasalesmanorassociated
person.

E.

Termsandconditionsforapplicantsforregistration:
i.

OnlynaturalpersonscanapplyandbeemployedbyaBrokerDealer.

ii.

Applicantsforsalesmenshallbeatleasteighteen(18)yearsofageand
applicantsforassociatedpersonshallbeatleasttwentyone(21)yearsof
age.

iii.

Applicantsforregistrationasasalesmanmusthavenodisciplinary
historythatwouldsubjectthemtodisqualificationfromregistrationunder
Section29oftheCode.

iv.

Applicantsforregistrationasanassociatedperson,mustnothavebeen
censuredorreprimandedbyaprofessional(e.g.IBP,PRC,etc.),or
regulatorybody(e.g.SEC,BSP,IC,etc.)fornegligence,incompetence
ormismanagement,ordismissedorrequestedtoresignfromany
positionorofficefornegligence,incompetenceormismanagement,orbe
subjecttoanyotherdisqualificationunderSection29oftheCode.

v.

Anyapplicantapplyingforregistrationasasalesmanorassociated
personforthefirsttime,musthavetakenandpassedtheapplicable
examinationwithinthelastthree(3)yearsimmediatelyprecedingthedate
ofhisapplication.

vi.

Anyapplicantapplyingforalicenseintheyearsubsequenttohis
originalregistrationmusthaveaminimumofthree(3)yearsexperience
asaregisteredsalesmanorassociatedpersonorpassedtheapplicable
examination,withinthelastthree(3)yearsimmediatelyprecedingthe
dateofhisapplication.Anyapplicantwhohasnotbeenengagedasa
salesmanorassociatedpersonforacontinuousperiodofatleastthree
(3)yearspriortothedateofhisapplication,shallnotbeallowedtorenew
hislicenseuntilhehasundergonetrainingandarefreshercourseand
passedtherelatedexaminationprovided,further,thatallapplicantsmust
beabletodemonstrateanunderstandingoftheCodeandrulesand
regulationsadoptedthereunder,theparticularExchangeand/orclearing
agencyrulesthatapplytothefunctionsthattheywouldperform,any
obligationsimposedbythoseprovisionsandrules,andthefiduciary
obligationsowedtoclientsandthegeneralobligationsowedtoemployers.

F.

Theregistrationofasalesmanorassociatedpersonshallceasewhenheisno
longeremployedbytheBrokerDealeridentifiedinhisregistrationapplication.

G.

DutiesofanAssociatedperson.TakeninconjunctionwithSRCRule30.2(6),
anAssociatedpersonshall:
i.

HaveageneralknowledgeoftheoperationsoftheBrokerDealerwithout
necessarilyengagingoractivelyparticipatinginthedaytoday
operationsofthefirm

ii.

SuperviseandprovidetrainingsasprescribedunderSRCRule30.2(7)
tootheremployees,agents,salesmen,officers,directors,clerksand
stockholdersoftheBrokerDealerforcompliancewiththeCodeandrules
andregulationsadoptedthereunder
CSEHIa

iii.

Overseecompliancewithlegislativeandotherregulatoryrequirements
(suchasnotifyingtheCommissionofmaterialchangesininformation
previouslyfiled,maintainingregisters,booksofaccountsandother
records,compliancewithrules,ordersandlawsrelatingtotrading,
issuingconfirmationreceipts,compliancewithmarginrules,netcapital
andotherfinancialrequirements)

H.

5.

iv.

EnsurethatallsalesmenoftheBrokerDealerareregisteredandthatthe
Commissionisnotifiedwhenanysalesmanisnolongeremployedbythe
BrokerDealer

v.

Developproceduresandmonitoronadailybasiscompliancewith
financialresourcerequirementsand

vi.

Ensurethatthereisanaudittrailwhichenablescompliancewith
applicablelaws,Exchange,clearingagencyandotherSROrules.

Asaconditionforcontinuingregistration,registeredsalesmenandassociated
personsshall:
i.

Reportanychangeintheinformationprovidedintheapplicationformto
theCommissioninwritingwithinseven(7)daysofsuchchanges,using
SECForm28AMD

ii.

ObserveatalltimestheprovisionsofthisCode,allrulesandregulations
adoptedthereunder,andapplicableExchange,clearingagencyandother
SROrulesand

iii.

Demonstrateanongoingunderstandingofapplicableregulatory
requirementsandExchange,clearingagency,andotherSROrules.

I.

Everyregisteredsalesmanorassociatedpersonwhoshallchangehis
registrationcategoryduringtheyear(i.e.,salesmantoassociatedpersonand
viceversa)shallbeassessedtheappropriatefeefortheissuanceofanew
license.

J.

Everyregisteredsalesmanandassociatedpersonshallapplyforissuanceof
annuallicenseinNovemberofeachyear.Uponfilingandpaymentofthe
requiredannualfee,theCommissionwillissueanewlicensewhichshallbe
effectiveforone(1)yearprovided,however,thattheapplicantisclearedofall
derogatoryreportsandcasesbytheCommissionand/oranydulyrecognized
professionalorregulatorybodyor,inappropriatecases,theSRO.Thefiling
andpaymentoftherequiredannualfeeaftertheprescribedperiodwillbe
treatedasanewapplicationandtheapplicantshallbechargedthefilingfeeof
anewregistrant.

BrokerDealerSuretyBondandSelfInsuranceBond
TheamountofsuretybondsrequiredtobefiledpursuanttoSRCRule28.1,paragraph1by

Broker Dealers who have elected to defer compliance with the One Hundred Million
(P100,000,000.00)unimpairedpaidupcapitalrequirementspursuanttothatRuleisfixedat
notlessthanFiveMillionPesos(P5,000,000.00)forBrokersandnotlessthanOneMillion
Pesos (P1,000,000.00) for Dealers, or such other amount which the Commission may
prescribe.Suchbondsshallbeconditioneduponthefaithfulcompliancewiththeprovisions
oftheCodeandrulesandregulationsadoptedthereunderbysaidBrokerDealerandbyall
salesmenandAssociatedPersonswhileactingforhim.Suchbondshallbeexecutedbya
surety company authorized to do business in the Philippines. In lieu of such bond, the
BrokerDealermayfilebondsoftheGovernmentofthePhilippines.Ifabondisfiled,any
person damaged by the failure of such Broker Dealer or of any salesman or Associated
Person while acting for him, to comply with the provisions of this Code and rules and
regulationsadoptedthereundershallbeentitledtosuethesuretiesundersuchbondandto
recover the damages so suffered thereunder. If other securities are filed in lieu thereof,
suchpersonmaysubjectsuchsecuritiestothepaymentofsuchdamage.
With the adoption of the risk based capital adequacy model as required under SRC Rule

28.1, paragraph 1 (E) (v) (d), the Commission may prescribe Broker Dealers to file the
requiredsuretybondspursuanttoSRCRule28.11paragraph1(e)(v)(b).

6.

AnyregisteredtransferagentexistingpriortotheeffectivityoftheseRulesshall,within45
days from effectivity of these Rules, comply with all the requirements provided under this
Rule,whichwerenotprovidedforinitsoriginalregistration.
Nothing in this Rule shall be construed as precluding the Commission from requiring an

applicant for registration or a registered Broker Dealer, Salesman, Associated Person to

submit other requirements it may deem reasonably necessary to effectively regulate and
supervisethesepersonsand/ortoprotecttheinterestoftheinvestingpublic.
SRCRULE28.2
CompliancewithQualificationRequirementsofSelfRegulatoryOrganizations
No Broker Dealer shall effect any transaction in, or induce the purchase or sale of, any
security unless the employee of such Broker Dealer who effects or is involved in effecting such
transaction is registered or approved in accordance with the standards of training, experience,
competence, and other qualification standards (including, but not limited to, submitting and
maintaining all required forms, paying all required fees, and passing the required examinations)
established by the rules of any Exchange or other Self Regulatory Organization where such
BrokerDealerisaMemberoforParticipantin.
aHSCcE

SRCRULE29
ProtectionofCustomerAccountsWhereRegistrationofaBrokerDealerisSuspendedor
Revoked
Where the Commission has suspended or revoked the registration of a Broker Dealer
underSection29oftheCode,thefollowingprocedureshallbeobserved:
1.

WheresuchBrokerDealerisaMemberofanExchange(oranExchange
TradingParticipant),theExchangeshallimmediatelyarrangeforanother
Member(orExchangeTradingParticipant)totakeoveranyoutstanding
contractsrelatingtosecuritiesandsimultaneouslynotifytheCommissionin
writingofsuchtransferandtheaffectedcustomersthatsaidcontractshave
beentransferred.

2.

WheresuchBrokerDealerisnotaMemberofanExchange(oranExchange
TradingParticipant),theCommissionshallnotifytheaffectedcustomers,ifany,
ofsuchsuspensionorrevocationandrequirethattheytransfertheiraccountto
anotherBrokerDealer.
SRCRULE30.1
MonitoringofAffiliatedTransactionsbyBrokerDealers

1.

EveryBrokerDealershallrequesteverystockholder,director,associatedperson,salesman
andauthorizedclerkoftheBrokerDealer(collectivelyreferredtoas"director")tocomplete
and submit to the Broker Dealer an executed copy of SEC Form 30.1 under oath
(hereinafterreferredtoasthe"questionnaire")toensurecompliancewiththeconditionsset
forthinSection30.1oftheCode.

2.

Basedoninformationsetforthinthequestionnaire,everyBrokerDealershallprovidethe
CommissionwithalistofsecuritiesthattheBrokerDealermustreportpursuanttoSection
30.1 of the Code, and shall file an amendment thereto with the Commission, within twenty
four(24)hoursofanychangethereto.

3.

Everydirectorshallensurethathisquestionnaireisaccurateandcompleteatalltimesand
shallupdateandsubmittotheBrokerDealeranyamendmenttheretowithintwentyfour(24)
hoursofsuchamendmentsoastoreflectanychange/sthereto.

4.

ThefailureofanydirectortocomplywiththisruleshallbedeemedaviolationoftheCode.
SRCRULE30.2
TransactionsandResponsibilitiesofBrokersandDealers

[formerly,SRCRules30.21,2,3,4,5,6,7,8,and9]
1.

EthicalStandardsRule
A.

EveryBrokerDealer,associatedpersonandsalesmanofaBrokerDealer
(hereinafterreferredtoasa"registeredperson"),intheconductofhis
business,shallobservehighstandardsofcommercialhonorandjustand
equitableprinciplesoftrade.

B.

Inconsideringwhetheraregisteredpersonisconductinghisbusinessinan
ethicalandfairmanner,theCommission,inadditiontorequirementsimposed
underotherSRCrules,willbeguidedbythefollowingprinciplesand
requirementswhichincorporateInternationalOrganizationofSecurities
Commissionstandards.
i.

HonestyandfairnessInconductinghisbusinessactivities,aregistered
personshouldacthonestly,fairlyandinthebestinterestofhisclientand
fortheintegrityofthemarket.
Wherearegisteredpersonadvisesoractsonbehalfofaclient,heshall

ensureatalltimesthatanyrepresentationsorothercommunications
madeandinformationprovidedtotheclientareaccurateandnot
misleadinganddonotviolateSRCRule24.1(d),paragraph1.
ii.

iii.

DiligenceInconductinghisbusinessactivities,aregisteredperson
shouldactwithdueskill,careanddiligence,inthebestinterestofhis
clientsandfortheintegrityofthemarket.
a.

Aregisteredpersonshalltakeallreasonablestepstopromptly
executeclientordersandinconformitywiththeinstructionofthe
client.

b.

Aregisteredpersonwhenactingfororwithaclientshallalways
executeclientordersonthebestavailabletermsincompliancewith
SRCRule32.2(a).

c.

Aregisteredpersonshallensurethattransactionsexecutedon
behalfofclientsarepromptlyandfairlyallocatedtotheaccountsof
theclientsonwhosebehalfthetransactionswereexecuted.

d.

Whenprovidingadvicetoaclient,aregisteredpersonshallact
diligentlyandensurethathisadviceandrecommendationsin
relationtoclientsarebasedonthoroughanalysisandtakeinto
accountavailablealternatives.

CapabilitiesAregisteredpersonshouldhaveandemployeffectively
theresourcesandprocedureswhichareneededfortheproper
performanceofhisbusinessactivities.
a.

Aregisteredpersonshallensureatalltimesthatanypersonhe
employsorappointstoconductbusinessfororwithclientsorother
registeredpersonsisqualified,includinghavingrelevanttrainingor
experiencetoactinthecapacitysoemployedorappointedin
compliancewithSRCRules28.1,paragraph4and28.2.

b.

Aregisteredpersonshallensurethatatalltimes,pursuanttoSRC
Rule30.2,paragraph7,hehas:
(1)

Adequateresourcestodiligentlysuperviseanddoes
diligentlysupervisehisemployeesandallpersonsappointed
byhimtoconductbusinessfororwithclientsoranyother
registeredpersonsand

(2)

iv.

v.

Satisfactoryinternalcontrolproceduresandfinancialand
operationalcapabilitieswhichcanbereasonablyexpected
toprotecthisoperations,hisclientsandotherregistered
personsfromfinanciallossarisingfromthetheft,fraudand
otherdishonestacts,orprofessionalmisconductor
omissionsofallcompanyofficers,employeesand
authorizedrepresentatives.

Informationaboutclients
a.

Aregisteredpersonshouldseekfromhisclients,informationabout
theirfinancialsituation,investmentexperienceandinvestment
objectivesrelativetotheservicestobeprovidedpursuanttoSRC
Rule52.1,paragraph6andotherapplicablelaws.

b.

Aregisteredpersonshalltakeallreasonablestepstoestablishthe
trueandfullidentityofeachofhisclients,theirfinancialsituation,
investmentexperience,andinvestmentobjectives.

c.

Havingregardtoinformationdisclosedbyaclientandother
circumstancesrelatingtotheclientwhichtheregisteredpersonis
orshouldbeawareofthroughtheexerciseofduediligence,the
registeredpersonshallensurethatsuchrecommendationor
solicitationforthatclientisreasonableandsuitableinall
circumstancespursuanttoSRCRule30.2,paragraph4.

d.

Aregisteredpersonprovidingservicestoanyclient,inrelationto
derivatives,includingoptionsandwarrants,oranyleveraged
transaction,shallassurehimselfthattheclientunderstandsthe
natureandrisksoftheseinstrumentsandhassufficientnetworth
tobeabletoassumetherisksandbearthepotentiallossesof
tradinginsuchinstruments.

e.

Aregisteredpersonshouldbereasonablysatisfiedaboutthe
identity,addressandcontactdetailsofthepersonultimately
responsiblefororiginatingtheinstructioninrelationtoa
transaction,thepersonwhostandstogainthecommercialor
economicbenefitofthetransactionand/orbearsthecommercial
oreconomicriskprovided,however,thatinrelationtoan
investmentcompany,ordiscretionaryaccount,thepersonreferred
toaboveistheinvestmentcompanyoraccount,notthosewhohold
abeneficialinteresttherein.

f.

AregisteredpersonshallkeepinthePhilippinesarecordofthe
detailsreferredtoaboveandprovidetheCommissionwithaccess
tothoserecordsuponrequestpursuanttoSection52oftheCode
andSRCRule52.1,paragraph1.

g.

Aregisteredpersonshallnotdoanythingtoeffectatransaction
unlesshehasfirstcompliedwiththerequirementsofthisrule,as
requiredinSRCRule30.2,paragraph4.

InformationforclientsAregisteredpersonshallmakeadequate
disclosureofmaterialinformationinhisdealingswithhisclients.
a.

Aregisteredpersonshallensurethatawrittenagreementwhich
complieswithSRCRule30.2,paragraph3isenteredintowitha
clientbeforeanyservicesareprovidedtothatclient.

b.

Aregisteredpersonshallprovideclientswithadequateinformation

abouthisfirm,includinghisbusinessaddress,anyrelevant
conditionsorrestrictionsunderwhichtheregisteredperson
conductshisbusiness,andtheidentityorstatusofemployeesand
othersactingonhisbehalfwithwhomtheclientmayhavecontact.

vi.

c.

Afteraregisteredpersonhaseffectedatransactionforaclient,he
shallendeavortoconfirmpromptlywiththeclient,inwriting,the
essentialfeaturesofthetransactionpursuanttoSRCRule30.2.

d.

AregisteredpersonshallcomplywithSRCRule52.1,paragraph
8,regardingcustomeraccountstatements.

e.

Aregisteredpersonshalldisclosethefinancialconditionofhis
businesstoaclientuponrequestbyprovidingacopyofthemost
recentreportrequiredtobefiledwiththeCommissionunderSRC
Rule52.1,paragraph5(AuditedFinancialStatements)andSRC
Rule49.1paragraph1(A)(iii)(NetCapital)anddiscloseany
materialchangeswhichadverselyaffecttheregisteredperson's
financialconditionafterthedateofsuchfiling.

ConflictsofInterestAregisteredpersonshouldavoidconflictsof
interestandwhentheycannotbeavoided,shouldensurethathisclients
arefairlytreatedandproperlyinformedofsuchconflictsofinterest.
a.

ClientpriorityAregisteredpersonshallhandleordersofclients
fairlyandintheorderinwhichtheyarereceivedincompliance
withSRCRule34.1,paragraph1.
(1)

Ordersofclients,ortransactionstobeundertakenon
behalfofclients,shallhaveinallcasespriorityoverorders
fortheaccountoftheregisteredperson,andotherwise
complywithSRCRule34.1,paragraph1wheretheBroker
isaMemberofanExchange

(2)

Aregisteredpersonshall,wherehehasaggregatedan
orderforaclientwithanorderforanotherclient,orwithan
orderforhisownaccount,giveprioritytosatisfyingorders
ofclients,inanysubsequentallocation,ifallorderscannot
befilled
TESICD

b.

(3)

Aregisteredpersonshallnotdealinanysecuritiesfor
himselforforanyaccountinwhichhehasaninterest
baseduponadvanceknowledgehepossessesofpending
transactionsfororwithclientsoranyothernonpublic
information,thedisclosureofwhichwouldbeexpectedto
affectthepriceofsuchsecuritiesandviolateSection27of
theCode(insidertradingprohibition)

(4)

Aregisteredpersonwhowithdrawsinwholeorinpartfrom
providinganyinvestmentorrelatedserviceshallensurethat
affectedclientsarepromptlynotifiedofsuchactionandthat
anybusinesswhichremainsoutstandingispromptly
completedortransferredtoanotherregisteredpersonin
accordancewithSRCRule29andanyinstructionofthe
affectedclients.

ConflictsofinterestWherearegisteredpersonhasamaterial
interestinatransactionwithorforaclient,orarelationshipwhich
givesrisetoanactualorpotentialconflictofinterestinrelationto

suchtransaction,heshallneitheradvise,nordealinrelationtothe
transactionunlesshehasdisclosedthatmaterialinterestorconflict
totheclientandhastakenallreasonablestepstoensurefair
treatmentoftheclient.
c.

vii.

2.

ClientassetsAregisteredpersonshall,inthehandlingofclient
transactionsandassets,acttoensurethatclientassetsare
accountedforproperlyandpromptlyandcomplywithSRCRule
52.1,paragraph10.Wheretheregisteredperson,orathirdparty
onbehalfoftheregisteredperson,isinpossessionorcontrolof
clientpositionsorassets,theregisteredpersonshallensurethat
clientpositionsorassetsareadequatelysafeguarded.

ComplianceAregisteredpersonshallcomplywithallregulatory
requirementsapplicabletotheconductofhisbusinessactivitiessoasto
promotethebestinterestofclientsandtheintegrityofthemarket.
a.

AregisteredpersonshallcomplywiththeCode,rulesand
regulationsadoptedthereunder,andrulesofanyExchange,
clearingagency,orotherSRO,ofwhichheisamemberofor
participantin.

b.

Aregisteredpersonshallhaveapolicy,whichhasbeen
communicatedtoemployeesinwriting,onwhetheremployeesare
permittedtodealfortheirownaccountsinsecurities.Ifemployees
arepermittedtodeal,theconditionsonwhichtheymaydoso,
includingthoseimposedunderSRCRule34.1,paragraph1,shall
besetoutinwritingandcommunicatedtoeachemployee.

c.

Aregisteredpersonshallensurethatcomplaintsfromclients
relatingtohisbusinessareadequatelyaddressedincompliance
withSRCRule30.2,paragraph6(B)(vii)andsufficientrecordsof
suchcomplaintsaremadeincompliancewithSRCRule52.1,
paragraph9.

d.

Aregisteredpersonshallatalltimesberesponsiblefortheactsor
omissionsofhisemployeesandagentsinrespecttotheconduct
ofhisbusiness,pursuanttoSection51oftheCode.

e.

Allregisteredpersons,asaconditionoftheirregistration,shall
undertakeinwritingtoupholdtheCode,andrulesandregulations
adoptedthereunder.

C.

Thisruleappliestoallregisteredpersons,althoughtheCommissionrecognizes
thatcertainrequirementsoftheCodeandrulesadoptedthereundermaynotbe
withinthecontrolofanassociatedperson.Inconsideringtheconductofan
associatedperson,theCommissionwillconsidersuchperson'slevelof
responsibilitywithintheBrokerDealerfirm,andthelevelofcontrolorknowledge
hemayhaveconsideringanyfailurebyhisfirmorpersonsunderhis
supervisiontofollowtheCode.

D.

WheretheCommissionmakesaninquiryunderSection53oftheCode,the
CommissionwillrefertotherequirementssetforthinthisRuleinconsidering
whetheranypersonisguiltyofaviolationofthisCodeandshouldremain
registered.

ConfirmationofCustomerOrders
A.

ABrokerDealershallreporttoitscustomersalltransactionsenteredintoforthe
customer'saccount,andtothisend,shallsendthecustomerawritten

confirmationofpurchasesandsalesaspromptlyaspossibleonthedayon
whichtheyaremade.AnemployeeorsalesmanofaBrokerDealershallnotbe
authorizedtoacceptaconfirmationfororonbehalfofacustomer.
B.

TheBrokerDealershallgiveitsclientstheoptiontochoosewhether
confirmationofcustomerorderswillbedonebywayofcourier,facsimile
transmissionorelectronicmailandsuchpreferenceshouldbeclearlystatedin
theCustomerAccountInformationForm(CAIF).Theconfirmationshallbesent
tothecustomerattheaddressindicatedintheCAIF.Partiessubscribingto
facsimiletransmissionorelectronicmailconfirmationofcustomerordersare
governedbythespecialprocedureprovidedintheimmediatelysucceeding
paragraph.

C.

BrokerDealersshallsendtotheirclients,duringofficehoursandonthedayof
thetransaction,theirconfirmations.Clientssubscribingtosucharrangements
arerequiredtoattesttotheaccuracyoftheinformationcommunicatedby
replyingviafacsimiletransmissionorelectronicmailtotheBrokerDealer,not
laterthan12:00noonofthenextbusinessday.TheBrokerDealershallthen
keepaprintoutofsuchreplytogetherwiththefilenotificationsandtransaction
databeingconfirmed.

D.

Theconfirmationrequiredbyparagraph2Aaboveshallcontainatleastthe
followinginformation:

E.
3.

i.

AstatementastowhethertheBrokerDealerisbrokingforacustomeror
anotherBrokerDealerorisdealingforhimselfpursuanttoSection
34.1(a)to(d)oftheCodeandSRCRule34.1,paragraph1

ii.

ThattheBrokerDealeriscontrolledby,orcontrols,orisundercommon
controlwiththeissuerofsuchsecurityifsuchbethefact

iii.

WhetherthetransactionwassolicitedorunsolicitedbytheBrokerDealer
orwhetherthetransactionwasexecutedpursuanttotheexerciseof
discretionarypowerand

iv.

Forfacsimiletransmissionandelectronicconfirmations,thereminder
thatclientsmustconfirmtheirorders,notlaterthan12noonofthenext
businessday.

TheCommission,whenitdeemsnecessary,mayrequireaBrokerDealerto
submitareportofhiscommissionorremunerationonaparticulartransaction.

ClientAgreement
A.

ABrokerDealeranditsregisteredpersonswhodealdirectlywithclientsshall
ensurethatawrittenagreement(hereinafter"ClientAgreement")isenteredinto
withaclientbeforeanyserviceisprovidedtothatclient.

B.

TheClientAgreementshallbeinalanguageunderstoodbytheclient.The
registeredpersonswhodealdirectlywithclientsshallexplaintotheclientthe
contentsoftheagreement.

C.

AClientAgreementshallcontain,amongothers,thefollowinginformation:
i.

thefullnameandaddressoftheclient,asevidencedbyaretainedcopy
oftheidentitycard,relevantsectionsofthepassport,business
registrationcertificate,corporationdocuments,oranyotherofficial
documentwhichuniquelyidentifiestheclient

ii.

thefullnameandregisteredaddressoftheBrokerDealer

iii.

theBrokerDealer'sregistrationstatuswiththeCommission

4.

5.

iv.

undertakingsbytheBrokerDealerandtheclienttonotifytheotherinthe
eventofanymaterialchangetotheinformationprovidedinthe
agreement

v.

adescriptionofthenatureofservicestobeprovidedtooravailabletothe
client,suchassecuritiescashaccount,securitiesmarginaccount,
discretionaryaccount,portfoliomanagement,investmentadvice,
derivativestrading

vi.

adescriptionofanyremuneration(andthebasisforpayment)thatisto
bepaidbytheclienttotheBrokerDealer,suchascommission,
brokerage,andanyotherfeesandcharges

vii.

astatementindicatingthecircumstancesunderwhichtheBrokerDealer
willbeactingasprincipalinrelationtotheclientandthatinallother
circumstancestheBrokerDealerwillbeactingasagentfortheclient

viii.

iftheBrokerDealerisactingasaDealerinrelationtosecuritiesandis
amemberofanExchange(oranExchangeTradingParticipant),a
statementexplainingtheapplicationofSection34oftheCode,andifthe
clientspecificallyauthorizestheDealertopledgetheclient'ssecuritiesor
subjectsuchsecuritiestoliensofthirdparties

ix.

ifmarginorshortsellingfacilitiesaretobeprovidedtotheclient,details
ofmarginrequirements,interestscharges,margincalls,andthe
circumstancesunderwhichaclient'spositionmaybeclosedwithoutthe
client'sconsentand

x.

riskdisclosurestatementassetforthinAnnex30.2A.

D.

Aregisteredpersonshallensurethathecomplieswithhisobligationsunderthis
ruleandtheClientAgreementandthattheClientAgreementdoesnotoperateto
remove,exclude,orrestrictanyrightsofaclientorobligationsofaBroker
DealerundertheCode.

E.

ABrokerDealershallnoteffectatransactiononbehalfofaclientunlessbefore
thetransactioniseffected,theclient,orapersondesignatedbytheclient,
specificallyauthorizesthetransaction,ortheclienthasauthorizedinwritingthe
BrokerDealertoeffecttransactionsonbehalfoftheclientwithouttheclient's
specificauthorization.IftheBrokerDealerhasobtainedsuchanauthorization,
theClientAgreementshallspecifythattheaccountisadiscretionaryaccount.

F.

AcopyoftherequiredClientAgreementissetforthinAnnex30.2B.

SuitabilityRule
A.

Inrecommendingtoacustomerthepurchase,saleorexchangeofany
security,aBrokerDealeroranassociatedpersonorsalesmanofaBroker
Dealer,shallhavereasonablegroundsforbelievingthattherecommendationis
suitableforsuchcustomeruponthebasisofthefactsdisclosedbysuch
customerastohisothersecurityholdingsandastohisfinancialsituationand
needs.

B.

ExceptasprovidedinSRCRule52.1,paragraph6,priortotheexecutionofa
transactionrecommendedtoacustomer,aBrokerDealershallexecutea
customeraccountinformationformwhichcomplieswithSRCRule52.1,
paragraph6.

CommissionsandChargesforServicesPerformedbyaBrokerDealer
A.

ChargesbyaBrokerDealerforservicesperformed,including:

B.

6.

i.

miscellaneousservicessuchascollectionofmoniesdueforprincipal,
dividendsorinterest

ii.

exchangeortransferofsecuritiesand

iii.

appraisals,safekeepingorcustodyofsecurities,andotherservices,
shallbereasonable.

AllBrokerDealers,incompliancewithexistinglaws,shallfileascheduleoftheir
minimumcommissionrateswiththeCommission.Nodiscountsand/orrebates
shallbepermittedfromtheminimumrates.

Supervision
A.

ThemanagementofeveryBrokerDealershallestablishandmaintainan
appropriateandeffectivecompliancefunctionwithinthefirmwhichis
independentofalloperationalandbusinessfunctions.Thecompliancefunction
shallbeperformedbyanAssociatedPersonwhoshallberegisteredwiththe
Commissionandrequiredtoreportdirectlytotheboardofdirectorsandthe
companyPresident.ThemanagementshallensurethattheAssociatedPerson/s
performingthecompliancefunctionpossessessufficienttrainingand
experienceinsecuritiesregulationmattersandanunderstandingofthe
securitiesactivitiesofthefirmenablingthemtoeffectivelyexecutetheirduties.

B.

AssociatedPersonsshallberesponsible,inadditiontothedutiesenumerated
underSRCRule28.1(4)(G)formaintainingasystemtosupervisetheactivities
ofallpersonsemployedbytheBrokerDealerwhoaredirectlyorindirectly
relatedtotheconductofitssecuritiesbusiness.Thesupervisorysystemshallbe
reasonablydesignedtoachievecompliancewiththeCodeandrulesand
regulationsadoptedthereunder,withtherulesofanyselfregulatory
organizationwhichtheBrokerDealerisamemberoforparticipantin,other
applicablelaws,including,butnotlimitedto,theAntiMoneyLaunderingAct(RA
9160,asamended),andtheBrokerDealer'sowninternalpoliciesand
procedures.Afirm'ssupervisorysystemshallincludeatleastthefollowing:
i.

establishmentandmaintenanceofwrittensupervisoryprocedures

ii.

designationofoneormoreAssociatedPersonswiththeauthorityand
responsibilitytocarryoutthesupervisionofeachtypeofbusinessin
whichitengages

iii.

titles,registrationstatusandlocationsoftherequiredAssociated
Person/sandtheresponsibilitiesofeachAssociatedPersonasthese
relatetothetypesofbusinessengagedin

iv.

writtendocumentationtoprovethatallAssociatedPersonsarequalified
byvirtueofexperienceortrainingtocarryouttheirassignedsupervisory
responsibilities

v.

writtendocumentationtoprovethateachpersonengagedinsecurities
transactions,eithercollectivelyorindividually,hasparticipatednoless
thanannuallyinaninterviewormeetingconductedbytheAssociated
Person/sdesignatedbythefirmatwhichcompliancemattersrelevantto
theactivitiesofthesepersonsarediscussed.Thereshallbeprompt
notificationinwritingtoeachsuchpersonofnewormodifiedcompliance
obligations

vi.

establishmentofaneffectivemanagementandorganizationalstructure
whichensuresthattheoperationsofthebusinessareconductedina
sound,efficientandeffectivemannerand

vii.

establishment,maintenanceandenforcementofpoliciesandprocedures
toensuretheproperhandlingofcomplaintsfromclientsandthat
appropriateremedialactionispromptlytaken.Wherepossible,
complaintsshouldbeinvestigatedbytheAssociatedPersonperforming
thecompliancefunctionwhoisnotdirectlyinvolvedinthesubjectmatter
ofthecomplaint.Whereacomplaintisnotremediedpromptly,theclient
shallbeadvisedofanyfurtherstepswhichmaybeavailabletotheclient
underthelaw.

C.

AlthoughfinalresponsibilityforpropersupervisionshallrestwiththeBroker
Dealerfirm,diligenceofagoodfatherofthefamilyisrequiredfromthe
AssociatedPerson/sintheconductoftheircompliancefunction.

D.

AssociatedPerson/sshallpromptlyreporttomanagementalloccurrencesof
materialnoncompliancebythefirmoritsstaffwithlegalandregulatory
requirements,aswellaswiththefirm'sownpoliciesandprocedures.
ManagementshallthenpromptlynotifytheCommissionandanyselfregulatory
organizationofwhichsuchBrokerDealerisatradingparticipantofsuch
findingsandactiontaken.Forthispurpose,theAssociatedPersonmust
maintainalogbookofallmaterialnoncompliancereportswiththeappropriate
notationoftheactiontakenbymanagementonthesaidoccurrences.Such
logbookmustbedulyregisteredwiththeCommissionwithinfifteen(15)days
fromissuanceoftheAssociatedPerson/snew/renewallicense.

E.

Notwithstandingtherequirementintheimmediatelyprecedingparagraph,all
AssociatedPersonsmustprepare,signandfilewiththeCommissionnotlater
thanfifteen(15)daysaftertheendofeachcalendarquarter,aCompliance
Reportonthefirm'scomplianceand/ornoncompliancewiththeprovisionsof
theCodeanditsimplementingrulesandregulationsincluding,butnotlimitedto,
thefollowingconcerns:
i.

whetherthefirmcomplieswiththerequirementsoftheCodeandthe
implementingrules

ii.

thesignificantfindingsofnoncomplianceand

iii.

informationontheactiontakenbymanagementtoaddresstheissue.

SaidReportshallalsoincludeasummaryofalloccurrencesofmaterialnon

compliancebythefirmoritsstaffwithlegalandregulatoryrequirementsandthe
actionstakenbymanagementonsuchviolations.
7.

InternalorAccreditedTrainingProgram
A.

B.

EveryBrokerDealershallestablish,implementandmaintainareasonably
comprehensivesystemoftrainingtowards
i.

ensuringthecontinuingimprovementincriticalareasofitsprincipal
activitiesandoperationsand

ii.

enhancingthetechnicalknowledgeofitsemployeestoenablethemto
understandtheoperationalandinternalcontrolpoliciesandprocedures
ofthatBrokerDealerandallapplicablelegalandregulatoryrequirements.

Suchsystemoftrainingshallbeproperlydocumentedinamanualwhichshall:
i.

setoutdetailsofthetrainingprogramsthattheBrokerDealerproposesto
implementand

ii.

beregularlyupdatedinlinewiththedevelopmentinthesecurities
industry.

C.

D.

8.

i.

Theimplementationofthepreviousyear'sinternaltrainingprogramwith
detailsonseminardates,numberofparticipants,andotherpertinent
informationand

ii.

Currentyear'sseminartopics(withdescription),projecteddates,target
market,andplannedspeaker.

TheBrokerDealermay,atitsoption,substituteitsinternaltrainingprogram
submittedatthetimeofrenewalofitslicensebyenrollingintrainingprograms
sponsoredbyassociationsororganizationsdulyaccreditedorrecognizedby
theCommission,provided,however,thatproperapprovalisobtainedfromthe
Commissiononsuchsubstitution.ItistheresponsibilityofBrokerDealers,
throughitsAssociatedPerson,toprovideperiodictrainingtoitsofficersand
employeeswhetherexternallyorinternally,theoccurrenceofwhichshallnotbe
dependentsolelyontheexpectationthatanexternalseminarwillbesponsored
atalatertime.

BlockSale
A.

9.

AllBrokerDealersshallsubmittotheCommissionatthetimeofrenewaloftheir
licenseayearlyschedule/timetableoftheimplementationofitstrainingprogram.
Ataminimum,suchreportshouldcontainthefollowinginformation:

ABrokerDealermayengageinblocksalesonanExchange,andanExchange
mayexecuteblocksales,providedthat:
i.

suchtransactioncomplieswithExchangerules,whichhavebeen
approvedbytheCommissionand

ii.

theExchangenotifiestheCommissioninwriting,notlaterthanone
businessdayafterthedatesuchtransactionhasbeenexecuted,ofthe
priceandvolumethereoforinsuchformandmannerthatthe
Commissionmayprescribe.

B.

Ablocksaleshallmeanamatchedtradethatdoesnotgothroughthe
automatedordermatchingsystemofanExchangetradingsystembutinstead
hasbeenprearrangedbyandamongtheBrokerDealer'sclientsandisthen
enteredasadonedealdirectlyintothetradingsystem.

C.

Othertransactionssuchasbutnotlimitedtooptions,warrantsorthose
emanatingfromatenderoffer,rightsoffering,andconversionofasecuritywith
convertibilityfeatures,shallbeallowedtobeconsummatedwithintheExchange
tradingsystemusingtheblocksalefacilityofanExchange,andinaccordance
withtherelevantrulesoftheExchangeasapprovedbytheCommission.

Submission of Names of Stockholders, Members, Participants, Clients and Related

Information
Every Exchange, clearing agency, Broker Dealer, transfer agent, other self regulatory

organization, and every other person required to register under the Code (hereinafter
"registeredperson")shallimmediatelyreporttotheCommissionandanypersondeputized
and/ordulyauthorizedbytheCommissionpursuanttoSection5(h)oftheCode,thenames
of their owners/stockholders, members, participants, and clients, and other related
informationinitsorhispossession,uponorderoftheCommission,orasrequiredbythe
rulesofaselfregulatoryorganizationinwhichheisamemberorparticipant,inpursuance
of an investigation, examination, official inquiry or as part of a surveillance procedures,
and/orincompliancewithotherpertinentlaws.
SRCRULE31
CommissionRoleintheDevelopmentofSecuritiesMarketProfessionals

1.

The Commission shall periodically meet with organizations and associations of securities
market participants and private educational and research institutions to discuss new
regulatorydevelopmentsandrelatedcomplianceissues.

2.

The Commission, in coordination with such organizations, associations and institutions,

shall help facilitate the organization of, and participate in, workshops on regulatory
requirements.
DTAHSI

3.

The Commission shall encourage all securities market participants to participate in the
continued development of the securities market through such organizations, associations
andinstitutions.
SRCRULE32.1
TradingLimitedtoListedSecuritiesandExchangesRegisteredundertheCode
[formerlySRCRule32.11]

NoBrokerDealeroranyregisteredpersonshalleffectanytransactioninanysecurityinan
Exchangeoranyothertradingmarket,unlesssuchExchangeoranyothertradingmarketandthe
securities listed or allowed to be traded therein are registered under the Code or exempt from
registrationpursuanttoSections9and10thereof.
SRCRULE32.2(a)
BestExecution
Inanytransactionfororwithacustomer,aBrokerDealershallusereasonablediligenceto
ascertainthebestavailablepriceforthesecurityandbuyorsellatthatpricesothattheresultant
pricetothecustomerisasfavorableaspossibleundertheprevailingmarketconditions.
SRCRULE33.1
1.

RegistrationofExchange
An application for registration as an Exchange shall be filed on SEC Form 33 and be
accompaniedbythestatementsandexhibitsprescribedtobefiledunderSection33ofthe
Codeprovided,however,anExchangemayalsoapplyforregistrationasaSelfRegulatory
Organization under Section 40 of the Code at the same time on SEC Form 33SRO. An
applicationonSECForm33SROshallalsobeaccompaniedbythestatementsandexhibits
prescribed under Section 40 of the Code. Any registered Exchange existing prior to the
effectivityoftheseRulesshall,within45daysfromeffectivityoftheseRules,complywithall
the requirements provided under this Rule, which were not provided for in its original
registration.

2.

AnamendmenttosuchapplicationshallbemadeinduplicateonSECForm33A,andeach
amendmentshallbedatedandnumberedintheorderoffiling.

3.

Nolaterthanseven(7)daysafterthediscoverythatanyinformationinthestatement,any
exhibit, or any amendment was inaccurate when filed, an Exchange shall file with the
Commissionanamendmentcorrectingsuchinaccuracy.

4.

Whenever the number of changes to be reported in an amendment, or the number of

amendmentsfiled,aresogreatthatthepurposeorclarityofthedisclosurewillbepromoted
bythefilingofanewcompletestatementandexhibits,anExchangemay,atitselection,or
shall, upon request of the Commission, file as an amendment a completely new statement
togetherwithallexhibitswhichareprescribedtobefiledinconnectionwithSECForm33.

5.

Nothing in this Rule shall be construed as precluding the Commission from requiring an
applicant for registration or a registered Exchange to submit other requirements it may
deem reasonably necessary to effectively regulate and supervise the Exchange and/or to
protecttheinterestoftheinvestingpublic.
SRCRULE33.2(c)
OwnershipofanExchange

1.

2.

An Exchange organized as a stock corporation may be owned and controlled by another

juridical person ("Exchange Controller"), based on the following terms and conditions, to
ensure that such ownership will not negatively impact the Exchange's ability to effectively
operateinthepublicinterest.
A.

TheExchangeControllershallbecomeregisteredwiththeCommissionasaSelf
RegulatoryOrganizationunderSection40oftheCodeandcomplywithits
dutiesregardingrulemakingunderthissectionandrulesadopted
thereunderprovided,however,thatforpurposesofSection40andSRCRule
30.1,paragraph1,theenforcementresponsibilitiesofanSROshallbe
delegatedtotheExchangewhichisbeingcontrolledbytheExchangeController
ortoanotherentitywhichtheCommissionmayorder.

B.

TheBoardofanExchangeControllershallincludeinitscompositionthe
presidentoftheExchangeController,andunlesstheCommissionotherwise
agreestoadifferentgovernancestructurebasedonfindingsthattheExchange
ControllercanoperatetheExchangeinthepublicinterestandthatthe
ExchangecaneffectivelyoperateasanSRO,nolessthanfiftyone(51%)
percentoftheremainingmembersoftheBoardshallbecomprisedofthree(3)
independentdirectorsandpersonswhorepresenttheinterestofissuers,
investorsandothermarketparticipantswhoarenotassociatedwithanyBroker
Dealer,memberorparticipantoftheExchangecontrolledbytheExchange
Controller,foraperiodoftwo(2)yearspriortohis/herappointment.Noofficer
oremployeeofaBrokerDealer,itssubsidiariesoraffiliatesorrelatedinterests
maybecomeanindependentdirector.

C.

UnlesstheCommissionprescribesotherwise,nopersonshallbeneficiallyown
orcontrol,directlyorindirectly,morethanfivepercent(5%)ofthevotingrights
oftheExchangeControllerandnoindustryorbusinessgroupshallbeneficially
ownorcontrol,directlyorindirectly,morethantwentypercent(20%)ofthe
votingrightsoftheExchangeControllerProvidedthatpursuanttoparagraph3
below,theExchangeControllershalldisclosethenamesofitsbeneficialowners,
theirbusinessorindustryaffiliation,andshareownershiptotheCommission
and,nolessthanonceamonth,updatesuchdisclosure.

D.

AnExchangeControllershallobtainpriorCommissionapprovalregardingshare
ownershiporanyotherinvestmentinanyclearingagency,othersecurities
relatedbusiness,oranyothernonrelatedbusiness.

ForpurposesofSection33.2(c)oftheCode,anindustryorbusinessgroupshallinclude
the following sectors which are based on the Philippine Standard Industrial Classification
Code:
A.

Agriculture,Hunting,Forestry,Fishing,MiningandQuarrying

B.

Manufacturing

C.

Electricity,Gas,WaterSupply,andConstruction

D.

WholesaleandRetailTrade,HotelsandRestaurants

E.

Transport,StorageandCommunications

F.

BankingandotherFinancialInstitutions

G.

BrokersandDealers

H.

CompulsorySocialSecurity(Government)

I.

RealEstateincludingleasing

J.

Education,Health,SocialWorkandothercommunity,socialandpersonal

services
3.

To insure diversification of ownership of an Exchange or that of the Exchange Controller,

the Commission may consolidate different industry or business groups into one group or
divideonegroupintoseveralgroupsorredesignatetheindustryclassificationchosenbya
business group provided, however that where the shares of stock of the Exchange or
ExchangeControllerarenotyetlistedortradedinanexchangeoranyothertradingmarket,
prior to the sale of shares of an Exchange or Exchange Controller to any person, the
ExchangeorExchangeControllershalldiscloseinwritingtotheCommissiontheproposed
ownershiptoensurecompliancewithownershiprestrictions.NosharesofanExchangeor
ExchangeControllermaybetransferredwithoutpriorCommissionapproval.

4.

Where any ownership restrictions set forth in this rule are exceeded and/or violated, the
Commission may order divestment of such excess ownership. Until such ownership is
divested,apersonviolatingthisrestrictionshallbebarredfromexercisinghisvotingrights
thereunder.
SRCRULE33.2(d)
ProtectionofCustomerAccountsinCaseofBusinessFailureofanExchangeMember(or
TradingParticipant)

1.

WhenanExchangeMemberFirmhasfiledoristhesubjectofapetitionforinsolvency,or
when an Exchange determines that the Member Firm's financial condition has so
deteriorated that it cannot readily meet the demands of its customers for the delivery of
securitiesandorpaymentofsalesproceeds,theCommissionmayissueexparteanorder
compelling the insolvent or failed member firm [hereinafter Failed Member Firm and the
Exchange] to take the necessary action to protect customer accounts including, but not
limitedto,thepreservationofthememberfirm'sbooksandrecords.Saidordershallremain
ineffectuntilliftedbytheCommissionmotupropriooruponpetitionoftheFailedMember
Firm.

2.

The Commission, after proper investigation or verification, motu proprioor upon verified
complaintbyanyparty,orderanExchangetotakeovertheoperationoftheFailedMember
Firmforthepurposeofsettlingthememberfirm'sliabilitiestoitscustomers.

3.
Where the Commission has ordered an Exchange to take over the operations of a failed
memberfirm,anExchangeshall:
A.

SuspendsuchFailedMemberFirm'smembershipimmediatelyarrangefor
anotherMembertotakeovertheoutstandingcontractsrelatingtosecurities,and
simultaneouslynotifytheCommissionofsuchsuspensionandtakeover

B.

PromptlynotifycustomersoftheFailedMemberthattheiraccountshavebeen
transferredtoanotherMemberandprovidesuchcustomerswiththeopportunity
toretransfertheiraccountstoanotherMemberoftheirchoice

C.

SettletheFailedMember's(orTradingParticipant's)liabilitiestocustomers
throughthesaleoftheMember'stradingrightsandothertraderelatedassetsas
maybeprescribedbytheCommissionliquidationofpaidupcapitaland/or
overseeingthepaymentofclaimsagainstthesuretybond.

D.

SimultaneouslyinformtheAccreditedTrustFundreferredtoinSec.36.5ofthe
Code,wheresuchFailedMember(orTradingParticipant)isaMemberor
Participant,ofsuchtakeoverandinformthecustomersthattheymayalsoclaim
compensationforlossesfromtheTrustFund,subjecttothevalidationoftheir
claimsbytheExchangeandtheTrustFund

E.

WhereaftersuchsettlementandliquidationoftheFailedMemberFirm'strade
relatedassets,thereareoutstandingliabilitiestocustomersoftheFailed
Member(orTradingParticipant),referthesametotheAccreditedTrustFund

andinformthecustomersofthefurtherstepsnecessaryforclaiming
compensationforunsatisfiedlossesand
F.

TheAccreditedTrustFund,basedonitsrulesandregulationsoruponorderof
theCommission,shallreleasepaymentstotheFailedMember's(orTrading
Participant's)customersevenbeforetheExchangehasfinalizedthesettlement
oftheFailedMemberFirm'sliabilities,subjecttothevalidationasprovidedin
subsectionDhereinProvided,however,thattheTrustFundshallbesubrogated
tothecustomers'rightstoclaimbeforetheExchangetotheextentthatithas
paidthecustomers'claimsbeforefinalsettlementoftheFailedMember's
liabilitiesbytheExchange.
SRCRULE34.1
SegregationandLimitationofFunctionsofMembers,BrokersandDealers
[formerlySRCRules34.12and34.13]

1.

SegregationofBrokerandDealerFunction,AffiliationsandPractices.
A.

AMemberBrokerofanExchange(hereinreferredtoas"MemberBroker")
shallnoteffectanytransactiononsuchExchangeforitsownaccount,the
accountofanassociatedperson,salesmen,oranyotherpersonassociated
withtheMemberBroker,includingaffiliatedpersons,oranaccountwithrespect
towhichanassociatedpersonexercisesinvestmentdiscretion,unlessit
complieswiththe"CustomerFirst"Policyasprescribedbelow:
1.

TheMemberBrokergivesprioritytotheexecutionofcustomerorders
overitsordersatthesamepriceaccordingtothefollowingrules:
a.

WhentheMemberBroker'sOrderispreexisting(andhaspriority
intermsoftime)andthereupontheMemberBrokerreceivesa
customer'sorderand/orholdsawhollyorpartiallyunexecuted
customer'sOrder,thentheMemberBrokershallsurrenderpriority
andgiveprecedencetohisclient'sorder

b.

WhentheMemberBrokerholdsanunexecutedcustomer'sOrder
withpriority(preexistingorder),thenanyBroker'sOrderthat
intendstoimprovethepriceshalldosobyatleastthree(3)
fluctuationsbetterthanthepreexistinghighestbidorlowestoffer
fromacustomer.

2.

TheProceduresforexecutingtheabovereferencedpriorityruleshallbe
programmedintotheExchangetradingsystemsothatfullcompliance
canbeachievedpriortotheexecutionofanyMemberBroker'sOrder
underthisinterpretation,inaccordancewithSRCRule34.1,paragraph1
(B).

3.

Ordersofstockholders,officers,directors,associatedpersons,and
salesmen,oranyotherpersonassociatedwiththeMemberBroker,
includingaffiliatedpersons,tradedwithintheMemberBrokershallbe
treatedastheproprietaryaccountoftheMemberBroker'saccount,in
whichcase,the"CustomerFirst"Policyshallapply.

4.

Theorderticketshallindicatethattheorderisfortheaccountofthe
MemberBroker,associatedpersonorotheremployeethereof,owner,
officerordirectoroftheMemberBroker.

5.

TheMemberBrokerretainsacopyoftheorderticketwiththedateand
timeofitstransmittal,whichshallbetimestampedthereon.

6.

TheMemberBrokerdatesandtimestampstheordertickettoreflectthe

timethattheorderwasreceivedormadeincompliancewithSRCRule
52.1,paragraph7.
7.

TheMemberBrokerretainsallorderticketsinchronologicalorder
containingthedate,time,priceandothersignificantdetailsoftheorder,
inaccordancewithSRCRule52.1,paragraph2.

8.

TheMemberBrokermayadoptanalternativemethod(e.g.taperecorded
withtiminginstrument)incapturingthetimestampingrequirements
prescribedbytheaforementionedsubsection(5)and(6)andbySRC
Rule52.1,paragraph7providedthatitconformswiththerulesand
proceduresoftheExchangegoverningsuchalternativemethodprovided
further,thatsuchalternativemethodandrelevantrulesandprocedures
havebeenapprovedbytheCommission.

9.

ProceduresformonitoringMemberOrders,assetforthinSRCRule
34.1,paragraph1(G)and(H)shallbecompliedwith.

B.

AdealerorproprietaryaccountwhentradedthoughanotherMemberBroker
(hereinafterreferredtoas"ExecutingMemberBroker")shallbetreatedbythe
ExecutingMemberBrokerasanothercustomer.

C.

Stockholders,officers,directors,associatedpersons,oranyotherperson
associatedwiththeMemberBrokeroraffiliatedpersonsotherthanaSalesman
(hereinafterreferredtoas"AssociatedPersons"cannottradeoutsidethe
employingMemberBroker(hereinafterreferredtoas"EmployingMember
Broker")unlesstheyobtainthepermissionoftheEmployingMemberBroker
andinformsuchBrokerthattheyhaveopenedsuchaccountwiththeExecuting
MemberBroker,andprovidedfurtherthattheExecutingMemberBrokeragrees
tosendduplicateaccountstatementstotheAssociatedPerson'sExecuting
MemberBroker.
IftheaccountoftheAssociatedPersonoftheEmployingMemberBrokeriswitha

nonMemberBroker,suchAssociatedPersonshallreceivepermissionfromthat
NonMemberBrokerforaccesstothataccountbytheExchangeandthe
EmployingMemberBroker.
SalesmenareprohibitedfromtransactingwithMemberBrokersotherthantheir

employingMemberBroker.
D.

NonExchangeBrokerDealersshalllikewiseobservethe"CustomerFirst"
Policywheneverapplicable.

E.

ForpurposesofthisRule:
i.

AffiliatedpersonofaMemberBrokerisanypersonwho(a)controls,is
controlledby,orisundercommoncontrolwiththeMemberBroker,(b)
hasofficers,directors,orassociatedpersonswhoarealsoofficers,
directors,orassociatedpersonsoftheMemberBroker,(c)directlyor
indirectlycontrolsmorethantenpercent(10%)oftheequityinterestin
theMemberBroker,or(d)hasmorethantenpercent(10%)ofitsequity
interestownedbytheMemberBrokerand/orassociatedpersonsofthe
MemberBroker.

ii.

AMemberBrokereffectsasecuritiestransactionwhenitperformsany
functioninconnectionwiththeprocessingofthattransaction,including,
butnotlimitedto,(a)transmissionofanorderforexecution,(b)execution
oftheorder,(c)clearanceandsettlementoftransaction,and(d)
arrangingfortheperformanceofanysuchfunction.

iii.

2.

Compensationinconnectionwitheffectingthetransactionrefersto
compensationdirectlyorindirectlyreceivedorcalculatedona
transactionrelatedbasisfortheperformanceofanyfunctioninvolvedin
effectingsecuritiestransactions.

F.

AMemberBrokercanhaveasubsidiaryoraffiliatewhichisaMemberDealer,
and/ornonMemberBrokerDealer,and/orInvestmentHouse,providedthat
wherethereareinterlockingdirectorsorofficers,suchfactmustbedisclosedto
theCommissionandmeasuresinstitutedtopreventconflictofinterest.

G.

AMemberBroker,andanyotherBrokerorInvestmentHouse,withsecurities
accountsofMemberBrokers,and/ortheirassociatedpersons,other
employees,owners,directorsand/orofficers,includingdiscretionaryaccounts
onbehalfthereof,fortransactionsexecutedinaccordancewithparagraph1(A)
(ii)(h)ofthisrule,shall,whenreceivingandexecutingsuchtransactions,
identifysuchaccountsasemployee,owner,director,officerorMemberbroker
accounts,ordiscretionaryaccountsonbehalfthereof(alongwiththenameof
therelatedMemberBroker),andrequirethefirm'sresponsibleAssociated
Personor,inthecaseofanInvestmentHouseapersonresponsiblefor
compliance,toreviewsuchaccountsonadailybasis.

H.

NoBrokerDealershallexecuteforitsownaccount,ortheaccountofits
customers,listedsecuritiesissuedbyanaffiliatedcompanyidentifiedunder
Section30.1oftheCodeunlesstheconditionssetforthinSRCRule30.1are
compliedwith.

I.

Forpurposesofparagraph1(l)(C)ofthisrule,affiliatedcompanymeansa
companyinwhichanydirector,president,vicepresident,manager,treasurer,
comptroller,secretary,anyotherofficeroftrustandresponsibility,orother
controlpersonisalsoastockholder,director,associatedperson,orsalesman,
oraclerkofanyBrokerDealer,orarelativeofanyoftheforegoingwithinthe
fourthdegreeofconsanguinityoraffinity.

SegregationofFunctions(ChineseWalls)
A.

B.

C.

AnyBrokerDealerwhichassumesmorethanonefunctionwhetherasadealer,
adviser,orunderwriter,orwhichengagesinmarketmakingtransactions,shall
maintainpropersegregationofthosefunctionswithinthefirmtoprevent:
i.

theflowofinformationbetweenthedifferentpartsofitsorganizationwhich
performeachfunctionand

ii.

anyconflictofinterestwhichmayresult.

Forpurposesofthisrule,informationmeansmatter:
i.

ofaspecificnaturewhichhasnotbeenmadepublic

ii.

relatingtooneormorepubliccompaniesorsecuritiesofapublic
companyand

iii.

which,ifitweremadepublic,wouldlikelyaffectthemarketpriceofthe
securities.

ABrokerDealershallatalltimesensurethatitstradingfunctionsandback
officesettlementfunctionsandphysicalsetupareproperlysegregatedandshall
establishwrittenprocedurestoensurecompliancewiththisrule.
SRCRULE36.4

RulesandRegulationsforClearanceandSettlementofSecuritiesTransactionsInvolving
ExchangesandOtherTradingMarkets

[formerlySRCRules36.41,2,and3]
1.

RegistrationofTransferAgents
A.

Nopersonshallactasatransferagentforasecuritywhichislistedortraded
onanExchange,overthecounter,oranyothertradingmarketwithoutbeing
registeredwiththeCommissioninaccordancewiththeprovisionsofthisRule.
AnyregisteredtransferagentexistingpriortotheeffectivityoftheseRulesshall,
within45daysfromeffectivityoftheseRules,complywithalltherequirements
providedunderthisRule,whichwerenotprovidedforinitsoriginalregistration.

B.

ToapplyforregistrationunderthisRule,atransferagentshall:
i.

beacorporation

ii.

haveunimpairedpaidupcapitalofatleastOneMillion
Pesos(P1,000,000.00)orsuchamountastheCommissionmay
determine

iii.

haveanofficerwhoisacertifiedpublicaccountantand

iv.

submitanundertakingthatitshallcomplywiththerulesandregulations,
orders,memorandumcircularsandpoliciespromulgatedbythe
Commission,andofotherrules,procedures,standardsandpoliciesset
byothermarketparticipantsanddulyapprovedbytheCommission,and
itsowninternalrulesandprocedures.

C.

Anapplicationforregistrationasatransferagent,oranamendmenttoany
suchapplication,shallbefiledwiththeCommissiononSECForm36TA,in
accordancewiththeinstructionscontainedtherein.

D.

IfanyoftheinformationreportedonSECForm36TAbecomesinaccurate,
misleading,orincompleteorrequiresupdatingforanyreason,suchaschanges
inoperatingproceduresand/orthelistofdirectorsandofficers,theregistrant
shallfileanamendmentwithinseven(7)daysafterthedateonwhichthe
informationintheapplicationbecameinaccurate,misleading,orincomplete.

E.

Afterreviewinganapplicationforregistrationasatransferagent,oran
amendmentthereto,theCommissionshall,byorder,
i.

grantregistrationorapprovetheamendmentor

ii.

denyregistrationortheamendment,placelimitationsontheactivities,
functionsoroperationsof,suspendorrevokeregistration,ifthe
Commissionfinds,afternoticeandopportunityforhearing,
a.

thatsuchorderisinthepublicinterest

b.

thattheregistrantdoesnotmeetapplicablequalifications

c.

thattheapplicationisincomplete,inaccurateormisleadingor

d.

thatthetransferagenthasbeenfoundto:
(1)

beinsolventornotinsoundfinancialcondition

(2)

haveviolatedorhavenotcompliedwiththeapplicable
provisionsoftheCodeortherulesandregulationsadopted
thereunder,oranyorderoftheCommission

(3)

haveengagedin,orbeengagedin,orisabouttoengage
infraudulenttransactions

(4)

beinanyotherwaydishonestornotofgoodrepute

(5)

havenotconducteditsbusinessinaccordancewithlawor
beengagedinabusinessthatisillegalorcontraryto
governmentrulesandregulations

(6)

haveanofficer,memberoftheboardofdirectors,or
principalshareholderwhoisdisqualifiedtobesuchan
officer,directororprincipalshareholder

(7)

haveabacklogofsharecertificatetransferswhich
indicatesaninabilityoftheregistranttofulfillits
responsibilitiesasatransferagent

(8)

haverepeatedlyormateriallyfailedtocomplywithits
proceduresorthoseofaregisteredclearingagencyor

(9)

ASHaTc

havefiledanapplicationforregistrationoranamendment
theretowhichisincompleteorinaccurateinanymaterial
respectorwhichincludesanyuntruestatementofamaterial
factoromitstostateamaterialfactrequiredtobestated
thereinornecessarytomaketheapplicationoramendment
notmisleading.

F.

Atransferagentcannotbetheauditorofanissuerforwhomitactsastransfer
agent.

G.

Theproceduresofatransferagentarebindingonandenforceableagainst
issuersforwhichtheyact,registeredsecuritiesholdersandtransfereeswho
presentsecuritiesfortransfer.Tominimizetheissuanceandmovementofand
tofacilitateotherdealingswiththosesecuritieseligibletotheoperationsofa
registeredclearingagency,atransferagentandregisteredclearingagency
shalljointlyformulateandabidebywrittenproceduresaddressingcertificated
anduncertificatedsecuritiesissuance,transfers,cancellations,registration,
confirmationandreconciliationofpositionsinsecurities,audit,replacementof
lostsecurities,signatureguarantees,deliveryprocessesandturnaroundtimes.

H.

EverytransferagentregisteredpursuanttothisRuleshallfiletheappropriate
registrationrenewalformeveryMay1toMay31ofeachyear,surrenderitsold
license,andpaytotheCommissiontheprescribedannualrenewalfee.
Ifsuchfeeisnotpaidortheregistrationrenewalformisnotfiledasrequired,the

registrationofsuchtransferagentshallbesuspendedorterminatedasthecase
maybe.
I.

2.

NothinginthisRuleshallbeconstruedasprecludingtheCommissionfrom
requiringanapplicantforregistrationoraregisteredtransferagenttosubmit
otherrequirementsitmaydeemreasonablynecessarytoeffectivelyregulate
andsupervisethetransferagentand/ortoprotecttheinterestoftheinvesting
public.

ReportsfromTransferAgents
A.

AnnualReportEveryregisteredtransferagentshallfilewiththeCommission
anannualreportonSECForm36ARinaccordancewiththeinstructions
containedthereinwithin120daysaftertheendofitsfiscalyear.Reportsfiled
onSECForm36ARshallbedeemedtosatisfySection141oftheCorporation
CodeofthePhilippines.

B.

ExceptionReportstotheCommissionAtransferagentshallprovidetothe
Commissionwithinseven(7)daysoftheoccurrenceofanyofthefollowing
events,areportdetailingthereasonsandcircumstancesfor:

i.

anydelayintheturnaroundorprocessingofanissue,transferor
replacementofasecurity

ii.

anydiscrepancybetweenitsrecordsandthoseoftheregisteredclearing
agency,ifapplicable

iii.

anylossofsecuritiesreportedtoit

iv.

actualterminationofitsfunctionasatransferagentforaparticular
securityand

v.

withdrawalfrombusinessofatransferagent.

C.

PeriodicReportingtoIssuerAtregularintervalswithineachandeveryyear
anduponrequestbytheissuer,atransferagentshallsupplytheissuer,for
whomitactsinthatcapacity,withthelistofholdersofitssecurities,asshown
bytheregisterofholdersofsecurities,andthechangestotheregisterof
transfers,showingthenameandregisteredaddressof,andthenumberorface
valueofthesecuritiesheldbyeachsuchholderandsupplyanyother
statements,lists,entries,informationandmaterialconcerningissues,transfers
andcancellationsofsecurities.

D.

ComplaintLogArecordofallclaimsandcomplaintsmadetoatransfer
agentshallbekeptbyitatitsprincipaloffice.Therecordshallcontain:
i.

thenameofthesecurityholderandadescriptionofthesecurity

ii.

thedateofthecomplaintorclaimandacompletedescriptionthereofand

iii.

thestepstakenbythetransferagent,themannerinwhichthecomplaint
orclaimisresolvedandanysubsequentactiontakenortobetakenby
theholderorthetransferagent.
Therecordshallbeopenforinspectionduringnormalbusinesshoursby

theCommissionandbyanyissuerwithrespecttosecuritiesissuedbyit.
E.

3.

OtherReportsEveryregisteredtransferagentshallsubmitamonthlyreport
ofthefollowingtobefiledonorbeforethe10thdayofthesucceedingmonth:
i.

Certificationastothenumberofsharesregisteredunderthenameof
PCDand

ii.

ReconciliationofPCDandTransferAgentbalances.

RecordsRetentionbyTransferAgents
A.

B.

InadditiontotherecordsrequiredtobemaintainedpursuanttoSection74of
theCorporationCodeofthePhilippines,everytransferagentshallmakeand
retainforaperiodoffive(5)yearsthefollowingbooksandrecordsrelatingto
itstransferagentactivities:
i.

itsrulesandprocedures

ii.

exceptionreportsfiledwiththeCommissionpursuanttoSRCRule36.4,
paragraph2(B)

iii.

complaintlogasrequiredtobemaintainedunderSRCRule36.4,
paragraph2(D)

iv.

reportstotheissuersforwhomthefirmactsastransferagentas
requiredunderSRCRule36.4,paragraph(2)(C)and

v.

annualreportonSECForm36AR.

Everytransferagentshallmakeavailableanyorallofitsbooksandrecords

uponrequestofanauthorizedrepresentativeoftheCommission.Failuretodo
soshallresultinanimmediatesuspensionofthetransferagent'sregistration.
Suchsuspensionshallcontinueuntilsuchtimeasthebooksandrecordsare
madeavailabletotheCommission.
SRCRULE36.5(a)
TrustFundsforBrokerDealerCustomers
[formerlySRCRule36.4(a)1]
1.

Atrustfundestablishedtocompensatecustomersfortheextraordinarylossesordamage
theymaysufferduetothebusinessfailureorfraudormismanagementofaBrokerDealer
shallberegisteredasanAccreditedTrustFundunderthisRule.ForpurposesofthisRule,
theterm"extraordinarylossesanddamages"refersonlytoactualdamages.

2.

AnapplicationforregistrationshallbefiledonSECForm36TFandcontainthefollowing
supportingdocuments:
A.

dataonitsorganization,rulesofprocedureandmembership/participation

B.

copiesofitsruleand

C.

listofdirectorsandofficersandalistoftheiraffiliations.

3.

Business failure shall be established upon a determination by the Exchange, or the

Commission, when the Exchange fails or does not exercise such timely determination,
wheretheBrokerDealerisanExchangememberortheCommission,orwheretheBroker
DealerisnotanExchangemember,thatthefinancialconditionoftheBrokerDealerhasso
deterioratedthattheBrokerDealercannotreadilymeetthedemandsofitscustomersfor
the delivery of securities and/or the payment of sales proceeds provided, however, that
suchdeterminationshallnotbedependentuponajudicialdeclarationofinsolvency.

4.

Asaconditionoftheirregistration,allBrokerDealersshallbeamemberoforparticipantin
anAccreditedTrustFund.

5.

An Accredited Trust Fund shall establish a Customer Protection Fund (the "Fund"). All
amountsreceivedbytheAccreditedTrustFund,exceptamountssetoutsideforoperating
expenses,shallbedepositedintotheFundwhichshallserveastrusteeincompliancewith
generalrulesoftrust.

6.

The Commission shall not accredit a trust fund unless the trust fund has adopted rules
governing:
A.

TheinitialandthecontinuingrequiredbalancefortheFund

B.

Assessmentstobeimposedonmembers/participantsandproceduresfor
collectingsuchassessment

C.

BorrowingbytheFund

D.

InvestmentofFundassets

E.

Proceduresforpayingcustomersfortheextraordinarylossesordamagethey
maysufferduetobusinessfailureorfraudormismanagementoftheBroker
Dealer

F.

Roleanddutyofthetrustfundastrusteeand

G.

Thecompositionofthetrustfund'sBoardofDirectors.

7.

AllrulesoftheAccreditedTrustFund,includingamendmentsthereto,shallbeapprovedby
theCommissionpriortobecomingeffective.

8.

IftheCommissionoranyExchangeisawareoffactswhichmayleadonetobelievethatthe
financialconditionofaBrokerDealer,includinganExchangeMember,hassodeteriorated
andtheBrokerDealerhasdifficultiesmeetingthedemandsofitscustomersforthedelivery

of securities and/or the payment of sales proceeds, it shall immediately notify the
Accredited Trust Fundprovided, however, where such notification involves an Exchange
member,theExchangeshallsimultaneouslynotifytheCommission.
9.

Every Exchange, or other SRO responsible for monitoring the financial condition of
Membersand/orParticipantBrokerDealershallfilewiththeAccreditedTrustFundcopies
offinancialreportssubmittedbysuchBrokerDealers.
SRCRULE38
RequirementsonNominationandElectionofIndependentDirectors
(formerly,SRCRule38.1Definitionof"IndependentDirector")

1.

ThisRuleshallapplytocompaniesmentionedunderSec.38oftheCodeandtocompanies
with secondary licenses that adopted in their Manuals on Corporate Governance the
practice of nominating and electing independent director/s in their Boards. Said entities
shallbereferredtointhisRuleas"coveredcompanies".

2.

AsusedinSection38oftheCode,independentdirectormeansapersonwho,apartfrom
hisfeesandshareholdings,isindependentofmanagementandfreefromanybusinessor
otherrelationshipwhichcould,orcouldreasonablybeperceivedto,materiallyinterferewith
hisexerciseofindependentjudgmentincarryingouthisresponsibilitiesasadirectorinany
coveredcompanyandincludes,amongothers,anypersonwho:
A.

Isnotadirectororofficerofthecoveredcompanyorofitsrelatedcompanies
oranyofitssubstantialshareholdersexceptwhenthesameshallbean
independentdirectorofanyoftheforegoing

B.

Doesnotownmorethantwopercent(2%)ofthesharesofthecovered
companyand/oritsrelatedcompaniesoranyofitssubstantialshareholders

C.

Isnotrelatedtoanydirector,officerorsubstantialshareholderofthecovered
company,anyofitsrelatedcompaniesoranyofitssubstantialshareholders.
Forthispurpose,relativesincludespouse,parent,child,brother,sister,andthe
spouseofsuchchild,brotherorsister

D.

Isnotactingasanomineeorrepresentativeofanydirectororsubstantial
shareholderofthecoveredcompany,and/oranyofitsrelatedcompanies
and/oranyofitssubstantialshareholders,pursuanttoaDeedofTrustorunder
anycontractorarrangement

E.

Hasnotbeenemployedinanyexecutivecapacitybythecoveredcompany,
anyofitsrelatedcompaniesand/orbyanyofitssubstantialshareholderswithin
thelastfive(5)years

F.

Isnotretained,eitherpersonallyorthroughhisfirmoranysimilarentity,as
professionaladviser,bythatcoveredcompany,anyofitsrelatedcompanies
and/oranyofitssubstantialshareholders,withinthelastfive(5)yearsor

G.

Hasnotengagedanddoesnotengageinanytransactionwiththecovered
companyand/orwithanyofitsrelatedcompaniesand/orwithanyofits
substantialshareholders,whetherbyhimselfand/orwithotherpersonsand/or
throughafirmofwhichheisapartnerand/oracompanyofwhichheisa
directororsubstantialshareholder,otherthantransactionswhichareconducted
atarmslengthandareimmaterial.

3.

No person convicted by final judgment of an offense punishable by imprisonment for a

periodexceedingsix(6)years,oraviolationofthisCode,committedwithinfive(5)years
prior to the date of his election, shall qualify as an independent director. This is without
prejudice to other disqualifications which the covered company's Manual on Corporate
Governanceprovides.

4.

Anycontroversyorissuearisingfromtheselection,nominationorelectionofindependent

directorsshallberesolvedbytheCommissionbyappointingindependentdirectorsfromthe
listofnomineessubmittedbythestockholders.
5.

6.

WhenusedinrelationtoacompanysubjecttotherequirementsofthisRuleandSection38
oftheCode:
A.

Relatedcompanymeansanothercompanywhichis:(a)itsholdingcompany
(b)itssubsidiaryor(c)asubsidiaryofitsholdingcompanyand

B.

Substantialshareholdermeansanypersonwhoisdirectlyorindirectlythe
beneficialownerofmorethantenpercent(10%)ofanyclassofitsequity
security.

QualificationsandDisqualifications
A.

B.

7.

8.

Anindependentdirectorshallhavethefollowingqualifications:
(i)

Heshallhaveatleastone(1)shareofstockofthecorporation

(ii)

Heshallbeatleastacollegegraduateorheshallhavebeenengagedor
exposedtothebusinessofthecorporationforatleastfive(5)years*

(iii)

Heshallpossessintegrity/probity*and

(iv)

Heshallbeassiduous.*

NopersonenumeratedunderSectionII(5)oftheCodeofCorporate
Governanceshallqualifyasanindependentdirector.Heshalllikewisebe
disqualifiedduringhistenureunderthefollowinginstancesorcauses:
(i)

Hebecomesanofficeroremployeeofthecorporationwhereheissuch
memberoftheboardofdirectors/trustees,orbecomesanyofthe
personsenumeratedunderSectionII(5)oftheCodeonCorporate
Governance*

(ii)

Hisbeneficialsecurityownershipexceedstwopercent(2%)ofthe
outstandingcapitalstockofthecompanywhereheissuchdirector*

(iii)

Fails,withoutanyjustifiablecause,toattendatleast50%ofthetotal
numberofBoardmeetingsduringhisincumbency*

(iv)

Suchotherdisqualificationswhichthecoveredcompany'sManualon
CorporateGovernanceprovides.

NumberofIndependentDirectors
A.

Allcompaniesareencouragedtohaveindependentdirectors.However,issuers
ofregisteredsecuritiesandpubliccompaniesarerequiredtohaveatleasttwo
(2)independentdirectorsoratleasttwentypercent(20%)ofitsboardsize,
whicheveristhelesser.Providedfurtherthatsaidcompaniesmaychooseto
havemoreindependentdirectorsintheirboardsthanasaboverequired.

B.

TheExchange/sarerequiredtohaveatleastthree(3)independentdirectors.
ToeffectivelycarryouttheprovisionsofSection33.2(g)oftheSecurities
RegulationCode,theExchange'sindependentdirectororanomineeforsuch
directorshallnotsolicitvotesforhimself.

NominationandElectionofIndependentDirector/s
Thefollowingrulesshallbeapplicabletoallcoveredcompanies:

A.

TheNominationCommittee(the"Committee")shallhaveatleastthree(3)
members,oneofwhomisanindependentdirector.Itshallpromulgatethe
guidelinesorcriteriatogoverntheconductofthenomination.Thesameshallbe
properlydisclosedinthecompany'sinformationorproxystatementorsuch

otherreportsrequiredtobesubmittedtotheCommission.

9.

B.

Nominationofindependentdirector/sshallbeconductedbytheCommitteeprior
toastockholders'meeting.Allrecommendationsshallbesignedbythe
nominatingstockholderstogetherwiththeacceptanceandconformitybythe
wouldbenominees.

C.

TheCommitteeshallprescreenthequalificationsandprepareafinallistofall
candidatesandputinplacescreeningpoliciesandparameterstoenableitto
effectivelyreviewthequalificationsofthenomineesforindependentdirector/s.

D.

Afterthenomination,theCommitteeshallprepareaFinalListofCandidates
whichshallcontainalltheinformationaboutallthenomineesforindependent
directors,asrequiredunderPartIV(A)and(C)ofAnnex"C"ofSRCRule12,
whichlist,shallbemadeavailabletotheCommissionandtoallstockholders
throughthefilinganddistributionoftheInformationStatement,inaccordance
withSRCRule20,orinsuchotherreportsthecompanyisrequiredtosubmitto
theCommission.Thenameofthepersonorgroupofpersonswho
recommendedthenominationoftheindependentdirectorshallbeidentifiedin
suchreportincludinganyrelationshipwiththenominee.

E.

OnlynomineeswhosenamesappearontheFinalListofCandidatesshallbe
eligibleforelectionasIndependentDirector/s.Noothernominationsshallbe
entertainedaftertheFinalListofCandidatesshallhavebeenprepared.No
furthernominationsshallbeentertainedorallowedonthefloorduringtheactual
annualstockholders'/memberships'meeting.

F.

ElectionofIndependentDirector/s
i.

ExceptasthoserequiredunderthisRuleandsubjecttopertinentexisting
laws,rulesandregulationsoftheCommission,theconductoftheelection
ofindependentdirector/sshallbemadeinaccordancewiththestandard
electionproceduresofthecompanyoritsbylaws.

ii.

ItshallbetheresponsibilityoftheChairmanoftheMeetingtoinformall
stockholdersinattendanceofthemandatoryrequirementofelecting
independentdirector/s.Heshallensurethatanindependentdirector/s
areelectedduringthestockholders'meeting.

iii.

Specificslot/sforindependentdirectorsshallnotbefilledupby
unqualifiednominees.

iv.

Incaseoffailureofelectionforindependentdirector/s,theChairmanof
theMeetingshallcallaseparateelectionduringthesamemeetingtofill
upthevacancy.

v.

Thecoveredcompaniesshallamenditsbylawsinaccordancewiththe
foregoingrequirementsassoonaspracticable.

Termination/CessationofIndependentDirectorship
Incaseofresignation,disqualificationorcessationofindependentdirectorshipandonlyafter

notice has been made with the Commission within five (5) days from such resignation,
disqualificationorcessation,thevacancyshallbefilledbythevoteofatleastamajorityof
theremainingdirectors,ifstillconstitutingaquorum,uponthenominationoftheCommittee
otherwise,saidvacanciesshallbefilledbythestockholdersinaregularorspecialmeeting
calledforthatpurpose.Anindependentdirectorsoelectedtofillavacancyshallserveonly
fortheunexpiredtermofhispredecessorinoffice.
SRCRULE39.1
Registration,ResponsibilitiesandOversightofSelfRegulatoryOrganizations

[formerlySRCRules39.11,2&6]
1.

RulesGoverningaSelfRegulatoryOrganizationwhichisanOrganizedExchange
A.

AllorganizedExchangesshallbesubjecttotheseproceduresandrequirements
setforthinthisRule.

B.

ForpurposesofthisRule:

C.

D.

i.

OrganizedExchangeorExchangemeansaregisteredExchange,whether
ornotregisteredasanSROundertheCode.

ii.

ParticipantreferstoanypersonwhohasbeenapprovedtousetheSRO's
servicesandfacilitiesbutisnotamembertherein.

iii.

SecuritieslawsreferstotheCodeandrules,regulationsandorders
issuedbytheCommission.

iv.

SROreferstoaSelfRegulatoryOrganizationwhichisanorganized
Exchange.

v.

SROrulereferstotheconstitution,articlesofincorporation,bylawsand
rules,orinstrumentscorrespondingtotheforegoingandsuchpolicies,
practicesandinterpretationsoftheSRO,otherthanthosedesignatedby
theSROasconstitutingapolicy,practiceorinterpretationofanexisting
ruleorestablishingorconcerningsolelymattersofSROadministration
underSRCRule40.3,paragraph3.

SRORulemaking
i.

SubjecttoCommissionapprovalandpursuanttotheproceduressetforth
inSRCRule40.3,anSRO'spowertoadoptandamendrulesshallalso
includethepowertorepealexistingrules,implementsuchrulesand
provideinterpretativeguidancetoaidincompliance.

ii.

AnSROshalladoptcomprehensiverulesgoverningitsorganizationand
governance,qualificationsandrightsofshareholders,listingofsecurities,
tradingofsecurities,settlementofcontracts,qualificationofmembers
andotherparticipants,ethicalconductofmembersandother
participants,supervisionandcontrolofmembers,financialand
operationalresponsibilityofmembers,anddisciplineofmembersand
otherparticipants.

Poweroverlistedcompanies
TheSROshallbesolelyresponsibleforprocessingandapprovingorrejecting

applicationsfornewlistingofshares,suspensionanddelistingoflistedissues
andimpositionofsanctionsonlistedcompaniesforviolationofSRO
rulesprovided,however,thatsuchpowersshallbeexercisedpursuanttoSRO
rules.
E.

ComplianceandSurveillance
i.

AnSROshallestablishanindependentaudit,complianceandsurveillance
officeseparatefromtheExchangeorwithintheExchange,andinsuch
formandsubstancethattheCommission,byorder,mayprescribe.Such
officeshallnotbesubordinatedorotherwisecontrolledinitsactivityby
theExchangeBoardoritsreviewunit,andshallberesponsiblefor
carryingouttheSRO'senforcementrolepursuanttothesecuritieslaw
andforthediscipliningofparticipants.Suchofficeshallfurthersubmitto
theCommissionacopyofitsfindingswithinthree(3)businessdaysfrom
completionoratthesametimethatsaidofficeprovidesacopytothe

Boardorareviewunit,ifsaidofficeisanentityseparatefromthe
Exchange,ortoanypersonorunitoutsideoftheofficeifsaidofficeis
anintegralunitwithintheExchange,whicheverisearlier.Nothinginthis
ruleshallbeunderstoodtoprecludetheCommissionfromrequiringsaid
officetosubmitastatusreportoranyotherkindofreportonanyofthe
activitiesthatitisperforming.
HEcSDa

ii.

TheComplianceandSurveillanceoffice,inordertoprotecttheinterestof
investorsandthepublicingeneral,arrestthefurthercommissionof
violationsofthesecuritieslaw,preventfinancialinstabilityanddamageto
thecapitalmarketcausedbydelay,and/orriskmanageBrokerDealer
operationseffectively,maysummarilysuspendorimposelimitationsupon
theerringBrokerDealerwithoutneedofapprovalfromtheExchange
Boardoritsreviewunit.Provided,however,thattheExchangeBoard
shall,withinfive(5)tradingdaysfromimplementationofsuchorder,
convenetoreview,confirm,modify,orreversetheComplianceand
Surveillanceoffice'saction.FailurebytheExchangeBoardoritsreview
unittoresolvethesummaryordershallbedeemedanautomatic
confirmationoftheactiontakenbytheComplianceandSurveillance
office.

iii.

Absentreasonablejustificationorexcuse,theSROshallenforce
compliancewithprovisionsofthesecuritieslawsregulatingbrokers,
dealersandtradingontheSROandSROrulesbyitsmembers.TheSRO
shallnotifytheCommissionwithinfortyeight(48)hoursofanyinstance
whereinitfailstoenforcecompliancewiththeprovisionsofthesecurities
lawsandtheimplementingrulesandregulationsandtheSROrules,
whichitbelievesisjustifiable,andwithinten(10)dayssubmitacomplete
reportofsuchaninstance.

iv.

AnSROshallenterintoaMemorandumofUnderstandingwithother
SROstoclarifyitsoversightresponsibilitiesoverpersonswhoare
membersoforparticipantsinmorethanoneSROandcoordinatewith
otherSROstoensureadequateoversight.Suchplanshallbesubmittedto
theCommissionforapprovalunderSRCRule39.1,paragraph6.

v.

AnSROshallmonitormarketconditionsandtradingactivitytodetect
violationsofthesecuritieslawandSROrules.

vi.

F.

a.

TheSROshallconductmarketsurveillanceofalltradingactivityon
theSROpursuanttoSROrulessettingforthsurveillance
proceduresandguidelines.

b.

TheSROshallmonitorcompliancebylistedcompanieswith
continuinglistingobligationsprovided,however,primaryoversight
forcompliancewithfulldisclosureregulationunderthesecurities
lawshallremaintheresponsibilityoftheCommission.

TheCommissionmay,onitsowninitiative,monitorthemarkettoensure
thattheSROisfulfillingitsfunctionsandtoensurefurtherthateach
activityorpotentialproblemareainthemarketisadequatelycoveredand
beingreasonablyaddressed.

PeriodicExaminations
i.

TheSROshallexaminememberstodeterminewhethertheyarein
compliancewiththesecuritieslawandSROrulesgoverning,amongother
things,financialresponsibility,dealingsofmemberswiththepublic,back
officeprocedures,tradingpractices,andsupervisionandshallsubmitto

theCommissionforreviewandcommentitsexaminationcalendarforthe
yearonorbeforethe15thofJanuaryofeveryyear,providedthatany
amendmenttothecalendarshallbepromptlyprovidedtotheCommission.
Thesubmittedcalendarshallincludethemannerofselectionand
prioritizationusedbytheSROinformulatingit.Themannerofselection
andprioritizationshallbebasedonthehistoricalandpotentialrisksthat
eachmemberposedtothemarket.Thiscalendarshallbetreatedas
confidentialinformation.Periodicexaminationofeachmemberfirmshall
beconductedwithoutpriornoticetothememberfirm.

G.

ii.

TheSROshallfilewiththeCommissionmonthlyreportsofitsperiodic
examinationsstartedandcompletedduringthemonth,withinten(10)
daysaftertheendofeachmonth,togetherwithasummaryoffindingsfor
auditscompleted.Periodicexaminationsofeachmemberfirmshallbe
madebytheSROpursuanttowrittenproceduresapprovedbythe
Commission.Wheredeficienciesaredetected,theSROshalleithersend
alettertothefirmwithinthree(3)businessdaysofthecompletionof
suchexaminationdirectingthatsuchdeficienciesbecorrectedor,where
suchdeficienciesevidenceviolationsofthesecuritieslaw,SROrules
and/orotherwisenegativelyreflectuponthefirm'sintegrityorsolvency,
promptlynotifytheCommissionthroughabriefwrittenreportandwithout
delayinitiateaninvestigation.

iii.

TheCommissionmay,onitsowninitiative,conductperiodicorparallel
examinationsofmemberstovalidatetheSRO'sfindingsandconducton
spotauditinspectionsoftherelevantSROdepartmenttocheckifitis
fulfillingitsdutiesandresponsibilitiesasanSRO.

Investigations
i.

AnSROshallinvestigatesuspectedviolationsofthesecuritieslawand
SROrulesbasedoncomplaints,examination/auditfindingsorunusual
tradingactivitiesorverifiedreferralsfromamember,othertrading
participant,SROotherthananExchange,clearingagency,transfer
agent,anyregisteredperson,ortheCommissionandtakedisciplinary
action,whereappropriate,pursuanttoSROrules.

ii.

TheSROshallbeprimarilyresponsibleforconductinginvestigations
whichconcernsuspectedviolationofrulesgoverningsalespractices,
financialandoperationalrequirements,tradingandfloorrelated
violations,andcomplianceprocedures/supervisionofmembers.

iii.

TheSROshallpromptlynotifytheCommissionofanyinvestigationwhich
involvessuspectedviolationsofthesecuritieslawinvolvingpersonsnot
subjecttotheSRO'sjurisdiction,concerningthedisclosureobligationsof
listedcompaniesunderthesecuritieslaw,and/orinvolvingfraudor
manipulation.TheSROshallcooperatewiththeCommissionwhichshall
haveprimaryinvestigativeauthorityoversuchsuspectedviolations.

iv.

TheCommissionshallnotbeprecludedfrominitiatingitsown
investigationaheadof,paralleltoorfollowinganinvestigationconducted
byanSRO.Insuchanevent,theSROshallcoordinate,cooperate,and
provideacopytotheCommission,uponnoticeororder,documents,
piecesofevidenceorotherinformationrelatedtothecasethatitmay
haveearliergatheredorareavailableinitsdatabaseandwhichitmay
readilyprocure.UnlessspecificallyorderedbytheCommissionorbya
competentcourttocease,theSROshallcontinuetoconductitsown
investigationpursuanttoitsmandate.Incaseofconflictbetweenthe

findingsoftheCommissionandtheExchange,theformer'sdecisionshall
prevail.Forpurposesofinitiatingitsowninvestigation,theCommission,
throughtheChairperson,maydesignateanydepartment,otherthanthe
ComplianceandEnforcementDepartmentorformthetaskforceforthe
purposeoftakingtheleadinsuchinvestigation.
H.

I.

DisciplineofSROMembersandParticipants
i.

AnSROshalldisciplineamember,includingsuspensionorexpulsionofa
member,ifsuchpersonhasbeenfoundtohavebeenengagedina
violationofSROrulesorprovisionsofthesecuritieslaw,including,but
notlimitedto,illegalsalespractices,financialandoperational
requirements,tradingandfloorrelatedviolations,and/orviolationofSRO
listingrules.

ii.

InanydisciplinaryhearingbytheSRO,otherthanaproceedingbrought
pursuanttoparagraph(iii)below,theSROshallbringspecificcharges,
providenoticetothememberorparticipantcharged,affordsuchperson
chargedwithanopportunitytodefendagainstthecharges,andkeepa
writtenrecordoftheproceeding.Adeterminationtobringadisciplinary
sanctionshallbesupportedbyawrittenstatementoftheoffense,a
summaryoftheevidencepresentedandastatementofthesanction
imposed.

iii.

TheSROmaysummarilysuspendamemberorpersonassociatedwitha
memberwhohasbeenexpelledorsuspendedfromanotherSRO,and/or
suspendamemberwhotheSROfindstobeinsuchfinancialor
operatingdifficultythatthemembercannotbepermittedtodobusiness
asamemberwithsafetytoinvestors,creditors,othermembers,orthe
SROprovided,howeverthattheSROimmediatelyprovideswrittennotice
totheCommissionoftheactiontaken.Anypersonaggrievedbya
summaryactionpursuanttothisparagraphshallbepromptlyaffordedan
opportunityforahearingbytheSROinaccordancewithparagraph(ii)
above.TheCommission,byorder,maystayasummaryactionmotu
propriooruponapplicationbyanypersonaggrievedtherebyifthe
Commissiondeterminessummarilyorafternoticeandanopportunityfor
hearing(whichmayconsistsolelyofthesubmissionofaffidavitsor
presentationoforalarguments)thatastayisconsistentwiththepublic
interestandtheprotectionofinvestors.

iv.

TheSROshallpromptlynotifytheCommissioninwrittenreportsofany
disciplinarysanctionimposedonanymemberorparticipant.Withinthirty
(30)daysafterreceiptofsuchnotice,anyaggrievedpersonmayappeal
totheCommissionfrom,ortheCommissionmotupropriowithinsuch
period,mayinstitutereviewof,thedecisionoftheSRO,attheconclusion
ofwhich,afterduenoticeandopportunityforhearingwhichmayconsist
solelyofreviewoftherecordbeforetheSRO,theCommissionshall
affirm,modifyorsetasidethesanction.Insuchproceeding,the
Commissionshalldeterminewhethertheaggrievedpersonhasengaged
oromittedtoengageintheactsandpracticesasfoundbytheSRO
whethersuchacts,andpractices,oromissionconstitutewillfulviolations
ofthesecuritieslaworSROrules,whethersuchprovisionswereapplied
inamannerconsistentwiththepurposesofthesecuritieslawand
whether,withdueregardforthepublicinterestandtheprotectionof
investors,thesanctionisexcessiveoroppressive.

SRODisciplinebytheCommission

TheCommissionmay,ifinitsopinionsuchactionisnecessaryorappropriatein

thepublicinterestorfortheprotectionofinvestors,orotherwiseinfurtherance
ofthepurposesofthesecuritieslaw,afterduenoticeandanopportunityfora
hearing:

J.

i.

Suspendforaperiodnottoexceedtwelve(12)monthsorrevokethe
registrationofanSRO,orcensureorimposelimitationsontheactivities,
functionsandoperationsoftheSROasanSRO,iftheCommissionfinds
thattheSROhaswillfullyviolatedorisunabletocomplywithany
provisionofthesecuritieslaworSROrules,orwithoutreasonable
justificationorexcusehasfailedtoenforcecompliancetherewithbya
memberorparticipant

ii.

TakeovertheactivitiesofanSROpursuanttoSRCRule40.5

iii.

Suspendforaperiodnotexceedingtwelve(12)monthsortoexpelfrom
theSROanymemberwhoissubjecttoanorderoftheCommission
underSection29oftheCodeorisfoundtohavewillfullyviolatedany
provisionofthesecuritieslaw,oreffected,directlyorindirectly,any
transactionforanypersonwhosuchmemberhadreasontobelievewas
violating,inrespectofsuchtransaction,anyofsuchprovisions

iv.

RemovefromofficeorcensureanyofficerordirectoroftheSROifit
findsthatsuchofficerordirectorhasviolatedanyprovisionofthe
securitieslawortherulesofsuchSRO,abusedhisauthorityorwithout
reasonablejustificationorexcuse,hasfailedtoenforcecompliancewith
anyofsuchprovisionsand/or

v.

TakeotheractionsasprovidedbytheCode.

SROReporting
AnSROshallsubmitthefollowingreportstotheCommission:

K.

i.

Monthlyreportsondocketsofexaminationsandinvestigationsbeing
conducted,containingthedocketnumber,nameofSRO
examiner/investigator,howaudit/examinationoriginated(investor
complaint,examination,surveillance),nameofthememberorparticipant,
includingalistedcompanybeingaudited/investigated,natureofthe
violationsalleged,status,findings,sanctionsimposedandothercourses
ofactiontakenbytheSROrelativethereto

ii.

Monthlyreportsoncapitaladequacyrequirementsbymembers

iii.

Quarterlyreportsontheresultofthemonitoringoftradingoflisted
companiesandinvestigationsconductedwithrespectthereto

iv.

Semiannualreportonthenumberofnewlylistedissues,
delisted/suspendedissuesandreasonstherefor,andthenumber,type
andissuerofcurrentlistedissues

v.

Semiannualreportcontaininginformationonthenumberofinvestor
complaintsreceived,investigated,natureofclaim,statusandmannerof
dispositionand

vi.

Suchotherinformationasmay,fromtimetotime,berequiredbythe
CommissionfromtheSRO.

SRORelationshipwithCommission.
i.

Inordertoenhanceinvestorprotectionandmoreeffectivelyutilizeexisting
resources,theCommissionandtheSROshallworktowardsamore

harmoniousandcooperativerelationshipamongtheirofficersand
personnel.CommissionstaffworkingintheareaofBrokerDealerand
marketregulationandcorporatedisclosureshallmeetwiththeirSRO
counterpartsatleastonceamonthtodiscussissuesandconcerns
relatingtotheoperationoftheSROasanSRO.Minutesofsuchmeetings
shallbepreparedandcirculatedtoSROmanagementand
CommissionersoftheCommission.Thismonthlymeetingmay,atthe
discretionoftheCommissionandSRO,involveofficialsofthe
Commissionand/orSRO,directorsoftheCommissionandtheirSRO
counterparts,ortechnicalworkinggroupsfrombothsides.
ii.

2.

3.

TheCommissionandtheSROshallworkcloselyandtrytocoordinate
theirmediacampaignsonthesecuritiesindustrytogeneratepositive
publicopinionandincreaseinvestorconfidence.

Registration of Associations of Brokers and Dealers and Other Self Regulatory

Organizations
A.

AnapplicationforregistrationasanAssociationofSecuritiesBrokersand
DealershallbefiledonSECForm39BDaccompaniedbycopiesofthe
statementsandexhibitsrequiredtobefiledthereunderunderSection40ofthe
CodeandSECForm39BD.

B.

AnyotherapplicationforregistrationasaSelfRegulatoryOrganizationshallbe
filedonSECForm39accompaniedbythestatementsandexhibitsrequiredto
befiledthereunderunderSection40andSECForm39provided,however,
thatanapplicantforregistrationasanExchangeandSROshallfileForm33
SROandanapplicantforregistrationasaClearingAgencyandSROshallfile
SECForm42SRO.

C.

EveryAssociationofSecuritiesBrokersandDealersandotherSelfRegulatory
Organizations(collectivelyreferredtohereinafteras"SROs")shallpromptly,
afterthediscoveryofanyinaccuracyintheregistrationstatementorinany
amendmentorsupplementthereto,filewiththeCommissionanamendmenton
SECForm39Acorrectingsuchinaccuracy.

D.

Promptlyafterthecloseofeachfiscalyear,everyregisteredSROshallfilewith
theCommissionanannualreturnonSECForm39ARincludingacopyofits
balancesheetasofthecloseofitsfiscalyearanditsincomeandexpense
statementforsuchyear.Theannualreturnshallbesignedandattested,inthe
samemannerasrequiredinthecaseoftheoriginalregistrationstatement.

E.

Amendmentstotheregistrationstatementshallbefiled,atleastonecopyof
whichshallbesignedandattested,inthesamemannerasrequiredinthecase
ofanoriginalregistrationstatement.Allamendmentsshallbedatedand
numberedintheorderoffiling.Oneamendmentmayincludeanumberof
changes.

F.

Inadditiontotheformalfilingofamendmentsandtheannualreturn,every
registeredSROshallsendtotheCommissioncopiesofanynotices,reports,
circulars,looseleafinstructions,riders,newadditions,lists,orotherrecordsof
changescoveredbyamendmentsorsupplementswhen,as,andifsuchrecords
aremadeavailabletomembersand/orparticipantsoftheSRO.

AllocationofRegulatoryResponsibilitiesAmongSelfRegulatoryOrganizations
A.

Anytwo(2)ormoreSelfRegulatoryOrganizations(SROs)mayfilewiththe
CommissionaplanforallocatingamongSROstheresponsibilitytoreceive
regulatoryreportsfrompersonswhoaremembersoforparticipantsinmore
thanoneSRO,toexaminesuchpersonsforcompliance,ortoenforce

compliancebysuchpersons,withtheCodeandrulesandregulationsadopted
thereunder,andtherulesofsuchSRO,andtocarryoutotherspecified
regulatoryfunctionswithrespecttosuchpersons.
B.

Anyplanfiledhereundermaycontainprovisionsfortheallocationamongthe
partiesofexpensesreasonablyincurredbytheSROhavingregulatory
responsibilityundertheplan.
THaCAI

C.

Afterappropriatenoticeandopportunityforcomment,theCommissionmay,by
writtennotice,declaresuchaplan,oranypartthereof,effectiveifitfindsthe
plan,oranypartthereof,necessaryorappropriateinthepublicinterestandfor
theprotectionofinvestors,tofostercooperationandcoordinationamongSROs.

D.

Upontheeffectivityofsuchaplan,orpartthereof,anySROwhichisapartyto
theplanshallberelievedofresponsibilityastoanypersonforwhomanother
SROisresponsibleundertheplan,totheextentoftheresponsibilityallocated.

E.

AftertheCommissionhasdeclaredaplanorpartthereofeffectivepursuantto
paragraph(C)ofthisrule,oractedpursuanttoparagraph(F)ofthisrule,an
SROrelievedofresponsibilitymaynotifycustomersof,andpersonsdoing
businesswith,suchmemberorparticipantofthelimitednatureofits
responsibilityforsuchmember'sorparticipant'sacts,practicesandcourseof
business.

F.

Intheeventthataplandeclaredeffectivepursuanttoparagraph(C)doesnot
provideforallmembersorparticipantsordoesnotallocateregulatory
responsibilities,theCommissionmay,afternoticeandopportunityforhearing,
designateoneormoreSROsresponsibleforspecifiedregulatory
responsibilitieswithrespecttosuchmembersorparticipants.
SRCRULE40.3
CommissionReviewProcedures
[formerlySRCRule39.11]

1.

AnSROshallsubmittotheCommissionforpriorapprovalanyproposedruleoramendment
thereto(hereinaftercollectivelyreferredtoas"proposal"),togetherwithaconcisestatement
ofthereasonandeffectoftheproposal.IftheCommissionbelievesthatsuchproposalisof
"major significance", at least thirty (30) days before approving such proposal, the
CommissionshalldirecttheSROtopublishthetextoftheproposalandastatementofthe
reasons and effect in a newspaper of general circulation and/or by some other means to
guaranteethepubliccirculationthereof,andshallaffordinterestedpersonsanopportunity
to submit written data, views and arguments, provided that the comment period shall not
exceed a period of twenty (20) days. The SRO shall file with the Commission a written
summaryofthecommentsreceived,alongwithresponsesthereto,nolaterthanthirty(30)
daysaftertheendofthecommentperiod.WherethecommentscausetheSROproposalto
bechangedinamaterialmanner,anewreviewperiodshallbetriggered.

2.

Except as provided in paragraph 3 below, within sixty (60) days after submission of the
proposal or summary of comments required to be filed with the Commission pursuant to
paragraph 1 above, the Commission shall, by order, approve the proposal, or institute
proceedingstodeterminewhethertheproposalshouldbedisapproved.IftheCommission
doesnotinstituteproceedingstodisapprovetheproposalwithinsuchperiod,theproposal
maybedeclaredeffectivebytheSRO.Ifaproceedingisinstituted,theCommissionshall
providenoticetotheSROoftheproposedgroundsfordisapproval,andanopportunityfor
hearing, at the conclusion of which the Commission shall grant or deny approval of the
proposal. The Commission shall approve a proposal where it finds that the proposal is
consistent with the requirements of the securities law. If the proceeding is not concluded
withinninety(90)daysfollowingitscommencement,theproposalshallbemadeeffectiveby

theSRO.
3.

Notwithstanding paragraph 2 above, a proposal may take effect within ten (10) business
days after its submission to the Commission if designated by the SRO as constituting a
policy, practice or interpretation of an existing rule, establishing or concerning solely
mattersofadministrationoftheSRO(e.g.settingofdues,feesandcharges)orsuchother
mattersastheCommissionbyruleororder,mayprescribe,unlesstheCommission,within
the ten (10) day period, provides written notice to the SRO of its determination to review
suchproposalforpriorapprovalpursuanttoparagraphs1and2above.

4.

Notwithstanding any other provision of this section, in an emergency requiring action for
theprotectionofinvestors,themaintenanceoffairandorderlymarkets,orthesafeguarding
of securities and funds, the SRO may summarily put into effect a proposal provided,
however, that the proposal made effective shall be promptly submitted to the Commission
pursuant to paragraph 1 above, which case, the Commission, may upon proper finding,
affirm,amend,disallowororderthediscontinuanceoftheSRO'sproposal.
SRCRULE40.4
CommissionDirectionsRegardingRulemaking
[formerlySRCRule39.11]

1.

2.

The Commission may request in writing that the SRO effect on its own behalf specified
changesinitsrulesandpracticeswhicharenecessaryorappropriatefortheprotectionof
investors,toensurefairdealinginsecuritiestradedontheSRO,ensurefairadministration
of the SRO, conform and harmonize SRO rules to the requirements set forth in the
securitieslaw,ortootherwisefurtherthepurposesofthesecuritieslawonsuchmattersas:
A.

safeguardsinrespectofthefinancialresponsibilityofmembersandadequate
provisionagainsttheevasionoffinancialresponsibilitythroughtheuseof
corporateformsorspecialpartnerships

B.

supervisionoftradingpractices

C.

listingordelistinganysecurity

D.

hoursoftrading

E.

manner,methodandplaceofsolicitingbusiness

F.

fictitiousaccounts

G.

timeandmethodofmakingsettlements,paymentsanddeliveriesandofclosing
accounts

H.

transparencyofsecuritiestransactionsandprices

I.

fixingofreasonableratesoffees,interest,listingandotherchargesbutnotrates
ofcommission

J.

minimumunitsoftrading

K.

oddlotpurchasesandsales

L.

minimumdepositsonmarginaccountsand

M.

supervision,auditinganddiscipliningofmembersorparticipants.

IfaftermakingsuchrequestinwritingtotheSRO,andafterduenoticeofthereasonsand
effectsoftheproposedchangesandopportunityforahearing,theCommissiondetermines
thattheSROhasnotmadethechangessorequested,theCommissionmayalter,abrogate,
orsupplementtheSRO'srules,withsuchchangestobemadeeffectiveimmediatelyupon
adoptionbytheCommission.
SRCRULE40.5

CommissionPowersOverExchanges,ClearingAgenciesandSelfRegulatoryOrganizations
1.

Subjecttoparagraph2through6ofthisrule,theCommissionmay,whenitissatisfiedthat
it is in the interest of the investing public, or is appropriate to do so for the protection of
investors,andafterduenoticeandahearing:
A.

suspendregistrationofanExchange,clearingagencyand/orselfregulatory
organization(hereinaftercollectively"Exchange")uponfindingsthatsuch
Exchangehaswillfullyviolatedorisunabletocomplywithanyprovisionofthis
Code,ortherulesandregulationshereunder,oritsownrules,orhasfailedto
enforcecompliancetherewithbyamemberof,personassociatedtherewith,or
aparticipantinsuchExchangeor

B.

suspendanyorallofficersofsaidExchangeandappointanindependent
administratorknowledgeableincapitalmarketoperationstotakeoverthe
managementoftheExchange,and/orsuspendanyandallmember/softhe
boardofdirectorsandappointnewdirector/stoserveduringthesuspension
period,uponfindingsthatsuchofficer/sand/ordirector/shavewillfullyviolated
anyprovisionofthisCode,anyotherlawadministeredbytheCommission,the
rulesorregulationsthereunder,ortherulesofsuchExchange,orabusedhis
authority,orwithoutreasonablejustificationorexcusehasfailedtoenforce
compliancewithanyofsuchprovisions.

2.

Upondiscoveryofanyoftheabovementionedviolationsorfailures,theCommissionshall
notify the Exchange, officer/s and/or director/s thereof and set a period of time in which
suchviolationorfailureshallberectified,whichperiodshallbenolessthanten(10)days
normorethanninety(90)days.

3.

In the event that an Exchange fails to rectify such violation or failure within the stated
period, which the Commission may extend only once based on its finding that such
extension is in the public interest or for the protection of investors, the Commission, after
duenoticeandahearing,mayundertakethenecessaryremediestocorrectthesame.

4.

For as long as an order suspending any officer/s and/or director/s is in effect under this
rule,noneofthefunctionstowhichtheorderrelatesshallbeperformed,bysaidsuspended
officerordirector.

5.

Whereanindependentadministratorisappointedunderthisrule,suchadministratorshall
immediately prepare a workplan which shall be submitted to the Commission for approval
and/or amendment, to address the underlying reason for the suspension. Such workplan
shall include a timetable for compliance with this Code which shall not be later than the
periodofsuspension.

6.

At the end of the suspension period, or upon expiration of the period set forth in the
workplanapprovedbytheCommission,theCommissionmay:(a)liftthesuspensionorder
and reinstate the Exchange's registration (b) revoke such registration pursuant to this
Code (c) reinstate the Exchange's officer/s and/or board member/s and/or (d) issue an
order prohibiting officers and/or members of the board who have been suspended from
servinginsuchcapacityforastatedperiod.

7.

Immediately after the issuance of a decision to revoke registration, no new transactions

shallbeeffected,exceptasnecessarytoprotectinvestors.
SRCRULE42
RegistrationofClearingAgencies
[formerlySRCRule40.51]

1.

Registration
A.

Anapplicationforregistrationasaclearingagencyoranyamendmentthereto
shallbefiledwiththeCommissiononSECForm42CAinaccordancewiththe
instructionscontainedthereinalongwiththeprescribedregistration

feeprovided,however,thatanapplicantforregistrationasclearingagency
mayalso,atthesametime,applyforregistrationasanSROpursuanttoSRC
Rule39.1,paragraph3onSECForm42SROprovided,further,thatany
registeredclearingagencyexistingpriortotheeffectivityoftheseRulesshall,
within45daysfromeffectivityoftheseRules,complywithalltherequirements
providedunderthisRule,whichwerenotprovidedforinitsoriginalregistration.
B.

Inadditiontotheprescribedregistrationfeeprescribedaboveandforthe
privilegeofdoingbusinessfortheprecedingcalendaryearoranypartthereof,
everyClearingAgencyshallpaytotheCommission,onorbeforethethirtieth
(30th)dayofthefourth(4th)monthaftertheendofthefiscalyear,aprescribed
annualfee.

C.

Afterreviewinganapplicationforregistrationasaclearingagency,oran
amendmentthereto,theCommissionshall:
i.

grantregistrationorapprovetheamendment

ii.

requireachangeintheArticlesofIncorporation,Bylaws,contracts,
rulesorprocedures(hereinafter"rules")toensuretheirfair
administrationortomakethemconformtotherequirementsoftheCode
andrulesandregulationsadoptedthereunder

iii.

denyregistrationortheamendmentif:

iv.

a.

theclearingagencydoesnothavethecapacityandresourcesto
enforcecompliancewithitsrulesasproposedoramendedor

b.

therulesoranyamendmenttheretowouldbeinconsistentwith
provisionsoftheCode,orrulesandregulationsadopted
thereunderorwiththedevelopmentandoperationofapromptand
accurateclearanceandsettlementsystemandthesafeguardingof
moneyandsecuritiesinitscustody,withinitscontrolorforwhich
itisresponsibleor

c.

theapplicationforregistrationoranamendmenttheretois
incomplete,inaccurateormisleadingor

exemptfromregistrationduetothelimitedvolumeoftransactionsand
basedonfindingsthatitisnotpracticableandnecessaryorappropriate
inthepublicinterestorfortheprotectionofinvestorstorequiresuch
registration.

D.

IfanyoftheinformationreportedonSECForm42CAbecomesinaccurate,
misleadingorincompleteorrequiresupdatingforanyreason,including
changestorulesandthelistofdirectorsandofficers,theregistrantshallcorrect
theinformationbyfilinganamendmentwithinseven(7)daysafterthedateon
whichtheinformationcontainedintheapplicationbecameinaccurate,
misleadingorincomplete.AmendmentstoSECForm42CAwhichupdatethe
registrant'slistofdirectors,officers,partnersorshareholdersshallbedeemed
tosatisfySection26oftheCorporationCodeofthePhilippines.

E.

Onanannualbasis,aregisteredclearingagencyshallfilewiththeCommission
itsauditedbalancesheetandstatementofincomeandexpenses,andallnotes
orschedulestheretowithinOnehundredfive(105)daysfromtheendofits
fiscalyear.Financialstatementsfiledpursuanttothissubsectionshallbe
deemedtosatisfySection141oftheCorporationCodeofthePhilippines.

F.

NothinginthisRuleshallbeconstruedasprecludingtheCommissionfrom
requiringanapplicantforregistrationoraregisteredclearingagencytosubmit

otherrequirementsitmaydeemreasonablynecessarytoeffectivelyregulate
andsupervisetheclearingagencyand/ortoprotecttheinterestoftheinvesting
public.
2.

ReportsfromClearingAgencies
Ifaregisteredclearingagencyatanytimebecomesawareofanydevelopmentrelatingtoa

participant that leads such clearing agency to believe that (1) such participant has
breached, is in breach, or is about to breach the clearing agency's rules or (2) the
participanthasexperienced,isexperiencing,orisabouttoexperiencematerialoperational
or financial difficulties, which breach or difficulties may adversely affect such participant,
suchregisteredclearingagencyshallimmediatelynotifytheCommissionandprovideany
documentationorevidenceleadingtheclearingagencytosuchdetermination.
SRCRULE48.1
Margin
[formerlySRCRule48.11]
1.

A Broker Dealer shall not extend credit to a customer in an amount that exceeds fifty
percent(50%)ofthecurrentmarketvalueofthesecurityatthetimeofthetransaction.In
noeventshallneworadditionalcreditbeextendedintoanaccountinwhichtheequityis
lessthanFiftyThousandPesos(P50,000.00).

2.

Themarginmaintainedinamarginaccountofacustomershallbenolessthantwentyfive
percent(25%)ofthecurrentmarketvalueofallsecurities"long"intheaccountandthirty
percent(30%)ofthecurrentmarketvalueofsecurities"short"intheaccount.

3.

When there is an insufficiency of margin, a call for additional margin shall be issued
promptly by the Broker Dealer to the customer. A call for initial margin shall be satisfied
within five (5) business days from the date the insufficiency is created. A call for
maintenancemarginshallbesatisfiedwithintwentyfour(24)hoursafterthecallisissued.

4.

If a margin call is not met within the time prescribed in paragraph 3 above, the Broker
Dealer shall liquidate securities sufficient to meet the margin call or eliminate the margin
deficiency existing on the day such liquidation is required, whichever is less. The Broker
DealershallliquidatethesecuritiesthroughtheExchangeonwhichitistradedorinthebest
availablepublicmarket.IfthemargindeficiencyintheaccountinlessthanTenThousand
Pesos(P10,000.00),noactionneedbetakenbytheBrokerDealer.

5.

Therequiredpaymentdateforacallforinitialmarginmaybeextendedbyseven(7)days
uponwrittenapplicationdeliveredbyhandorfacsimiletransmissionbytheBrokerDealerto
anExchange,inthecaseofmembersofthatExchange,ortotheCommission,inthecase
ofnonexchangemembers.Ingrantingsuchanextension,theExchangeorCommissionwill
takeintoconsiderationwhethertheBrokerDealerandthecustomerareactingingoodfaith
and whether exceptional circumstances warrant such extension. Application for the
extension must be received and acted upon before the expiration of the original payment
periodortheexpirationofanypreviousextension.
SRCRULE49.1
RestrictionsonBorrowingsbyMembers,Brokers,andDealers
[formerlySRCRules49.11and49.12]

1.

NetCapitalRule
A.

i.

EveryBrokerDealeratalltimesshallhaveandmaintainanetcapitalof
FiveMillionPesos(P5,000,000.00)orfivepercent(5%)ofhisaggregate
indebtednesswhicheverishigher.However,aBrokerDealerwhodeals
onlywithproprietarysharesandwhodoesnotkeepthesharesunderits
custodyshallhaveandmaintainanetcapitalofP2.5MillionPesosortwo
andonehalfpercent(2.5%)ofhisaggregateindebtedness,whicheveris
higher.

ii.

EveryBrokerDealershallmakeacomputationofnetcapitalonadaily
basis.Suchcomputations,uponrequestofanExchangeifsuchBroker
Dealerisamember,and/ortheCommissionshallimmediatelybe
providedinwrittenform.

iii.

EverybrokerdealershallfilewiththeCommissionitscertifiedmonthly
financialandoperationalreport(FINOP)onorbeforethe15thofthe
followingmonth.TheFINOPshallbecertifiedbythefirm'sAssociated
PersonandPresident/NomineeDirectorandacopysubmittedtothe
BrokerDealer'sAuditCommitteeorinlieuthereof,itsBoardofDirectors.

iv.

EveryBrokerDealershallimmediatelyceasedoingbusinessasaBroker
Dealer,andshallnotifyanExchange,ifitisamemberofthatExchange,
andtheCommissionifitdeterminesthatitsnetcapitalfallsbelowthe
minimumamountsrequiredpursuanttothisRule.
ICAcaH

v.

TheCommissionoranExchange,inthecaseofamemberofan
Exchange,mayrequireBrokerDealersfromtimetotimetosubmit
reportswhichreflecttheirfinancialandoperationalcondition,including
netcapital.

B.

NoBrokerDealershallpermititsaggregateindebtednesstoallotherpersonsto
exceed2,000percentofitsnetcapital.

C.

NotwithstandingtherequirementinparagraphsA&Babove,everyBroker
DealershallnotifytheCommissioninwritingwithintwentyfour(24)hours,the
occurrenceofanyofthefollowingevents:
i.

TheBrokerDealer'scomputationshowsthatitsAggregateIndebtednessis
inexcessof1,700percentofitsadjustednetcapitaland/or

ii.

TheBrokerDealer'scomputationshowsthatitstotaladjustednetcapitalis
lessthanonehundredtwentypercent(120%)oftherequiredminimum
netcapital.

TheBrokerDealershallalsoincludeinitsnoticetotheCommissionthemeasures

itwilladopttocomplywiththenetcapitalrequirementofwhicheverishigher
betweenFiveMillionPesos(P5,000,000.00)orfivepercent(5%)ofaggregate
indebtedness(forBrokerDealerinsecurities)orTwoMillionFiveHundred
ThousandPesos(P2,500,000.00)andtwoandonehalfpercent(2.5%)of
aggregatedindebtedness(forbrokerdealerinproprietaryshareshavingno
custodyoftheshares),whicheverishigher.
TheBrokerDealerisgiventen(10)calendardayswithinwhichtoeffectits

proposal.Pendingactualimplementation,theBrokerDealerisrequiredtonotify
theCommissiononadailybasisofitsNetCapitalposition.
D.

Thetermaggregateindebtednessshallmeanthetotalmoneyliabilitiesofa
BrokerDealerarisinginconnectionwithanytransactionwhatsoever,and
includes,amongotherthings,moneyborrowed,moneypayableagainst
securitiesloanedandsecuritiesfailedtoreceive,themarketvalueofsecurities
borrowedtotheextenttowhichnoequivalentvalueispaidorcredited(other
thanthemarketvalueofmarginsecuritiesborrowedfromcustomersandmargin
securitiesborrowedfromnoncustomers),customers'andnoncustomers'free
creditbalances,andcreditbalancesincustomers'andnoncustomers'
accountshavingshortpositionsinsecurities,butexcluding:
i.

Indebtednessadequatelycollateralizedbysecuritieswhicharecarried
longbytheBrokerDealerandwhichhavenotbeensoldorbysecurities

whichcollateralizeasecureddemandnoteinconformitywithSRCRule
49.1paragraph2
ii.

Amountspayableagainstsecuritiesloaned,whichsecuritiesarecarried
longbytheBrokerDealerandwhichhavenotbeensoldorwhich
securitiescollateralizeasecureddemandnoteinconformitywithSRC
Rule49.1paragraph2

iii.

Amountspayableagainstsecuritiesfailedtoreceivewhichsecuritiesare
carriedlongbytheBrokerDealerandwhichhavenotbeensoldorwhich
securitiescollateralizeasecureddemandnoteinconformitywithSRC
Rule49.1paragraph2oramountspayableagainstsecuritiesfailedto
receiveforwhichtheBrokerDealeralsohasareceivablerelatedto
securitiesofthesameissueandquantitythereofwhichareeitherfailsto
deliverorsecuritiesborrowedbytheBrokerDealer

iv.

Fixedliabilitiesadequatelysecuredbyassetsacquiredforuseinthe
ordinarycourseofthetradeorbusinessofaBrokerDealerbutnotother
fixedliabilitiessecuredbyassetsoftheBrokerDealershallbeso
excludedunlessthesolerecourseofthecreditorfornonpaymentofsuch
liabilityistosuchasset

v.

Indebtednesssubordinatedtotheclaimsofcreditorspursuanttoa
satisfactorysubordinationagreementinconformitywithSRCRule49.1
paragraph2

vi.

Liabilitieswhichareeffectivelysubordinatedtotheclaimsofcreditors,
butwhicharenotsubjecttoasatisfactorysubordinationagreementin
conformitywithSRCRule49.1paragraph2bynoncustomersofthe
BrokerDealerpriortosuchsubordination,exceptsuchsubordinationsby
customersashavebeenapprovedbyanExchangeinthecaseofa
memberofthatExchangeandtheCommissioninthecaseofafirmthat
isnotamemberofanExchange

vii.

Creditbalancesinaccountsofgeneralpartners

viii.

Deferredtaxliabilitiesand

ix.

E.

Eightypercent(80%)ofamountspayableagainstsecuritiesloanedfor
whichtheBrokerDealerhasreceivablesrelatedtosecuritiesofthesame
classandissueandquantitythataresecuritiesborrowedbytheBroker
Dealer.

ThetermnetcapitalshallmeanthenetworthofaBrokerDealer,adjustedby
thefollowing,provided,however,thatindeterminingnetworth,alllongandall
shortsecuritiespositionshallbemarkedtotheirmarketvalue:
i.

Addingunrealizedprofits(ordeductingunrealizedlosses)intheaccounts
oftheBrokerDealer.

ii.

ExcludingliabilitiesoftheBrokerDealerwhicharesubordinatedtothe
claimsofcreditorspursuanttoasatisfactorysubordinationagreementin
conformitywithSRCRule49.1paragraph2andinaccordancewiththe
followingschedule:
Periodfromexecutiondate
ofAgreement
Withinthefirstyear

Allowable

Deduction
100%

Betweenthe1stand2ndyear

75%

Betweenthe2ndand3rdyear
Duringthe3rdyear

25%

Beyondthe3rdyear

0%

50%

iii.

Deducting,inthecaseofaBrokerDealerwhoisasoleproprietor,the
excessofliabilitieswhichhavenotbeenincurredinthecourseof
businessasaBrokerDealeroverassetsnotusedinthebusiness.

iv.

DeductingDepositforFuturesStockSubscriptionforwhichno
applicationforincreaseincapitalstockorrequestforexemptionfor
registrationhasbeenfiledwiththeCommission.Fornetcapitalpurposes,
thesameshallbeconsideredpartofaggregateindebtednessunless
thereisevidencethatsuchamountisadepositbutanirrevocable
subscriptionorasubordinatedloanagreementhasbeenenteredintowith
thesubscriber.

v.

Deductingfixedassetsandassetswhichcannotbereadilyconvertedinto
cash[lessanyindebtednessexcludedinaccordancewithparagraphD
(iv)]including,amongotherthings:
a.

RealestatefurnitureandfixturesExchangememberships/trading
rightsprepaidrent,insuranceandotherexpensesgoodwill,
organizationexpenses

b.

Allunsecuredadvancesandloansdeficitsincustomers'andnon
customers'unsecuredandpartlysecurednotesdeficitsinspecial
omnibusaccountsorsimilaraccountscarriedonbehalfofanother
BrokerDealer,afterapplicationofcallsformargin,markstothe
marketorotherrequireddepositsthatareoutstandingfour(4)
businessdaysorlessdeficitsincustomers'andnoncustomers'
unsecuredandpartlysecuredaccountsafterapplicationofcalls
formargin,markstothemarketorotherrequireddepositsthatare
outstandingfour(4)businessdaysorless,exceptdeficitsincash
accountsforwhichnotmorethanoneextensionrespectinga
specifiedsecuritiestransactionhasbeenrequestedandgranted
themarketvalueofstockloanedinexcessofthevalueofany
collateralreceivedthereforandanycollateraldeficienciesin
secureddemandnotesinconformitywithSRCRule49.1
paragraph2.
Forthepurposeoftheabove,aloanoranyotherformof

receivablesshallbeconsidered"unsecured"unlessthefollowing
conditionsexist:

c.

(1)

thereceivableissecuredbycollateralwhichisotherwise
unencumberedprovided,however,thatsuchreceivablewill
beconsideredsecuredonlytotheextentofthemarketvalue
ofsuchcollateralafterapplicationofsuchpercentage
deductionsasmaybeprescribedbytheCommission

(2)

thecollateralisinthepossessionorcontroloftheTrading
Memberand

(3)

theTradingMemberhasalegallyenforceablewritten
securityagreementexecutedbythedebtorinitsfavorunder
whichtheTradingMembershallhavethepowertoreadily
sellorotherwiseconvertthecollateralintocash.

Interestreceivable,floorbrokeragereceivable,commissions

receivablefromotherBrokerDealers,andmanagementfees
receivablefromregisteredinvestmentcompanies,allofwhich
receivablesareoutstandinglongerthanthirty(30)daysfromthe
datetheyarosedividendsreceivableoutstandinglongerthanthirty
(30)daysfromthepayabledate

vi.

vii.

d.

Insuranceclaimswhich,afterfifteen(15)businessdaysfromthe
datethelossgivingrisetotheclaimisdiscovered,arenotcovered
byanopinionofanoutsidecounselthattheclaimisvalidandis
coveredbyinsurancepoliciespresentlyineffectinsuranceclaims
whichafterthirty(30)businessdaysfromthedatethelossgiving
risetotheclaimisdiscoveredandwhichareaccompaniedbyan
opinionofoutsidecounseldescribedabove,havenotbeen
acknowledgedinwritingbytheinsurancecarrierasdueand
payableandinsuranceclaimsacknowledgedinwritingbythe
carrierasdueandpayableoutstandinglongerthantwenty(20)
businessdaysfromthedatetheyaresoacknowledgedbythe
carrier

Allotherunsecuredreceivablesallassetsdoubtfulofcollectionless
anyreservesestablishedthereforetheamountbywhichthe
marketvalueofsecuritiesfailedtoreceiveoutstandinglongerthan
thirty(30)daysexceedsthecontractvalueofsuchfailstoreceive

f.

Onepercent(1%)ofthemarketvalueofsecuritiesborrowed
collateralizedbyanirrevocableletterofcredit

g.

AnyreceivablefromanaffiliateoftheBrokerDealer(nototherwise
deductedfromnetworth)andthemarketvalueofanycollateral
giventoanaffiliate(nototherwisedeductedfromnetworth)to
securealiabilityovertheamountoftheliabilityoftheBroker
Dealerunlessthebooksandrecordsoftheaffiliatearemade
availableforexaminationwhenrequestedbytheCommissionor
theExchange,wheretheBrokerDealerisamemberforthe
BrokerDealerinordertodemonstratethevalidityofthereceivable
orpayable.Theprovisionsofthissubsectionshallnotapplywhere
theaffiliateisaBrokerDealer

a.

Deductingthemarketvalueofallshortsecuritiesdifferences
(whichshallincludesecuritiespositionsreflectedonthesecurities
recordwhicharenotsusceptibletoeithercountorconfirmation)
unresolvedafterdiscovery.

b.

Deductingthemarketvalueofanylongsecuritiesdifferences,where
suchsecuritieshavebeensoldbytheBrokerDealerbeforethey
areadequatelyresolved,lessanyreservesestablishedtherefore

c.

ForanExchangemember,theExchange,andinthecaseofa
BrokerDealerthatisnotamemberofanExchange,the
Commissionmayextendtheperiodsinparagraph(v)(a)abovefor
uptoten(10)businessdaysifitfindsthatexceptional
circumstanceswarrantanextension.
a.

Deductingforallsecuritiesorevidencesofindebtedness[other
thanthosedescribedinparagraphs(vi)(b)and(c)below]inthe
proprietaryorotheraccountsoftheBrokerDealer,fifteenpercent
(15%)ofthemarketvalueofthegreaterofthelongorshort
positionsandtotheextentthemarketvalueofthelesserofthelong

orshortpositionsexceedstwentyfivepercent(25%)ofthemarket
valueofthegreaterofthelongorshortpositions,thepercentage
deductiononsuchexcessshallbefifteenpercent(15%)ofthe
marketvalueofsuchexcess.Nodeductionneedbemadeinthe
caseof:

b.

c.

(1)

Securitiesthatareconvertibleintoorexchangeablefor
othersecuritieswithinaperiodofninety(90)days,subject
tonoconditionsotherthanthepaymentofmoney,andthe
othersecuritiesintowhichsuchsecurityisconvertibleorfor
whichitisexchangeable,areshortintheaccountsofsuch
BrokerDealeror

(2)

Asecuritythathasbeencalledforredemptionandthatis
redeemablewithinninety(90)days.

Deducting,inthecaseofsecuritiesintheproprietaryorother
accountsoftheBrokerDealer,whicharenotlistedortradedonan
Exchange,thefollowingamounts:
(1)

Inthecasewherethereareregularquotationsforthe
securitiesbythree(3)ormoreindependentdealers
(exclusiveofthecomputingBrokerDealer)andwhereeach
suchquotationrepresentsabonafideoffertoBrokersor
dealerstobothbuyandsellinreasonablequantitiesat
statedprices,thedeductionshallbedeterminedin
accordancewithparagraph(vii)(a)above

(2)

Inthecasewherethereareregularquotationsforthe
securitiesbyonlyoneortwoindependentdealers(exclusive
ofthecomputingBrokerDealer)andwhereeachsuch
quotationrepresentsabonafideoffertoBrokerDealers
bothtobuyandsellinreasonablequantities,atstated
prices,thedeductiononboththelongandshortposition
shallbefortypercent(40%)

(3)

WhereaBrokerDealerdemonstratesthatthereis
sufficientliquidityforanysecuritieslongorshortinthe
proprietaryorotheraccountsoftheBrokerDealerwhich
aresubjecttoadeductionrequiredbyparagraph(b)(2)
above,suchdeduction,uponapropershowingtoan
ExchangeinthecaseofamemberofthatExchangeandto
theCommissioninthecaseofafirmthatisnotamemberof
anExchange,maybeappropriatelydecreased,butinno
caseshallsuchdeductionbelessthanthatprescribedin
paragraph(a)above.

DeductingforsecuritiesissuedbytheRepublicofthePhilippines
orinvestmentgradenonconvertiblecorporatedebtsecurities
havingafixedinterestrateandfixedmaturitydateinthe
proprietaryorotheraccountsoftheBrokerDealer,theapplicable
percentageofthemarketvalueofthelongorshortpositions,
whicheverisgreater,ineachofthecategoriesspecifiedbelow:
lessthan1yeartomaturity2%
1yearbutlessthan2yearstomaturity3%
2yearsbutlessthan3yearstomaturity5%

3yearsbutlessthan5yearstomaturity6%
5yearsbutlessthantenyearstomaturity7%

viii.

d.

Deductinginthecaseofunittrustsandotherinvestmentsinthe
proprietaryorotheraccountsoftheBrokerDealerfortypercent
(40%)ofthemarketvalueofsuchinvestments.

e.

Inthecaseofsecuritiesofasingleclassorseriesofanissuer
(otherthansecuritiesissuedbytheRepublicofthePhilippines)
whicharelongorshortintheproprietaryorotheraccountsofa
BrokerDealer,includingsecuritiesthatarecollateraltosecured
demandnotesinconformitywithSRCRule49.1paragraph2and
thathaveamarketvalueofmorethantenpercent(10%)ofthenet
capitalofaBrokerDealerbeforetheapplicationofhaircuts
requiredbythisrule,thereshallbeanadditionaldeductionfrom
networthand/orthecollateralvalueforsecuritiescollateralizinga
secureddemandnoteinconformitywithSRCRule49.1paragraph
2equaltofiftypercent(50%)ofthepercentagededuction
otherwiseprovidedbyhaircutprovisionsofthisruleonthatportion
ofthesecuritiespositioninexcessoftenpercent(10%)ofthenet
capitaloftheBrokerDealerbeforetheapplicationofthehaircuts.

Deductingonehundredpercent(100%)ofthecarryingvalueinthe
caseofsecuritiesorevidenceofindebtedness,intheproprietaryor
otheraccountoftheBrokerDealer,forwhichthereisnoreadymarket,
asdefinedinparagraph(D)(v)ofthisrule,andsecurities,inthe
proprietaryorotheraccountsoftheBrokerDealer,whichcannotbe
publiclyofferedorsoldbecauseofstatutory,regulatoryorcontractual
arrangementsorotherrestrictions.

E.

Adequatelysecuredindebtednessshallbedeemedtoexistwhentheexcessof
themarketvalueofthecollateralovertheamountoftheindebtednessis
sufficienttomaketheloanacceptableasafullysecuredloantobanksregularly
makingsecuredloanstoBrokerDealers.

F.

Customershallmeananypersonfromwhom,oronwhosebehalf,aBroker
Dealerreceived,acquiredorholdsfundsorsecuritiesfortheaccountofsuch
person,butshallnotincludeageneral,specialorlimitedpartnerordirectoror
officeroftheBrokerDealer,oranypersontotheextentthatsuchpersonhasa
claimforpropertyorfundswhichbycontract,agreementorunderstanding,or
byoperationoflaw,ispartofthecapitaloftheBrokerDealerorissubordinated
totheclaimsofcreditorsoftheBrokerDealer.However,theterm"customer"of
aBrokerDealershallincludeanotherBrokerDealer(theinitiatingBrokeras
definedinSRCRule34.1whereinthelattermaintainsseparatelyaDealer
accountandaspecialomnibusaccountinbehalfofhiscustomerwiththe
former.

G.

i.

Readymarketshallincludearecognizedestablishedsecuritiesmarketin
whichexistsindependentbonafideofferstobuyandsellsothataprice
reasonablyrelatedtothelastsalespriceorcurrentbonafidecompetitive
bidandofferquotationscanbedeterminedforaparticularsecurity
almostinstantaneouslyandwherepaymentwillbereceivedinsettlement
ofasaleatsuchpricewithinarelativelyshorttime.
Forpurposesofdeterminingthemarketvalueofallsecuritiesusedas

collateralforareceivableorthoseheldintheproprietaryaccountor
otheraccountsofaBrokerDealer,saidsecuritiesshallbeconsideredas

havingareadymarketifthetotalholdingsofthecompany(securities
usedascollateralandthoseheldinproprietaryaccountorother
accountstakentogether)canbedisposedoverthenextOnehundred
twenty(120)calendardaysoranysuchperiodwhichtheCommission
maylaterdetermine,takingintoconsiderationtheaveragedailytrading
volumeofthattypeofsecuritycomputedoverthelastOnehundredeighty
(180)calendardaysorsuchrepresentativeperiodacceptabletothe
Commission,bothreckonedfromthedayofnetcapitalcomputation.A
haircutofonehundredpercent(100%)ofthemarketvalueofthe
securitieswillbedeductedfromtheexcesswhichcannotbedisposed
withinthehypotheticalOnehundredtwenty(120)calendardayperiod.
ii.

H.

Readymarketshallalsobedeemedtoexistwheresecuritieshavebeen
acceptedascollateralforaloanbyabankandwheretheBrokerDealer
demonstratestoanExchangeinthecaseofamemberofthatExchange
ortheCommissioninthecaseofafirmthatisnotamemberofan
Exchangethatsuchsecuritiesadequatelysecuresuchloans.

LIMITATIONSONWITHDRAWALOFEQUITYCAPITAL
i.

I.
2.

NoequitycapitalofaBrokerDealermaybewithdrawnbyactionofa
stockholderorapartnerorbyredemptionorrepurchaseofsharesof
stockorthroughthepaymentofdividendsoranysimilardistribution,nor
mayanyunsecuredadvanceorloanbemadetoastockholder,partner,
soleproprietor,employeeoraffiliate,ifaftergivingeffecttheretoandto
anyothersuchwithdrawals,advancesorloansandanypaymentsunder
satisfactorysubordinationagreementsinconformitywithSRCRule49.1
paragraph2whicharescheduledtooccurwithinonehundredandeighty
(180)daysfollowingsuchwithdrawal,advanceorloanif:
a.

TheBrokerDealer'snetcapitalwouldbelessthanonehundred
twentypercent(120%)oftheminimumamountrequiredby
paragraph(A)ofthisruleor,

b.

TheaggregateindebtednessoftheBrokerDealerexceedsone
thousandfivehundredpercent(1500%)ofitsnetcapital.

ii.

Forpurposesofparagraph(H)(i)above,thetermequitycapitalincludes
capitalcontributionsbypartners,parorstatedvalueofcapitalstock,
paidincapitalinexcessofpar,retainedearningsorothercapital
accounts.

iii.

Paragraph(H)(i)aboveshallnotprecludeaBrokerDealerfrommaking
requiredtaxpaymentsorprecludethepaymenttopartnersofreasonable
compensation,andsuchpaymentsshallnotbeincludedinthecalculation
ofwithdrawals,advances,orloansforpurposesofparagraph(H)(i)
above.

iv.

Forthepurposeofparagraph(H)(i)above,anytransactionbetweena
BrokerDealerandastockholder,partner,soleproprietor,employeeor
affiliatethatresultsinadiminutionoftheBrokerDealer'snetcapitalshall
bedeemedtobeanadvanceorloanofnetcapital.

Theformatforthenetcapitalcomputationissetforthin"Annex49.11A"

SatisfactorySubordinationAgreements
A.

i.

Thisrulesetsforthminimumandnonexclusiverequirementsfor
satisfactorysubordinationagreements(hereinafter"subordination
agreement").TheExchange,Commission,orBrokerDealermayrequire

orincludesuchotherprovisionsasmaybedeemednecessarytothe
extentthatsuchprovisionsdonotcausethesubordinationagreementto
failtomeettheminimumrequirementsofthisRule.

ThesubordinatedagreementshallbeapprovedbytheExchange,ifaffecting

anExchangeMember,orbytheCommission,ifaffectinganon
ExchangeMember.Saidagreementshalltakeeffectuponsuchapproval.
ii.

ForpurposesofSRCRule49.1:
a.

Asubordinationagreementmaybeeitherasubordinatedloan
agreementorasecureddemandnoteagreement.

b.

"Subordinatedloanagreement"shallmeananotarizedagreement
evidencingorgoverningasubordinatedborrowingofcash.

c.

The"CollateralValue"ofanysecuritiespledgedtosecurea
secureddemandnoteshallmeanthemarketvalueofsuch
securitiesafterreducingthemarketvalueofthesecuritiesbythirty
percent(30%)exceptforsecuritiesissuedbytheRepublicofthe
Philippines.Inlieuofthethirtypercent(30%)deduction,the
BrokerDealershallreducethemarketvalueofsecuritiesissuedby
theRepublicofthePhilippinespledgedtosecurethesecured
demandnotebythepercentagedeductionssetforthinSRCRule
49.1,paragraph1(D)(vi)(c).

d.

"PaymentObligation"shallmeantheobligationofaBrokerDealer
inrespectofanysubordinationagreement(i)torepaycashloaned
totheBrokerDealerpursuanttoasubordinatedloanagreement
or,(ii)toreturnasecureddemandnotecontributedtotheBroker
Dealerorreducetheunpaidprincipalamountthereofandtoreturn
cashorsecuritiespledgedascollateraltosecurethesecured
demandnote."Payment"shallmeantheperformancebyaBroker
DealerofaPaymentObligation.
aCcHEI

e.

(1)

Secureddemandnoteagreementshallmeananotarized
agreement(includingtherelatedsecureddemandnote)
evidencingorgoverningthecontributionofasecured
demandnotetoaBrokerDealerandthepledgeofsecurities
and/orcashwiththeBrokerDealerascollateraltosecure
paymentofsuchsecureddemandnote.Thesecured
demandnoteagreementmayprovidethatneitherthelender,
hisheirs,executors,administratorsorassignsshallbe
personallyliableonsuchnoteandthat,intheeventof
default,theBrokerDealershalllookforpaymentofsuch
notesolelytothecollateralthenpledgedtosecurethesame.

(2)

Thesecureddemandnoteshallbeapromissorynote
executedbythelenderandshallbepayableonthedemand
oftheBrokerDealertowhichitiscontributedprovided,
however,thatthemakingofsuchdemandmaybe
conditionedupontheoccurrenceofanyofcertainevents
whichareacceptabletotheCommissionandtoan
ExchangeinthecaseofaBrokerDealerwhichisamember
ofthatExchange.

(3)

Ifsuchnoteisnotpaiduponpresentmentanddemandas
providedfortherein,theBrokerDealershallhavetherightto

liquidatealloranypartofthesecuritiesthenpledgedas
collateraltosecurepaymentofthesameandtoapplythe
netproceedsofsuchliquidation,togetherwithanycash
thenincludedinthecollateral,inpaymentofsuchnote.
SubjecttothepriorrightsoftheBrokerDealeraspledgee,
thelender,asdefinedherein,mayretainownershipofthe
collateralandhavethebenefitofanyincreasesandbear
therisksofanydecreasesinthevalueofthecollateraland
mayretaintherighttovotesecuritiescontainedwithinthe
collateralandanyrighttoincometherefromordistributions
thereon,excepttheBrokerDealershallhavetherightto
receiveandholdaspledgeealldividendspayablein
securitiesandallpartialandcompleteliquidatingdividends.

f.

B.

(4)

SubjecttothepriorrightsoftheBrokerDealeraspledgee,
thelendermayhavetherighttodirectthesaleofany
securitiesincludedinthecollateral,todirectthepurchaseof
securitieswithanycashincludedtherein,towithdraw
excesscollateralortosubstitutecashsoothersecuritiesas
collateral,providedthatthenetproceedsofanysuchsale
andthecashsosubstitutedandthesecuritiessopurchased
orsubstitutedareheldbytheBrokerDealer,aspledgee,
andareincludedwithinthecollateraltosecurepaymentof
thesecureddemandnote,andprovidedfurtherthatnosuch
transactionshallbepermittedif,after:givingeffectthereto,
thesumoftheamountofanycash,plustheCollateralValue
ofthesecurities,thenpledgedascollateraltosecurethe
secureddemandnotewouldbelessthantheunpaid
principalamountofthesecureddemandnote.

(5)

Uponpaymentbythelender,asdistinguishedfroma
reductionbythelenderwhichisprovidedforin"Annex
49.12A"paragraph6(C)orreductionbytheBrokerDealer
asprovidedforin"Annex49.12A"paragraph(b)(7)ofthis
rule,ofalloranypartoftheunpaidprincipalamountofthe
secureddemandnote,aBrokerDealershallissuetothe
lenderasubordinatedloanagreementintheamountofsuch
payment(orinthecaseofaBrokerDealerthatisa
partnershipcreditacapitalaccountofthelender)or
preferredorcommonstock(s)oftheBrokerDealerinthe
amountofsuchpayment,oranycombinationofthe
foregoing,asprovidedforinthesecureddemandnote
agreement.

"Lender"shallmeanthepersonwholendscashtoaBrokerDealer
pursuanttoasubordinatedloanagreementandthepersonwho
contributesasecureddemandnotetoaBrokerDealerpursuantto
asecureddemandnoteagreement.

RecoursetotheSubordinationAgreementsisviewedasatemporaryreliefto
addressnetcapitalrequirementsofBrokerDealersandisnotintendedto
replacethepermanentinfusionofcapitalbystockholders.Thus,subordinated
loansshallbeforaperiodofone(1)yearandisrenewableannuallybutfora
periodnotexceedingtwo(2)yearsorforsuchshorterperiodasthe
Commissiondeemsappropriate,providedhowever,thatacapitalbuildupplan
shallbearequirementfortherenewalofthesubordinatedloan.Advancesor

Agreementsthathavebeenoutstandingformorethanthree(3)yearswould
requireconversiontocapital.
C.

InordertoensurefinancialviabilityoftheBrokerDealer,theExchange,for
ExchangeBrokerDealers,ortheCommission,fornonExchangeBroker
Dealers,mayimposeadditionalrequirementstoregulatetheresorttofinancing
bywayofsubordinationagreementsandmayexercisediscretioninthe
approvalofsuchagreements.

D.

TheMinimumrequirementsforSubordinationAgreementsandMiscellaneous
ProvisionsandthesampleformatoftheSubordinatedLoanAgreementareset
forthinAnnex49.12AandAnnex49.12B,respectively.
SRCRULE49.2
CustomerProtectionReservesandCustodyofSecurities
[formerlySRCRule49.21]

1.

PhysicalPossessionorControlofSecurities
A.

ABrokerDealeronadailybasisshallobtainandshallthereaftermaintainthe
physicalpossessionorcontrolofallfullypaidsecuritiesandexcessmargin
securitiescarriedbyaBrokerDealerfortheaccountofcustomers.

B.

ABrokerDealershallnotbedeemedtobeinviolationoftheprovisionsof
paragraph1(A)ofthisruleregardingphysicalpossessionorcontrolof
customers'securitiesif,solelyastheresultofnormalbusinessoperations,
temporarylagsoccurbetweenthetimewhenasecurityisrequiredtobeinthe
possessionorcontroloftheBrokerDealerandthetimethatitisplacedinthe
firm'sphysicalpossessionorunderthefirm'scontrolprovided,theBroker
Dealertakestimelystepsingoodfaithtoestablishpromptphysicalpossession
orcontrol.TheburdenofproofshallbeontheBrokerDealertoestablishthat
thefailuretoobtainphysicalpossessionorcontrolofsecuritiescarriedforthe
accountofcustomersismerelytemporaryandsolelytheresultofnormal
businessoperationsincludingsamedayreceiptandredelivery(turnaround),
andtoestablishthattheBrokerDealerhastakentimelystepsingoodfaithto
placethemintheBrokerDealer'sphysicalpossessionorcontrol.

C.

ABrokerDealershallnotbedeemedtobeinviolationoftheprovisionsof
paragraph1(A)ofthisruleregardingphysicalpossessionorcontroloffully
paidorexcessmarginsecuritiesborrowedfromanyperson,provided,thatthe
BrokerDealerandthelender,atorbeforethetimeoftheloan,enterintoa
writtenagreementthat,ataminimum
i.

Setsforthinaseparatescheduleorschedulesthebasisofcompensation
foranyloanandgenerallytherightsandliabilitiesofthepartiesastothe
borrowedsecurities

ii.

Providesthatthelenderwillbegivenascheduleofthesecuritiesactually
borrowedatthetimeoftheborrowingofthesecurities

iii.

SpecifiesthattheBrokerDealershall:
a.

providetothelender,upontheexecutionoftheagreementorby
thecloseofthebusinessdayoftheloaniftheloanoccurs
subsequenttotheexecutionoftheagreement,collateralconsisting
exclusivelyofcashorRepublicofthePhilippinesTreasurybills
andTreasurynotesoranirrevocableletterofcreditissuedbya
bankwhichfullysecurestheloanofsecurities,and

b.

mustmarktheloantothemarketnotlessthandailyand,inthe

eventthemarketvalueofalltheoutstandingsecuritiesloanedat
thecloseoftradingattheendofthebusinessdayexceeds100
percent(100%)ofthecollateralthenheldbythelender,the
borrowingBrokerDealermustprovideadditionalcollateralofthe
typedescribedinparagraph(iii)(a)abovetothelenderbythe
closeofthenextbusinessdayasnecessarytoequal,togetherwith
thecollateralthenheldbythelender,notlessthanonehundred
percent(100%)ofthemarketvalueofthesecuritiesloaned.
2.

ControlofSecurities
SecuritiesunderthecontrolofaBrokerDealershallbedeemedtobesecuritieswhich:

A.

Arerepresentedbyoneormorecertificatesinthecustodyorcontrolofa
clearingagencyregisteredwiththeCommissioninaccordancewithSection42
oftheCodethedeliveryofwhichcertificatestotheBrokerDealerdoesnot
requirethepaymentofmoneyorvalue,andifthebooksorrecordsofthe
BrokerDealeridentifythecustomersentitledtoreceivespecifiednumberor
unitsofthesecuritiessoheldforsuchcustomerscollectivelyor

B.

ArecarriedfortheaccountofanycustomerbyaBrokerDealerandare
carriedinaspecialomnibusaccountinthenameofsuchBrokerDealerwith
anotherBrokerDealer,suchsecuritiesbeingdeemedtobeunderthecontrolof
suchBrokerDealertotheextentthatithasinstructedsuchcarryingBroker
Dealertomaintainphysicalpossessionorcontrolofthemfreeofanycharge,
lienorclaimofanykindinfavorofsuchcarryingBrokerDealeroranyperson
claimingthroughsuchcarryingBrokerDealeror

C.

Arethesubjectofbonafideitemsoftransferprovidedthatsecuritiesshallbe
deemednottobethesubjectofbonafideitemsoftransferif,withinforty(40)
daysaftertheyhavebeentransmittedfortransferbytheBrokerDealertothe
issueroritstransferagent,newcertificatesconformingtotheinstructionsofthe
BrokerDealerhavenotbeenreceivedbyhim,hehasnotreceivedawritten
statementbytheissueroritstransferagentacknowledgingthetransfer
instructionsandthepossessionofthesecuritiesorhehasnotobtaineda
revalidationofawindowticketfromatransferagentwithrespecttothe
certificatedeliveredfortransferor

D.

Areinthecustodyofaforeigndepository,foreignclearingagencyorforeign
custodianbankwhichtheCommissionuponapplicationfromaBrokerDealer,
anExchangeoruponitsownmotion,shalldesignateasasatisfactorycontrol
locationforsecuritiesor

E.

Areinthecustodyorcontrolofabank,thedeliveryofwhichsecuritiestothe
BrokerDealerdoesnotrequirethepaymentofmoneyorvalueandthebank
havingacknowledgedinwritingthatthesecuritiesinitscustodyorcontrolare
notsubjecttoanyright,charge,securityinterest,lienorclaimofanykindin
favorofabankoranypersonclaimingthroughthebankor

F.

i.
ii.

AreheldinorareintransitbetweenofficesoftheBrokerDealeror
AreheldbyacorporatesubsidiaryiftheBrokerDealerownsand
exercisesamajorityofthevotingrightsofallofthevotingsecuritiesof
suchsubsidiary,assumesorguaranteesallofthesubsidiary'sobligations
andliabilities,operatesthesubsidiaryasabranchofficeoftheBroker
Dealer,andassumesfullresponsibilityforcompliancebythesubsidiary
andallofitssalesmenandotherpersonnelwiththeprovisionsofthe
Codeandrulesandregulationsadoptedthereunderaswellasforallof
theotheractsofthesubsidiaryandsuchpersonsor

3.

G.

AreintransittoorfromBrokerDealers,banks,custodians,registeredtransfer
agentsandregisteredclearingagencieswhichareotherwisegoodcontrol
locationspursuanttothetermofthisRule,provided,suchitemsshallhavebeen
intransitfromortotheBrokerDealerforaperiodofnotmorethanfive(5)
businessdaysfromthedaytheyarefirstputintransit,andprovided,further,the
booksandrecordsoftheBrokerDealerclearlyaccountforsuchitems.An"in
transit"accountmaybeusedforthispurposeor

H.

AreheldinsuchotherlocationsastheCommissionshalluponapplicationfrom
aBrokerDealeroranExchangetowhichaBrokerDealerisamemberfindand
designatetobeadequatefortheprotectionofcustomersecurities.

RequirementtoReduceSecuritiestoPossessionorControl
A.

Notlaterthanthenextbusinessday,aBrokerDealer,asofthecloseofthe
precedingbusinessday,shalldeterminefromitsbooksorrecordsthequantity
offullypaidsecuritiesandexcessmarginsecuritiesinitspossessionorcontrol
andthequantityoffullypaidsecuritiesandexcessmarginsecuritiesnotinits
possessionorcontrol.Inmakingthisdailydeterminationinactivemargin
accounts(accountshavingnoactivitybyreasonofpurchaseorsaleof
securities,receiptordeliveryofcashorsecuritiesorsimilartypeevents)may
becomputednotlessthanonceweekly.Ifsuchbooksorrecordsindicate,asof
thecloseofthebusinessday,thattheBrokerDealerhasnotobtainedphysical
possessionorcontrolofallfullypaidandexcessmarginsecuritiesasrequired
bythisparagraphandtherearesecuritiesofthesameissueandclassinanyof
thefollowingnoncontrollocations:
i.

SecuritiessubjecttoaliensecuringmoniesborrowedbytheBroker
DealerorsecuritiesloanedtoanotherBrokerDealer,thentheBroker
Dealershall,notlaterthanthebusinessdayfollowingthedayonwhich
suchdeterminationismade,issueinstructionsforthereleaseofsuch
securitiesfromthelienorreturnsuchloanedsecuritiesandobtain
physicalpossessionorcontrolofsuchsecuritieswithintwo(2)business
daysfollowingthedateofissuanceoftheinstructionsinthecaseof
securitiessubjecttoliensecuringborrowedmoniesandwithinfive(5)
businessdaysfollowingthedateofissuanceofinstructionsinthecaseof
securitiesloanedor,

ii.

Securitiesincludedonhisbooksorrecordsasfailedtoreceivemore
thanthirty(30)days,thentheBrokerDealershall,notlaterthanthe
businessdayfollowingthedayonwhichsuchdeterminationismade,
takepromptstepstoobtainphysicalpossessionorcontrolofsecurities
sofailedtoreceivethroughabuyinprocedureorotherwiseor,

iii.

SecuritiesreceivablebytheBrokerDealerasastockdividend
receivable,stocksplit,orsimilardistributionformorethanfortyfive(45)
days,thentheBrokerDealershall,notlaterthanthebusinessday
followingthedayonwhichsuchdeterminationismade,takepromptsteps
toobtainphysicalpossessionorcontrolofsecuritiessoreceivable
throughabuyinprocedureorotherwise.

B.

ABrokerDealerwhichissubjecttotherequirementsofthisrulewithrespectto
physicalpossessionorcontroloffullypaidandexcessmarginsecuritiesshall
prepareandmaintainacurrentanddetailedwrittendescriptionofthe
procedureswhichitutilizestocomplywiththepossessionorcontrol
requirementssetforthinthisrule.

C.

ABrokerDealerwhichissubjecttothisruleshallrecordinformationrelatingto

physicalpossessionandcontroloffullypaidandexcessmarginsecuritiesona
quarterlybasisandsubmitsuchrecordtoanExchange,inthecaseofa
memberofthatExchange,ortotheCommission,inthecaseofanonmember,
inaccordancewiththeformatsetforthin"Annex49.2A."
4.

SpecialReserveBankAccountfortheExclusiveBenefitofCustomers
A.

EveryBrokerDealershallmaintainwithabank/satalltimeswhendepositsare
requiredorhereinafterspecifiedas"SpecialReserveBankAccountforthe
ExclusiveBenefitofCustomers"(hereinafterreferredtoasthe"ReserveBank
Account"),anditshallbeseparatefromanyotherbankaccountoftheBroker
Dealer.SuchBrokerDealershallatalltimesmaintainintheReserveBank
Account,throughdepositsmadetherein,cash(bymaintainingseparatebank
depositaccount)and/orqualifiedsecurities(byopeningacustodyaccount)in
amountscomputedinaccordancewiththeformulaattachedheretoas"Annex
49.2B."
ABrokerDealer,inadditiontoorinlieuofmaintainingaReserveBankAccount,

may,uponproperapplicationwithandapprovalbytheCommission,deposit
qualifiedsecuritieswithdulyaccreditedorrecognizedentitiesexercising
custodianshipfunctions,Forthispurpose,theCommissionmayprescribeother
conditionsthatshallgoverndepositsofcashand/orqualifiedsecuritiesoutside
thebankingsystemandwithaffiliatedcompanies.
B.

ItshallbeunlawfulforanyBrokerDealertoacceptoruseanyoftheamounts
underitemscomprisingTotalCreditsundertheformulareferredtoinparagraph
4(A)aboveexceptforthespecifiedpurposesindicatedunderitemscomprising
TotalDebitsundertheformula,and,totheextentTotalCreditsexceedTotal
Debits,thenetamountthereofshallbemaintainedintheReserveBankAccount
requiredbyparagraph4(A)above.

C.

i.

Computationsnecessarytodeterminetheamountrequiredtobe
depositedpursuanttoparagraph4(A)aboveshallbemadeweekly,asof
thecloseofthelastbusinessdayoftheweekandthedepositso
computedshallbemadenolaterthanone(1)houraftertheopeningof
bankingbusinessonthesecondfollowingbusinessdayprovided,
however,aBrokerDealerwhichhasaggregateindebtednessnot
exceedingeighthundredpercent(800%)ofnetcapitalasdefinedinSRC
Rule49.1andwhichcarriesaggregatecustomerfundsasdefinedin
paragraph13(l)ofthisruleascomputedatthelastrequiredcomputation
pursuanttothisrule,notexceedingTwentyFiveMillionPesos
(P25,000,000.00),mayinthealternativemakethecomputationmonthly,
asofthecloseofthelastbusinessdayofthemonth,andinsuchevent,
shalldepositnotlessthanonehundredfivepercent(105%)amountso
computednolaterthanone(1)houraftertheopeningofbanking
businessonthesecondfollowingbusinessday.
IcTEAD

ii.

IfaBrokerDealer,computingonamonthlybasis,has,atthetimeofany
requiredcomputation,aggregateindebtednessinexcessofeighthundred
percent(800%)ofnetcapital,suchBrokerDealershallthereafter
computeweeklyasaforesaiduntilfoursuccessiveweeklycomputations
aremade,noneofwhichweremadeatatimewhenhisaggregate
indebtednessexceededeighthundredpercent(800%)ofhisnetcapital.

iii.

Computationsinadditiontothecomputationsrequiredinthisparagraph
(C)above,maybemadeasofthecloseofanyotherbusinessday,and
thedepositssocomputedshallbemadenolaterthanone(1)hourafter
theopeningofbankingbusinessonthesecondfollowingbusinessday.

iv.

5.

TheBrokerDealershallmakeandmaintainarecordofeachsuch
computationmadepursuanttoparagraph(C)aboveandsubmitsuch
computationquarterlytoanExchange,inthecaseofamemberofthat
Exchange,ortotheCommissioninthecaseofanonmember.

NotificationsofBanksandEntitieswithcustodianshiparrangements
ABrokerDealerrequiredtomaintaintheReserveBankAccountprescribedbyparagraphof

thisruleshallobtainandpreserveinaccordancewithSRCRule52.1paragraph2awritten
notificationfromeachbankinwhichthefirmhasitsReserveBankAccountthatthebank
and/orentitywithcustodianshiparrangements(custodian)wasinformedthatallcashand/or
qualified securities deposited therein are being held by the bank and/or custodian for the
exclusive benefit of customers of the Broker Dealer in accordance with the rules and
regulations of the Commission, and are being kept separate from any other accounts
maintained by the Broker Dealer with the bank and/or custodian, and the Broker Dealer
shall have a written contract with the bank and/or custodian which provides that the cash
and/or qualified securities shall at no time be used directly or indirectly as security for a
loan to the Broker Dealer by the bank and/or custodian and shall be subject to no right,
charge,securityinterest,lienorclaimofanykindinfavorofthebank,and/orcustodian,or
anypersonclaimingthroughthebankand/orcustodian.
TheBrokerDealershallatalltimesfilewiththeCommissionandtheExchangeacopyofthe

notificationsdulyreceivedbytheBankand/orcustodian.
6.

WithdrawalsfromtheReserveBankAccount
ABrokerDealermaymakewithdrawalsfromthefirm'sReserveBankAccountifandtothe

extentthatatthetimeofthewithdrawaltheamountremainingintheReserveBankAccount
isnotlessthantheamountthenrequiredbyparagraphofthisrule.Abankand/orcustodian
maypresumethatanyrequestforwithdrawalfromaReserveBankAccountisinconformity
andcompliancewiththisparagraph.Onanybusinessdayonwhichawithdrawalismade,
the Broker Dealer shall make a record of the computation on the basis of which the firm
makes such withdrawal, and the Broker Dealer shall preserve such computation in
accordancewithSRCRule52.1,paragraph2.
7.

BuyInofShortSecurityDifferences
ABrokerDealershallwithinten(10)daysafterthedateoftheexamination,count,verification

andcomparisonofsecuritiespursuanttoSRCRule52.1,paragraph10,preparationofthe
annualreportoffinancialconditioninaccordancewithSRCRule52.1,paragraph5,orfor
any other purpose, buyin all short security differences which are not resolved during the
ten(10)dayperiod.Thisrequirementiswithoutprejudicetotheindependentdetermination
by the Commission or the Exchange of the Broker Dealer's liability pursuant to the other
provisionsoftheCodeandtheRules
8.

NotificationintheEventofFailuretoMakeaRequiredDeposit
If a Broker Dealer shall fail to make in its Reserve Bank Account a deposit, as required by

thisrule,theBrokerDealershallbyfax,telegramorothersimilarmeans,immediatelynotify
theCommissionandanExchange,andshallpromptlythereafterconfirmsuchnotificationin
writing,includingthereasonsforsuchfailure.
9.

Exemptions
A.

TheprovisionsofthisruleshallnotbeapplicabletoaBrokerDealerwhocarries
nomarginaccounts,promptlytransmitsallcustomerfundsanddeliversall
securitiesreceivedinconnectionwithitsactivitiesasaBrokerDealeranddoes
nototherwiseholdfundsorsecuritiesfor,orowemoneyorsecuritiesto,
customers.

B.

UponwrittenapplicationbyaBrokerDealer,theCommission,mayexemptsuch
BrokerDealerfromtheprovisionsofthisrule,eitherunconditionallyoron

specifiedtermsandconditions,iftheCommissionortheExchangefindsthat
theBrokerDealerhasestablishedsafeguardsfortheprotectionoffundsand
securitiesofcustomerscomparablewiththoseprovidedforbythisruleandthat
itisnotnecessaryinthepublicinterestorfortheprotectionofinvestorsto
subjecttheparticularBrokerDealertotheprovisionsofthisrule.
10.

DeliveryofSecurities
Nothingstatedinthisruleshallbeconstruedasaffectingtheabsoluterightofacustomerofa

Broker Dealer to receive in the course of normal business operations following demand
madeontheBrokerDealer,thephysicaldeliveryofcertificatesfor:

11.

A.

Fullypaidsecuritiestowhichheisentitled,and

B.

MarginsecuritiesuponfullpaymentbysuchcustomertotheBrokerDealerof
hisindebtednesstotheBrokerDealerand,subjecttotherightoftheBroker
Dealertoretaincollateralforthefirm'sownprotectionbeyondtherequirements
ofSRCRule48.1,excessmarginsecuritiesnotreasonablyrequiredto
collateralizesuchcustomer'sindebtednesstotheBrokerDealer.

ExtensionsofTime
If an appropriate committee of the Exchange is satisfied that a Broker Dealer which is a

member of that Exchange is acting in good faith in making the application and that
exceptional circumstances warrant such action, such committee, on application of the
BrokerDealer,mayextendanyperiodspecifiedinparagraphs3(A)(i)and(iii),paragraph
7 and paragraph 11 of this rule, relating to the requirement that such Broker Dealer take
action within a designated period of time to buyin in a security, for one or more limited
periods commensurate with the circumstances. Each such committee shall make and
preserve for a period of not less than three (3) years a record of each such extension
grantedwhichshallcontainasummaryofthejustificationforthegrantingoftheextension.
12.

Definitions
Forthepurposeofthisrule:

A.

CustomershallmeananypersonfromwhomoronwhosebehalfaBroker
Dealerhasreceivedoracquiredorholdsfundsorsecuritiesfortheaccountof
thatperson.ThetermshallnotincludeaBrokerDealernorshallitinclude
generalpartnersordirectorsorprincipalofficersoftheBrokerDealerorany
otherpersontotheextentthatthepersonhasaclaimforpropertyorfunds
whichbycontract,agreementorunderstanding,orbyoperationoflaw,ispart
ofthecapitaloftheBrokerDealerorissubordinatedtotheclaimsofcreditors
oftheBrokerDealer.Theterm"customer",however,shallincludeanother
BrokerDealer(theinitiatingBrokerasdefinedinSRCRule34.1hereof)
whereinthelattermaintainsseparatelyaDealeraccountandaspecialomnibus
accountinbehalfofhiscustomerwiththeformer.

B.

Securitiescarriedfortheaccountofthecustomer(also"customersecurities")
shallmean:

C.

i.

SecuritiesreceivedbyoronbehalfofaBrokerDealerfortheaccountof
anycustomerandsecuritiescarriedlongbyaBrokerDealerforthe
accountofanycustomerand

ii.

Securitiessoldto,orboughtfor,acustomerbyaBrokerDealer.

Fullypaidsecuritiesshallincludeallsecuritiescarriedfortheaccountofa
customerinacashaccountoramarginaccountiftheyhavebeenfullypaid
forprovided,however,thattheterm"fullypaidsecurities"shallnotapplytoany
securitieswhicharepurchasedintransactionsforwhichthecustomerhasnot

madefullpayment.

13.

D.

Marginsecuritiesshallmeanthosesecuritieswhichhavebeenpurchasedbya
customeronthebasisofcreditextendedbyaBrokerDealerpursuanttothe
provisionsofSection48oftheCodeandSRCRule48.1.

E.

Excessmarginsecuritiesshallmeanmarginsecuritieshavingamarketvaluein
excessofonehundredfortypercent(140%)ofthetotalofthedebitbalancesin
thecustomer'saccount/sencompassedbyparagraph(D)abovewhichthe
BrokerDealeridentifiesasnotconstitutingmarginsecurities.

F.

QualifiedsecurityshallmeanasecurityissuedbytheRepublicofthe
Philippinesorasecurityinrespectofwhichtheprincipalandinterestare
guaranteedbytheGovernmentofthePhilippines.

G.

FreecreditbalancesshallmeanliabilitiesofaBrokerDealertocustomers
whicharesubjecttoimmediatecashpaymenttocustomersondemand,whether
resultingfromsalesofsecurities,dividends,interest,deposits,orotherwise.

H.

OthercreditbalancesshallmeancashliabilitiesofaBrokerDealerto
customersotherthanfreecreditbalances.

I.

Fundscarriedfortheaccountofanycustomer(also"customerfunds")shall
meanallfreecreditandothercreditbalancescarriedfortheaccountofthe
customer.

J.

Principalofficershallmeanthepresident,executivevicepresident,treasurer,
secretaryoranyotherpersonperformingasimilarfunctionwiththeBroker
Dealer.

K.

Householdmembersandotherpersonsrelatedtoprincipalsincludes
husbandsorwives,children,sonsinlawordaughtersinlawandanyhousehold
relativetowhosesupportaprincipalcontributesdirectlyorindirectly.For
purposeofthisparagraph,aprincipalshallbedeemedtobeadirector,general
partnerorprincipalofficeroftheBrokerDealer.

L.

Affiliatedpersonincludesanypersonwhodirectlyorindirectlycontrolsa
BrokerDealeroranypersonwhoisdirectlyorindirectlycontrolledbyorunder
commoncontrolwiththeBrokerDealer.Ownershipoftenpercent(10%)or
moreofthecommonstockoftherelevantentitywillbedeemedprima
faciecontrolofthatentityforpurposesofthisparagraph.

M.

OmnibusaccountshallmeananaccountinwhichaBrokerDealereffects
transactionsforitscustomerthroughanotherBrokerDealer.

Information relating to Possession and Control Requirements and the Formula for
Determination of Reserve Requirements of Broker Dealers under SRC Rule 49.2 are set
forthasAnnexes49.2Aand49.2B,respectively.
SRCRULE49.3
LendingandVotingCustomersSecurities
[formerlySRCRule49.31]

ABrokerDealerwhichextendscredittoacustomershallnotwithoutthewrittenconsentof
thecustomer,lendthelatter'ssecuritiestoitselfortoanyoneelse,orvotethemasiftheywereits
own.
SRCRULE50
PurchasesandSalesinCashAccount
[formerlySRCRule50.1]

1.

Purchasesbyacustomerinacashaccountshallbepaidinfullwithinthree(3)business
daysafterthetradedate.

2.

If full payment is not received within the required time period, the Broker Dealer shall
cancelorotherwiseliquidatethetransaction,ortheunsettledportionthereof,startingonthe
next business day but not beyond ten (10) business days following the last day for the
customer to pay, unless such sale cannot be effected within said period for justifiable
reasons in which case, notification in writing shall be made with the Exchange and the
Commission.

3.

If a transaction is cancelled or otherwise liquidated as a result of nonpayment by the

customer,priortoanysubsequentpurchaseduringthenextninety(90)days,thecustomer
shall be required to deposit sufficient funds in the account to cover each purchase
transactionpriortoexecution.

4.

IftheamountofmoneyduefromacustomerinacashaccountislessthanTenThousand
Pesos (P10,000.00) the Broker Dealer may choose not to take the action required by
paragraph2.

5.

Exceptionstoparagraphs1,2,and3includewhenthesecuritypurchasedisunissuedor
wherethepurchaseismadebythecustomerwiththeunderstandingthatpaymentistobe
madeupondelivery.

6.

Written application for an extension of the period of time required for payment under
paragraph1maybemadebytheBrokerDealertotheExchangeinthecaseofamember
of that Exchange or to the Commission, in the case of a nonmember of the Exchange.
Applicationsfortheextensionmustbebaseduponexceptionalcircumstancesandmustbe
filedandacteduponbeforetheexpirationoftheoriginalpaymentperiodortheexpirationof
anysubsequentextension.

7.

If a Broker Dealer executes a sell order of a customer (other than an order to execute a
sale of securities which the seller does not own) and if for any reason whatsoever the
BrokerDealerhasnotobtainedpossessionofthesecuritiesfromthecustomeronthenext
businessdayaftersettlementdatebutnotbeyondten(10)businessdaysforthecustomer
todeliverthesecurities,theBrokerDealershallimmediatelythereafterclosethetransaction
withthecustomerbypurchasingsecuritiesoflikekindandquantity,unlesssuchpurchase
cannot be effected within said period for justifiable reasons in which case, notification in
writingshallbemadewiththeExchangeandtheCommission

8.

If the Broker Dealer is required to take the action required by paragraph 7, prior to any
subsequentsaleduringthenextninety(90)days,thecustomerwillberequiredtoplacethe
securitiesondepositintheaccountpriortoexecutionofthetransaction.
SRCRULE52.1
AccountsandRecords,Reports,ExaminationofExchanges,Members,andOthers
[formerlySRCRules52.11,2,3,4,5,6,7,8,9,10,andanewprovisiononAgingof
Receivables]

1.

BooksandRecordsRule
A.

EveryBrokerDealershallmakeandkeepcurrentthefollowingbooksand
recordsrelatingtoitsbusinessandshallbemaintainedintheprincipalofficeof
theBrokerDealer:
i.

Blotters(orotherrecordsoforiginalentry)containinganitemizeddaily
recordofallpurchasesandsalesofsecurities,allreceiptsanddeliveries
ofsecurities(includingcertificatenumbers),allreceiptsand
disbursementsofcashandallotherdebitsandcredits.Suchrecords
shallshowtheaccountforwhicheachsuchtransactionwaseffected,the
nameandamountofsecurities,theunitandaggregatepurchaseorsale
price(ifany),thetradedate,settlementdate,andthenameorother

designationofthepersonfromwhompurchasedorreceivedortowhom
soldordelivered.
ii.

Ledgersreflectingallassetsandliabilities,incomeandexpenseand
capitalaccounts.

iii.

Ledgeraccounts(orotherrecords)itemizingseparatelyastoeachcash
andmarginaccountofeverycustomer,BrokerDealerandpartners
thereof,allpurchases,sales,receiptsanddeliveriesofsecuritiesfor
suchaccountandallotherdebitsandcreditstosuchaccount.

iv.

Ledgers(orotherrecords)reflectingthefollowing:
a.

Securitiesintransfer

b.

Dividendsandinterestreceivedandpaid,includingreceivableand
payablebalancesbysecurity

c.

Securitiesborrowedandsecuritiesloanedsharesandmonies

d.

Moniesborrowedandmoniesloaned(togetherwitharecordofthe
collateralthereforandanysubstitutionsinsuchcollateral)

e.

Securitiesandmoniesfailedtoreceiveandfailedtodeliver

f.

Alllongandallshortsecuritiesrecorddifferencesarisingfromthe
examination,count,verificationandcomparison(bydateof
examination,count,verificationandcomparisonshowingforeach
securitythenumberoflongorshortcountdifferences)and

g.

Repurchaseandreverserepurchaseagreements.

v.

Asecuritiesrecordorledgerreflectingseparatelyforeachsecurityasof
theclearancedatesall"long"or"short"positions(includingsecuritiesin
safekeepingandsecuritiesthatarethesubjectofrepurchaseorreverse
repurchaseagreements)carriedbysuchBrokerDealerforhisaccount
orfortheaccountofhiscustomersorpartnersorothersandshowingthe
locationofallsecuritieslongandtheoffsettingpositiontoallsecurities
short,includinglongsecuritycountdifferencesandshortsecuritycount
differencesclassifiedbythedateofthephysicalcountandverificationin
whichtheywerediscovered,andinallcasesthenameordesignationof
theaccountinwhicheachpositioniscarried.

vi.

Amemorandumofeachbrokerageorder,andofanyotherinstruction,
givenorreceivedforthepurchaseorsaleofsecurities,whetherexecuted
orunexecuted.Suchmemorandumshallshowthetermsandconditions
oftheorderorinstructionsandofanymodificationorcancellation
thereof,theaccountforwhichentered,thetimeofreceiptandentry,the
priceatwhichexecutedand,totheextentfeasible,thetimeofexecution
orcancellation.Ordersenteredpursuanttotheexerciseofdiscretionary
powerbysuchBrokerDealer,oranyemployeethereof,shallbeso
designated.Theterm"instruction"shallbedeemedtoincludeinstructions
betweenassociatedpersonsandemployeesofaBrokerDealer.Theterm
"timeofentry"shallbedeemedtomeanthetimewhensuchBroker
Dealertransmitstheorderorinstructionforexecutionsotransmitted.

vii.

Amemorandumofeachpurchaseandsalefortheaccountofsuch
BrokerDealershowingthepriceand,totheextentfeasible,thetimeof
executionandinaddition,wheresuchpurchaseorsaleiswitha
customerotherthanaBrokerDealer,amemorandumofeachorder
received,showingthetimeofreceipt,thetermsandconditionsofthe

order,andtheaccountinwhichitwasenteredprovided,however,with
respecttopurchasesandsalesonbehalfofaMemberBrokerDealer,its
officers,directors,employees,includingassociatedpersons,andowner's
thereof,includingdiscretionaryaccountsonbehalfthereof,the
memorandumshallreflectrequirementssetforthinSRCRule34.1
paragraph1.
viii.

Copiesofconfirmationsofallpurchasesandsalesofsecurities,
includingallrepurchaseandreverserepurchaseagreements,andcopies
ofnoticesofallotherdebitsandcreditsforsecurities,cashandother
itemsfortheaccountofcustomersandpartnersofsuchBrokerDealer.

ix.

ArecordinrespectofeachcashormarginaccountwithsuchBroker
Dealerindicating(A)thenameandaddressofthebeneficialownerof
suchaccount,and(B)inthecaseofamarginaccount,thesignatureof
suchowner,provided,that,inthecaseofajointaccountoranaccountof
acorporation,suchrecordsarerequiredonlyinrespectofthepersonor
personsauthorizedtotransactbusinessforsuchaccount.

x.

Arecordofallputs,calls,spreads,straddlesandotheroptionsinwhich
suchBrokerDealerhasanydirectorindirectinterestorwhichsuch
BrokerDealerhasgranted,purchasedorguaranteed,containing,at
least,anidentificationofthesecurityandthenumberofunitsinvolved.

xi.

Arecordoftheproofofmoneybalancesofallledgeraccountsinthe
formoftrialbalances,andarecordofthecomputationofaggregate
indebtednessandnetcapital,asofthetrialbalancedate.Suchtrial
balancesandcomputationsshallbecomputeddaily,providedinwriting
upontherequestoftheCommissionoranyExchangetowhichaBroker
Dealerisamember,andpreparedatleastonceamonth.

xii.

Aquestionnaireorapplicationforemploymentexecutedbyeach
associatedpersonandsalesmanofsuchBrokerDealer,which
questionnaireorapplicationshallbeapprovedinwritingbyanauthorized
representativeofsuchBrokerDealerandshallcontainatleastthe
followinginformationwithrespecttosuchperson:
a.

Hisname,address,andthestartingdateofhisemploymentor
otherassociationwiththeBrokerDealer

b.

Hisdateofbirth

c.

Acomplete,consecutivestatementofallhisbusinessconnections
foratleasttheprecedingten(10)years,includingwhetherthe
employmentwasparttimeorfulltime
AIaHES

d.

Arecordofanydenialofregistration,orterminationforcause,
andofanydisciplinaryactiontaken,orsanctionimposed,upon
himbyanyagency,orbyanyexchangeorotherSROincluding
anyfindingthathewasacauseofanydisciplinaryactionorhad
violatedanylaw

e.

Arecordofanydenial,suspension,expulsionorrevocationofany
registrationofaBrokerDealerwithwhichhewasassociatedin
anycapacitywhensuchactionwastaken

f.

Arecordofanypermanentortemporaryinjunctionenteredagainst
himoranyBrokerDealerwithwhichhewasassociatedinany
capacityatthetimesuchinjunctionwasentered

xiii.

2.

g.

Arecordofanyarrestorindictmentforanyfelony,orany
misdemeanorpertainingtosecurities,commodities,banking,
insuranceorrealestate(including,butnotlimitedtoactingasor
beingassociatedwithaBrokerDealer,investmentcompany,
investmenthouse,financecompany,bank,orquasibank,fraud,
falsestatementsoromissions,wrongfultakingofpropertyor
bribery,forgery,counterfeitingorextortion,andthedispositionof
theforegoing)and

h.

Arecordofanyothernameornamesbywhichhehasbeen
knownorwhichhehasusedprovided,however,thatifsuch
salesmanorassociatedpersonhasbeenregisteredwiththe
Commission,retentionofafull,correct,andcompletecopyofany
andallapplicationsforsuchregistrationorapprovalshallbe
deemedtosatisfytherequirementsofthissubparagraph.

LogbookonMaterialComplianceandnoncomplianceofBrokerfirms
andtheComplianceReportsmaintainedand/orsubmittedbythe
AssociatedPersonpursuanttoSRCRule.30.26paragraph(6).

B.

EveryBrokerDealershallimmediatelymakeavailableanyorallofitsbooksand
records,furnishcopiesthereof,andprepareandsubmittedreportsupon
requestoftheCommission,anExchangeoranyotherselfregulatory
organizationofwhichitisamemberoraparticipantin.Failuretodososhall
resultinimmediatesuspensionoftheBrokerDealer'sregistration.Such
suspensionshallcontinueuntilsuchtimeasthebooksandrecordsaremade
availabletotherequestingorganizationandtheorganizationhassatisfieditself
thatthebooksandrecordshavenotbeenmodifiedorotherwisechangedor
alteredduringtheperiodofsuspension.

C.

TheexplanationfortheBooksandRecordsRuleissetforthin"Annex52.1A".

RecordsRetentionRule
A.

EveryBrokerDealershallpreserveforaperiodofnotlessthanfive(5)years,
thefirsttwo(2)yearsinaneasilyaccessibleplace,allrecordsrequiredtobe
madepursuanttoParagraphs1(A)(i),(ii),(iii)and(iv)ofSRCRule52.1the
BooksandRecordsRule.

B.

EveryBrokerDealershallpreserveforaperiodofnotlessthanthree(3)years,
thefirsttwo(2)yearsinanaccessibleplace:
i.

Allrecordsrequiredtobemadepursuanttoparagraphs(A)(v),(vi),(vii),
(viii),(ix),(x),(xi),(xii)oftheBooksandRecordsRule,SRCRule52.1,
paragraph1

ii.

AllCheckbooks,bankstatements,cancelledchecksandcash
reconciliations

iii.

Allbillsreceivableorpayable(orcopiesthereof),paidorunpaid,relating
tothebusinessofsuchBrokerDealerassuch

iv.

Originalsofallcommunicationsreceivedandcopiesofall
communicationssentbysuchBrokerDealer(includinginteroffice
memoranda,emailsandothercommunications)relatingtohisbusiness
assuch

v.

Alltrialbalances,computationsofaggregateindebtednessandnetcapital
(andworkingpapersinconnectiontherewith),financialstatements,
branchofficereconciliationsandinternalauditworkingpapers,relatingto
thebusinessofsuchBrokerDealer

vi.

Allguaranteedaccountsandallpowersofattorneyandotherevidenceof
thegrantingofanydiscretionaryauthoritygiveninrespectofany
account,andcopiesofresolutionsempoweringanagenttoactonbehalf
ofacorporation.

vii.

Allwrittenagreements(orcopiesthereof)enteredintobysuchBroker
Dealerrelatingtohisbusinessassuch,includingclientagreements.

viii.

Recordswhichcontainthefollowinginformationinsupportofamounts
includedinthereportpreparedasoftheauditdateinannualaudited
financialstatementsrequiredbySRCRule52.1,paragraph5:
a.

Moneybalanceposition,longorshort,includingdescription,
quantity,priceandvaluationofeachsecurity,includingcontractual
commitmentsincustomer'saccounts,incashandfullysecured
accounts,partlysecuredaccounts,unsecuredaccountsandin
securitiesaccountspayabletocustomers

b.

Moneybalanceandposition,longorshort,includingdescription,
quantity,priceandvaluationofeachsecurity,includingcontractual
commitmentsinnoncustomers'accounts,incashandfully
securedaccounts,partlysecuredandunsecuredaccountsandin
securitiesaccountspayabletononcustomers

c.

Position,longorshort,includingdescription,quantity,priceand
valuationofeachsecurity,includingcontractualcommitments
includedintheComputationofNetCapitalascommitments,
securitiesowned,securitiesownednotreadilymarketable,and
otherinvestmentsownednotreadilymarketable

d.

Amountofsecureddemandnote,descriptionofcollateralsecuring
suchsecureddemandnoteincludingquantity,priceandvaluation
ofeachsecurityandcashbalancesecuringsuchsecureddemand
note

e.

Numberofshares,descriptionofsecurity,exerciseprice,cost
andmarketvalueofputandcalloptionsincludingshortoutofthe
moneyhavingnomarketorexercisevalue,showinglistedand
unlistedputandcalloptionsseparately

f.

Quantity,price,andvaluationofeachsecurityunderlyingthe
haircutforundueconcentrationmadeintheComputationforNet
Capital

g.

Description,quantity,price,andvaluationofeachsecurityor
contractualcommitment,longorshort,ineachjointaccountin
whichtheBrokerDealerhasaninterest,includingeach
participant'sinterestandmargindeposit

h.

Description,settlementdate,contractamount,marketprice,and
valuationforeachagedfailedtodeliverrequiringachargeinthe
ComputationofNetCapital

i.

Detailofallitems,nototherwisesubstantiatedwhicharechargedor
creditedintheComputationofNetCapitalpursuanttotheNet
CapitalRule,suchascashmargindeficiencies,deductionsrelated
tosecuritiesvaluesandundueconcentration,agedsecurities
differencesandinsuranceclaimsreceivableand

j.

Detailsrelatingtoinformationforpossessionorcontrol

requirementsandcomputationsfordeterminationofreserve
requirementsundertheRuleonCustomerProtectionReserves
andCustodyofSecurities.
ix.

AdetaileddescriptionoftheprocedureswhichtheBrokerDealerutilizes
tocomplywithrequirementssetforthin"AnnexE"49.11A

C.

EveryBrokerDealershallpreserveforaperiodofnotlessthanfive(5)years
aftertheclosingofanycustomer'saccount,theclientagreement,account
statementandanyotherrecordswhichrelatetothetermsandconditionswith
respecttotheopeningandmaintenanceofsuchaccount,includingbutnot
limitedtocustomeridentification,accountfilesandbusinesscorrespondence
provided,thatifmoneylaundering,criminaloradministrativecaseshavebeen
filedincourtoraninvestigationisbeingconductedwhereinthecustomeris
involvedorimpleadedasapartytothecaseorinvestigation,thefilemustbe
retainedbeyondthefive(5)earperioduntilitisconfirmedbyfinaljudgmentthat
thecasehasbeenfinallyresolvedorterminatedbythecourt.

D.

EveryBrokerDealershallpreserveduringthelifeoftheenterpriseandofany
successorenterpriseallpartnershiparticlesor,inthecaseofacorporation,all
articlesofincorporationorcharter,minutebooksandstockcertificatebooks.

E.

EveryBrokerDealershallmaintainandpreserveinaneasilyaccessibleplace
allrecordsrequiredunderparagraph(A)(xii)oftheBooksandRecordsRule,
SRCRule52.1,paragraph1untilatleastthree(3)yearsaftertheassociated
personorsalesmanhasterminatedhisemploymentandanyotherconnection
withtheBrokerDealer.

F.

TherecordsrequiredtobemaintainedandpreservedpursuanttothisRulemay
beimmediatelyproducedorreproducedonmicrofilmandbemaintainedand
preservedfortherequiredtimeinthatform.Ifsuchmicrofilmsubstitutionfor
hardcopyismadebyaBrokerDealer,itshall(a)atalltimeshaveavailablefor
theCommissionoranyExchangeofwhichitisamemberforexaminationofits
records,facilitiesforimmediate,easilyreadableprojectionofthemicrofilmand
forproducingeasilyreadablefacsimileenlargements,(b)arrangetherecords
andindexandfilethefilmsinsuchamannerastopermittheimmediatelocation
ofanyparticularrecord,(c)bereadyatalltimestoprovideandimmediately
provide,anyfacsimileenlargementwhichtheCommissionorthatExchangeby
theirexaminersorotherrepresentativesmayrequest,and(d)storeseparately
fromtheoriginaloneothercopiesofthemicrofilmforthetimerequired.

G.

EveryBrokerDealerwhoceasesoperationshallpreserveforaperiodofnot
lessthanfive(5)years,fromthedatethattheExchangeand/orCommission
hasapproveditsoperationtocease,allrecordsrequiredtobemaintained
pursuanttotheBooksandRecordsRule.TheBrokerDealershallinformthe
ExchangeandtheCommissionofthenamesandaddressesofatleasttwo(2)
person/sresponsibleinthesafekeepingofalltherecords,reportinganychange
intheperson/sresponsible,ifthereisany.Forthispurpose,theBrokerDealer
andthenamedrecordscustodiansshallexecuteandfilewiththeCommissiona
notarizedundertakingtothiseffect.Ifmoneylaundering,criminalor
administrativecaseshavebeenfiledincourtoraninvestigationisbeing
conductedwhereinthecustomerisinvolvedorimpleadedasapartytothecase
orinvestigation,thefilemustberetainedbeyondthefive(5)yearperioduntilit
isconfirmedbyfinaljudgmentthatthecasehasbeenfinallyresolvedor
terminatedbythecourt.

H.

IftherecordsrequiredtobemaintainedandpreservedpursuanttotheBooks
andRecordsRuleandRecordsRetentionRulearepreparedormaintainedby

anoutsideservicebureau,depository,bankorotherrecordkeepingserviceon
behalfoftheBrokerDealerrequiredtomaintainandpreservesuchrecords,
suchoutsideentityshallfilewiththeCommissionawrittenundertakinginaform
acceptabletotheCommission,signedbyadulyauthorizedperson,totheeffect
thatsuchrecordsarethepropertyoftheBrokerDealerrequiredtomaintain
andpreservesuchrecordsandwillbesurrenderedpromptlyonrequestofthe
BrokerDealerandincludingthefollowingprovision:
"Withrespecttoanybooksandrecordsmaintainedorpreservedonbehalfof[name
ofBrokerDealer],theundersignedherebyundertakestopermitexaminationofsuch
booksandrecordsatanytimeorfromtimetotimeduringbusinesshoursby
representativesordesigneesoftheSecuritiesandExchangeCommission,and/or
anyExchangetowhichtheBrokerDealerisamemberandtopromptlyfurnishtothe
CommissionandthatExchangeortheirdesigneetrue,correct,completeandcurrent
hardcopyofanyoralloranypartofsuchbooksandrecords."
AgreementwithanoutsideentityshallnotrelievesuchBrokerDealerfromthe

responsibilitytoprepareandmaintainrecordsasspecifiedinthisruleorinthe
BooksandRecordsRule.
I.

EveryBrokerDealersubjecttothisRuleshallfurnishpromptlytoa
representativeoftheCommissionandanyExchangetowhichtheBrokerDealer
isamemberlegible,trueandcompletecopiesofthoserecordsoftheBroker
DealerwhicharerequiredtobepreservedunderthisRulewhicharerequested
bytheCommissionorthatExchange.
aIAcCH

3.

KeepingofExchangeRecords
An Exchange shall keep complete and accurate records of all its proceedings, transactions

anddecisionsandsuchrecordsshallbemadeavailableforinspectionbytheCommission.
4.

ReportsofExchangeMembersandBrokersorDealersTradingThroughMembers
Every member of an Exchange and every Broker Dealer who transacts a business in

securities through the medium of any such member shall, in the manner and form to be
prescribed by the Commission, make such periodic, special or other reports as the
Commissionmaybyorderrequirefromtimetotime.
5.

AnnualAuditedFinancialReportsofBrokerDealers
A.

EveryBrokerDealershallfileannuallywiththeCommissionandanyExchange
towhichitisamemberatthecloseofitsfiscalyearanauditedfinancialreport
byanCommissionaccreditedindependentcertifiedpublicaccountantanda
statementofmanagementresponsibilityofsaidBrokerDealer.

B.

UnlesstheBrokerDealernotifiestheCommissionotherwiseandreceives
writtenapprovaltochangethedate,December31stofeachyearshallbe
consideredtheclosingofthefiscalyear,andtheAnnualAuditedFinancial
ReportisduewithinOneHundredTen(110)daysafterthecloseofsuchfiscal
year.

C.

TheAnnualAuditedFinancialReportshallcontainaStatementofFinancial
ConditionintheformatoutlinedinSECForm37AR,aStatementofIncome,a
StatementofChangesinFinancialConditionorStatementofCashFlows,a
StatementofChangesinStockholders'orPartners'orSoleProprietor'sEquity,
aStatementofChangesinLiabilitiesSubordinatedtoClaimsofGeneral
Creditors,aComputationofNetCapitalunderSRCRule49.1,paragraph1,A
StatementofManagement'sResponsibilityInformationrelatingtothe
PossessionorControlRequirementsunder"Annex49.2A"andaComputation
forDeterminationofReserveRequirementsunder"Annex49.2B",aReport

describinganymaterialinadequaciesfoundtoexistorfoundtohaveexisted
sincethedateofthepreviousaudit,theResultsofQuarterlySecuritiesCount
ConductedpursuanttoSRCRule52.1,paragraph10asofthedateofthe
balancesheetstatementintheAnnualAuditedFinancialReport.
D.

Allsupportingpaperspertainingtosuchreportorstatementshallbekeptinthe
possessionoftheBrokerDealerforatleastfive(5)yearsandshallbemade
availableforexaminationbytheCommissionandanExchange,iftheBroker
DealerisamemberofthatExchange.

E.

ForthepurposesofthisRule,thetermmarketvalueshallbeunderstoodto
meanthelastsalepriceofthesecurityonthedateofthereportorstatementif
nosaleofthecorrespondingsecurityismadeonthatdate,itshallbe
understoodtomeanthebidpriceand,intheabsenceofanybuyer,itshallbe
takentomeanthelastsalepricewhichisbelowtheofferpriceonthedateof
thereportorstatement.Forpurposesofdetermining"marketvalue"forashort
position,wherenosaleofthecorrespondingsecurityismadeonthatdate,it
shallbeunderstoodtomeantheofferpriceand,intheabsenceofanyseller,it
shallbetakentomeanthelastsalepricewhichisabovethebidpriceonthe
dateofthereportorstatement.

F.

ForthepurposesofthisRule,thetermmaterialinadequacyencompasses
eitheramaterialweaknessininternalcontroloramaterialinadequacyinthe
practicesandproceduresforsafeguardingsecurities.
Amaterialinadequacythatisexpectedtobereportedincludesanyconditionthat

haseithercontributedsubstantiallytoor,ifappropriatecorrectiveactionisnot
taken,couldreasonablybeexpectedtocauseanyofthefollowing:
i.

InhibitaBrokerDealerfromcompletingsecuritiestransactionsor
promptlydischargingitsresponsibilitiestocustomersortootherBroker
Dealersorcreditors

ii.

Resultinmaterialfinancialloss

iii.

ResultinmaterialmisstatementsoftheBrokerDealer'sfinancial
statements

iv.

ResultinviolationsoftheCommission'srecordkeepingorfinancial
responsibilityrulestoanextentthatcouldreasonablybeexpectedto
resultintheconditionsdescribedabove.
Ifconditionsbelievedtobematerialweaknessesarefoundtoexistorhave

existedduringtheyear,thereportshoulddisclosethenatureofthe
weaknessesandthecorrectiveactiontakenorproposedtobetakenby
theBrokerDealer.Ifmanagementhasimplementedcontrolproceduresto
correcttheweaknesses,theauditorshouldnotrefertothiscorrective
actioninhisorherreportunlesstheauditorissatisfiedthatthe
proceduresaresuitablydesignedtocorrecttheweaknessandarebeing
appliedasprescribed.
G.
6.

TheformatfortheAnnualAuditedFinancialReports(AAFR)forBrokerDealer
issetforthinAnnex52.1B.

CustomerAccountInformationRule
EveryBrokerDealershallmaintaincustomeraccountsasfollows:

A.

Foreachaccount,thefollowinginformation:
i.

Customer'sname,residenceaddress(presentandpermanent)and

residencetelephone

B.

C.

D.

ii.

Dateandplaceofbirth

iii.

Whethercustomerisaninstitutionalcustomer

iv.

Nationality

v.

Signatureofthesalesmanintroducingtheaccountandsignatureofthe
partner,officerormanagerwhoacceptstheaccount

vi.

Ifthecustomerisacorporation,partnershiporotherlegalentity,the
namesofanypersonauthorizedtotransactbusinessonbehalfofthe
entity

vii.

Specimensignaturesand

viii.

Optionwhetherconfirmationofcustomerorderswouldbeviacourier,
facsimileorelectronically.

Foreachaccountotherthananinstitutionalaccount,theBrokerDealershall
obtain,priortothesettlementoftheinitialtransactionintheaccount,the
followinginformationtotheextentitisapplicabletotheaccount:
i.

Customer'staxidentificationnumber,SocialSecuritySystemnumberor
GovernmentandInsuranceSystemnumber

ii.

Occupationofcustomerandname,addressandtelephonenumberof
employer

iii.

Whetherthecustomerisemployedbyorotherwiseassociatedwith
anotherBrokerDealer(e.g.officer,director,salesman,shareholder)

iv.

Whetherthecustomerisanofficerordirectorofacompanylistedonan
exchange

v.

Thecustomer'sinvestmentobjectiveandotherrelatedinformation
concerningthecustomer'sfinancialsituationandneeds

vi.

Ifduplicateconfirmationsarerequiredtobesenttoanotherperson,the
identityofthatpersonandhisrelationshiptothecustomer

vii.

Sourceoffund(s)and

viii.

AllotherinformationcontainedintheprescribedCAIFassetforthin
Annex"52.1C."

Fordiscretionaryaccounts,theBrokerDealershallalso:
i.

Obtainthesignatureofeachpersonauthorizedtoexercisediscretionin
theaccount

ii.

Recordthedatesuchdiscretionisgranted.

Forcorporateorinstitutionalaccounts,theBrokerDealershallobtain,priorto
thesettlementoftheinitialtransactionintheaccount,thefollowinginformationto
theextentitisapplicabletotheaccount:
ITSacC

i.

ArticlesofIncorporation/Partnership

ii.

Bylaws

iii.

Officialaddressorprincipalbusinessaddress

iv.

Secretary'sCertificateofboardresolutionauthorizingtheopeningofthe
accountwiththeBrokerDealerfirm

v.

Listofdirectors/partners

vi.

Listofstockholdersowningatleasttwopercent(2%)ofthecapitalstock

vii.

Contactnumbers

viii.

Beneficialowners,ifany

ix.

Verificationoftheauthorityandidentificationofthepersonpurportingto
actonbehalfoftheclient

x.

FinancialInformation

xi.

Investmentobjectiveand,

xii.

AllotherinformationcontainedintheprescribedCAIFassetforthin
Annex"52.1D."

ForpurposesofthisRule,theterminstitutionalaccountshallmeantheaccountof:

i.

Abank,insurancecompany,orregisteredinvestmentcompany

ii.

AnyotherentitysetforthinSection10.1(l)oftheCodeasaqualified
buyeror

iii.

Anyotherentity(whetheranaturalperson,corporation,partnership,
trustorotherwise)withtotalassetsofatleastP1,200,000,000provided,
however,thattheBrokerDealershallobtainfromsuchentitya
declaration,underoath,confirmingownershipofsuchassets.

E.

Ifmorethanonepartyisnamedontheaccount,newaccountinformationshall
beobtainedforeachpartyontheaccount.

F.

Iftheaccountisatrustaccount,acopyofthetrustagreementshallbe
required.Theagreementshallspecifythetypesoftransactionsthatthetrustee
isallowedtoperform.Theseaccountscannotbemarginaccountsunless
specificallyauthorizedbythetrustagreement.

G.

ABrokerDealerisallowedtomaintainanumberedaccountforaclientwho
wishestokeephisorhernameconfidential.Ifnumberedaccountsareused,
thefirmisobligedtokeeponfilethenameofthecustomerandawritten
statementsignedbythecustomershowingthatthecustomerownstheaccount.

H.

TheBrokerDealershalldevelopclearcustomeracceptancepoliciesand
procedureswhenconductingbusinessrelationsoraccommodatingspecific
transactionsandshallexerciseduediligenceinimplementingitspoliciesand
procedures.Furthermore,itshalladoptadequateinternalcontrolmeasuresfor
verifyingandrecordingthetrueandfullidentifyoftheircustomers.Itshall
requirecustomerstoproduceoriginaldocumentsofidentityissuedbyan
officialauthority,preferablybearingaphotographofthecustomerandwhere
practicable,maintainfilecopiesofdocumentsofidentityotherwise,relevant
detailsontheidentitydocumentswillberecorded.

I.

Inthecaseofcorporateclients,theBrokerDealershallrequireasystemof
verifyingtheirlegalexistenceandorganizationalstructure,aswellasthe
authorityandidentificationofallpersonspurportingtoactontheirbehalfand
shallexerciseduediligenceinimplementingitspoliciesandprocedures.Itshall
endeavortoensure,priortoestablishingbusinessrelationships,thatthe
corporateentityhasnotbeenorisnotintheprocessofbeingdissolved,wound
up,liquidated,orvoided,orthatitsbusinessoroperationshasnotbeenoris
notintheprocessofbeing,closed,shutdown,phasedout,orterminated.
Dealingswithshellcompaniesandcorporations,beinglegalentitieswhichhave

nobusinesssubstanceintheirownrightbutthroughwhichfinancial
transactionsmaybeconducted,shouldbeundertakenwithextremecaution.
J.

Inadditiontotherequirementsprescribedintheimmediatelypreceding
paragraphs,inthecaseofcustomerswhoareactingastrustee,nominee,agent
orinanycapacityforandonbehalfofanother,theBrokerDealershallverify
andrecordthetrueandfullidentityoftheperson(s)onwhosebehalfa
transactionisbeingconducted.Incaseofdoubtastowhethersuchpersons
arebeingusedasdummiesincircumventionofexistinglaws,thefirmshall
immediatelymakethenecessaryinquiriestoverifythestatusofthebusiness
relationshipbetweentheparties.

K.

Anonymousaccounts,accountsunderfictitiousnames,andallothersimilar
accountsshallbeabsolutelyprohibited.

L.

Numberedaccountsareallowedfortradingpurposesprovidedthattheowner
fillsuptheCAIFwithhisidentityclearlyindicatedintheform.

M.

TheBrokerDealercannotcreatenewaccountswithoutafacetofacemeeting.

N.

WithinOnehundredeighty(180)daysaftertheeffectivityofthese
amendments,allexistingCAIFsaccomplishedbyclientsshallbeupdatedor
amendedtocomplywiththenewrequirements.

O.

ItistheBrokerDealer'sdutytoknowitsclientswelland,accordingly,itshallbe
primarilyresponsibleinkeepingcurrentallmaterialinformationcontainedinthe
CAIF.

P.

TheBrokerDealer,itsdirectors,officers,andassociatedpersons,arerequired
toreportanysuspiciousclienttransactiontotheAntiMoneyLaunderingCouncil
(AMLC),pursuanttotheprovisionsoftheAntiMoneyLaunderingAct(RA9160,
asamended).
Forpurposesofthissection,a"suspiciousclienttransaction"shallmeanany

transactionwhichcausesanyordinarypersontohaveafeelingof
apprehensionormistrustaboutthetransactionconsidering(a)itsunusual
natureorcircumstances,or(b)thepersonorgroupofpersonswithwhomthey
aredealing,andbasedonthebringingtogetherofallrelevantfactorsincluding
knowledgeortheperson'sorpersons'businessorbackground(aswellas
behavioralfactors).
7.

OrderTicketRule
A.

EveryorderreceivedbyaBrokerDealeroranyotherassociatedpersonor
salesmanofaBrokerDealertobuyorsellsecuritiesforcustomersshallbe
enteredonanorderform,whichshallcontainattheminimum,alltheinformation
requiredbythisRule.Eachbuyingorsellingorderformshallbetimestamped
bytheBrokerDealeroranyotherassociatedpersonorsalesmanofaBroker
Dealeroranypersonactingonhisbehalfuponreceiptofthecustomer'sorder
andupontransmissiontothetradingfloor,ifnecessary.Timerecordingof
subsequentactiononanorder,whetherforamendment,cancellationoractual
matchingthereof,shallbecapturedbythecomputerizedtradingsystemofthe
Exchangeorbytimestamping,foroverthecountertransaction.Anysuch
informationcapturedbythecomputerizedtradingsystemoftheExchangeshall
beprintedandmadeavailableforlegaland/orauditpurposes.

B.

Allthenecessarytimerecordingsshallbedisclosedfortheconfirmationtothe
customeruponhisrequest.

C.

AllBrokerDealers,whodealfortheirownaccounteitherdirectlyorwherea
MemberBrokerDealer,throughanotherMemberBroker,ortradefora

discretionaryaccount,aswellastheirpartners,floortraders,officialsand
employees,shallrecordallpurchaseandsaleordersonthesameorderform
usedbysuchbrokersfortheircustomers,andsuchorderformsshallalsobe
timestampedasrequiredbyparagraph(A)hereof,andcomplywithSRCRule
34.1,paragraph1.

8.

D.

EveryBrokerDealer,associatedpersonandsalesmanofaBrokerDealer,
executinganorderforatransactioninsecuritiesshallenterontheorderticket
whetherthetransactionwillbematchedthroughtheExchangetradingsystemor
transactedasablocksaleinaccordancewithSRCRule30.2,paragraph8,
whetherthefirmisactingasagentorprincipalinconnectionwiththe
transactionprovided,however,MemberBrokersarerequiredtocomplywith
SRCRule34.1,paragraph1whenplacingordersfortheirownaccount.

E.

Inadditiontotheinformationrequiredinparagraphs7(A),(B),(C)ofthisRule,
theorderticketshallreflectthetermsandconditionsoftheorderorinstructions,
includinganotationiftheorderisashortsale,andanysubsequentmodification
orcancellation,thenameofthecustomerforwhichtheorderwasentered,the
nameofthesalesmanwhotooktheorder,thepriceatwhichitisexecuted,and
whethertheorderwassolicitedorunsolicited.
i.

Forpurposesofthisrule,anorderissolicitedorunsoliciteddependingon
whofirstmentionedthenameofthesecurity.Ifmentionedfirstbythe
customer,theordershouldbemarkedunsolicited(regardlessofwho
initiatedthephonecallorothercommunication).Ifmentionedfirstbythe
salesman,theordershouldbemarkedsolicited.

ii.

Thedesignationshouldbeenteredonrealtimeontheorderticketand
indicatedontheconfirmation.

F.

Anorderissolicitedorunsoliciteddependingonwhorecommendsthesecurity.
Iftheorderisrecommendedbythesalesman,theorderticketshouldbemarked
solicited.Otherwise,itshouldbemarkedunsolicited.Thedesignationshouldbe
enteredonrealtimeontheorderticketandindicatedontheconfirmation.

G.

Allpurchaseandsaleordersforthesamesecurityandunderthesameterms
andconditions,includingthoseplacedbytheBrokerDealerforitsownaccount
orfordiscretionaryaccountsandthoseplacedbypartners,floortraders,
officialsandemployees,shallbeexecutedbytheBrokerDealerintheorderin
whichtheywerereceivedprovided,however,MemberBrokersshallcomply
withSRCRule34.1,paragraph1regardingpriorityofcustomerorders.

H.

AlltimestampingmachinesthatarebeingusedbyBrokerDealersforthe
purposesofthisRuleshouldbesynchronizedatalltimesinaccordancewiththe
officialtimeoftheExchangeandtimestampingprintsshouldalwaysbeclear.

I.

ABrokerDealermayseekexemptionfromthepaperformatrequirementsofthis
Ruleandinsteadapplyforanelectronicformat.Suchapplicationhastobe
approvedbytheCommission.

CustomerAccountStatements
A.

ABrokerDealershall,withafrequencyofnotlessthanmonthly,senda
statementofaccountcontainingadescriptionofanysecuritiespositions,
moneybalances,oraccountactivitytoeachcustomerwhoseaccounthada
securityposition,moneybalance,oraccountactivityduringtheperiodsincethe
lastsuchstatementwassenttothecustomer.Inexceptionalcasesandonly
uponwrittenrequestmadebythecustomer,theBrokerDealermayissue
quarterlystatementsinlieuofmonthlystatements,suchwrittenrequestbeing

keptinthefirm'sfilesforSEC'sortheExchange'saudit/investigationpurposes.

9.

10.

B.

ABrokerDealermayissuequarterlystatementstocustomerswhoseaccounts
havenotbeentradedforaperiodofatleastone(1)year(inactiveaccounts).
TheBrokerDealercanonlybeexcusedfromthisobligationif,afteratleast
three(3)attempts,themails(withregistrycards)arereturnedbythepostoffice
forfailuretolocatethecustomers'whereabouts.Insuchcases,theBroker
DealerisrequiredtonotifytheExchangeofthenatureoftheseaccountsand
keepinitsfilesproofthatthesemailswereindeedreturnedbythepostoffice
undelivered.

C.

Notwithstandingtheissuanceofquarterlystatementsofaccount,theBroker
Dealerisstillrequiredtomaintainclosingbalancesofcustomers'positions
everymonthendandthesebalancesmustalwaysbereflectedandeasily
identifiableinthecompany'sbooksandrecords.Moreover,theyshouldbe
availableforinspectionbytheExchangeand/ortheCommissionatanytime.

D.

Suchstatementshalldisclosethatfreecreditbalancesarenotsegregatedand
maybeusedintheoperationoftheBrokerDealerandthatsuchfundsare
payableondemandofthecustomer.

E.

ForpurposesofthisRule,thetermaccountactivityshallinclude,butnotbe
limitedto,purchases,sales,interestcreditsordebits,chargesorcredits,
dividendpayments,transferactivity,securitiesreceiptsordeliveries,and/or
journalentriesrelatingtosecuritiesorfundsinthepossessionorcontrolofthe
BrokerDealer.

F.

ABrokerDealermaintainingaccountsofclientswhichhavenotbeentradedfor
three(3)yearsormore(dormantaccounts)shallberequiredtosurrenderor
turnovertotheCommissiontheseclients'cashandsecuritypositionsfor
safekeeping.TheCommissionshallholdthemforaperiodoften(10)yearsor
suchotherperiodasmaybeprescribedbylawsintrustforfutureclaimants
and,aftersuchperiod,shallbedisposedofpursuanttoescheatproceedingsin
favorofthePhilippinesgovernment.

CustomerComplaintRule
A.

EveryBrokerDealershallkeepandpreserveineachofitsofficeseither(i)a
separatefileofallcomplaintsofcustomersreceivedbythatofficeandthe
actiontakenbytheBrokerDealer,or(ii)aseparaterecordofsuchcomplaints,
properlyindexedandreferencedtothefilescontainingthecorrespondence
connectedwithsuchcomplaint.

B.

EveryBrokerDealershallkeepinitsmainofficeeitheraduplicatecopyofall
writtencomplaintsofcustomersreceivedbyallofficesoftheBrokerDealerand
theactiontakeninrespecttheretooraseparaterecordofsuchcomplaints
properlyindexedandreferencedtothefilescontainingthecorrespondence
connectedwithsuchcomplaint.

C.

Complaintshallmeananywrittenstatementand/oratranscript/writtensummary
oftheoral/verbalstatementsofacustomeroranypersonactingonbehalfofa
customerallegingagrievanceinvolvingtheactivitiesofthosepersonsunderthe
controloftheBrokerDealerinconnectionwiththesolicitationorexecutionof
anytransaction,thedispositionofsecuritiesorfundsofthatcustomerorany
otheraspectoftheBrokerDealer'sbusiness.

MonthlySecuritiesCountsbyBrokersDealers
A.

ThisruleshallapplytoallBrokerDealersexceptthoseBrokerDealerswho
promptlytransmitsallfundsanddeliversallsecuritiesreceivedinconnection

withitsactivitiesasaBrokerDealer,andwhodonototherwiseholdsecurities
foritselforholdfundsorsecuritiesfor,orowemoneyorsecuritiesto,
customers.
B.

11.

AnyBrokerDealerwhoissubjecttotheprovisionsofthisruleshallatleast
onceamonth:
i.

Physicallyexamineandcountallsecuritiesheld

ii.

Accountforallsecuritiesintransit,intransfer,pledged,loaned,
borrowed,deposited,failedtoreceive,failedtodeliver,subjectto
repurchaseandreverserepurchaseagreements,orotherwisesubjectto
itscontrolordirectionbutnotinitsphysicalpossessionbyexamination
andcomparisonofthesupportingdetailrecordswiththeappropriate
ledgercontrolaccounts

iii.

Verifyallsecuritiesintransfer,intransit,pledged,loaned,borrowed,
deposited,failedtoreceive,failedtodeliver,subjecttorepurchaseand
reverserepurchaseagreements,orotherwisesubjecttoitscontrolor
directionbutnotinitsphysicalpossession,wheresuchsecuritieshave
beeninthatstatusforlongerthanthirty(30)days

iv.

Comparetheresultsofthecountandverificationwithitsrecordsand

v.

Recordonitsbooksandrecordsallunresolveddifferencessettingforth
thesecurityinvolvedanddateofcomparisoninasecuritycount
differenceaccountnolaterthanseven(7)businessdaysafterthedateof
eachrequiredquarterlysecurityexamination,countandverificationin
accordancewiththerequirementsofparagraph10(C)ofthis
ruleprovided,however,thatnoexamination,count,verificationand
comparisonforthepurposeofthisruleshallbewithintwo(2)monthsof
ormorethanfour(4)monthsfollowingapriorexamination,count,
verificationandcomparisonmadehereunder.

C.

Theexamination,count,verificationandcomparisonmaybemadeeitherasof
adatecertainoronacyclicalbasiscoveringtheentirelistofsecurities.In
eithercasetherecordingshallbeeffectedwithinseven(7)businessdays
subsequenttotheexamination,count,verificationandcomparisonofa
particularsecurity.Intheeventthatanexamination,count,verificationand
comparisonismadeonacyclicalbasis,itshallnotextendovermorethanone
month.

D.

Theexamination,count,verificationandcomparisonshallbemadeor
supervisedbypersonswhoseregulardutiesdonotrequirethemtohavedirect
responsibilityforthepropercareandprotectionofthesecuritiesorthemaking
orpreservationoftherelevantrecords.

E.

TheCommissionand/orExchange,iftheBrokerDealerisamemberofthat
Exchange,may,uponwrittenrequest,exemptfromtheprovisionsofthisrule,
eitherunconditionallyoronspecifiedtermsandconditions,anyBrokerDealer
whosatisfiestheCommissionorthatExchangethatitisnotnecessaryinthe
publicinterestandfortheprotectionofinvestorstosubjectthatparticularBroker
Dealertocertainoralloftheprovisionsofthisrulebecauseofthespecial
natureoftheBrokerDealer'sbusiness,thesafeguardsithasestablishedforthe
protectionofcustomers'fundsandsecurities,orsuchotherreasonsasmaybe
deemedappropriate.

MonthlyAgingofCustomersReceivable
A.

EverybrokerdealershallfilewiththeCommissionitsMonthlyAgingSchedule

ofCustomersReceivableonorbeforethe15thofthefollowingmonth.The
AgingSchedule,whichshallbefiledwiththeFinancialandOperationsReport
(FINOP),shallbecertifiedbythefirm'sAssociatedPersonand
President/NomineeDirectorandalsosubmittedtotheBrokerDealer'sAudit
Committeeorinlieuthereof,itsBoardofDirectors.
B.

UnlessadifferentformatisprescribedbytheCommission,theAgingSchedule
shallindicatethemonetaryandsecuritiescollateralvaluesoftheCustomers
Receivableasofmonthendbrokendownasfollows:
CurrentDueinthree(3)days
Lessthanthirty(30)days
Morethanthirty(30)uptothreehundredsixtyfive(365)daysoroneyear
Morethanthreehundredsixtyfive(365)daysoroneyearuptothree(3)years
Morethanthree(3)years

C.

ConsistentwiththerequirementsofSRCRule50,detailedexplanationshallbe
providedbytheBrokerDealerforthosecustomeraccountswhichremain
outstandingformorethanthree(3)days.

D.

EveryBrokerDealershallestablishappropriateAllowancesforDoubtful
AccountsandthebasisforsuchcomputationoftheAllowanceshallbeproperly
disclosedintheReport.TheCommissionortheExchangeshallhavethe
prerogativetodeterminethereasonablenessofsuchreceivablevaluation
standardtakingintoconsiderationgenerallyacceptedaccountingprinciplesand
industrypractices.
SRCRULE55.1
SettlementOffers

1.

Any person who is notified that an investigation or proceeding has or will be instituted
against him, or any party to a proceeding already instituted, may, at any time propose in
writingtotheDirectoroftheDepartmentofComplianceandEnforcement(CED)anofferof
settlement(proposer).

2.

AnofferofsettlementshallstatethatitisbeingmadepursuanttoSection55oftheCode
andSRCRule55.1adoptedthereunder,shallreciteorincorporateaspartoftheofferthe
provisionsofparagraphs3(D)and(E)ofthisRule,shallbesignedbythepersonmaking
theoffer,notbycounsel,andshallbesubmittedtotheDirectorofCED.

3.

ConsiderationofSettlementOffers:
A.

Offersofsettlementshallbeconsideredwhentime,thenatureofthe
investigationorproceeding,andthepublicinterestpermit.

B.

TheDirectorofCEDshallconsultwiththepersonhehasassignedtothematter
(enforcementofficer)andrequesthisviewregardingtheappropriatenessofthe
offerofsettlement.Suchrequestforsuchenforcementofficer'sviewona
settlementofferorotherparticipationinasettlementconferenceconstitutesa
waiverbytheproposerofanyrighttoclaimbiasorprejudgmentbysuch
enforcementofficerbasedontheviewsexpressed.

C.

TheDirectorofCEDshallpresenttheofferofsettlementtotheCommission
withitsrecommendationsProvided,however,iftheDepartment's
recommendationisunfavorable,theoffershallnotbepresentedtothe
Commissionunlesstheproposersorequestsinwriting.

D.

Bysubmittinganofferofsettlement,theproposerwaives,subjecttothe
acceptanceoftheoffer:

E.

i.

allhearingspursuanttothestatutoryprovisionsunderwhichthe
investigationorproceedingistobeorhasbeeninstituted

ii.

thefilingofproposedfindingsoffactandconclusionsoflaw

iii.

proceedingsbefore,andaninitialdecisionby,theappropriateofficeor
divisionoftheCommissionsodelegated

iv.

allposthearingproceduresand

v.

judicialreviewbyanycourt.

Bysubmittinganofferofsettlement,theproposerfurtherwaives:
i.

Suchprovisionsoflawasmaybeconstruedtopreventanymemberofthe
Commission'sstafffromparticipatinginthepreparationof,oradvising
theCommissionasto,anyorder,opinion,findingoffact,orconclusion
oflawtobeenteredpursuanttotheorder

ii.

AnyrighttoclaimbiasorprejudgmentbytheCommissionbasedonthe
considerationofdiscussionsconcerningsettlementoralloranypartof
theproceeding.

F.

IftheCommissionrejectstheofferofsettlement,theproposershallbenotified
oftheCommission'sactionandtheofferofsettlementshallbedeemed
withdrawn.Therejectedoffershallnotconstitutepartoftherecordinany
proceedingagainsttheproposerprovided,however,thatrejectionofanoffer
ofsettlementdoesnotaffectthecontinuedvalidityofwaiverspursuantto
paragraph3(E)ofthisrulewithrespecttoanydiscussionsconcerningthe
rejectedofferofsettlement.

G.

FinalacceptancebytheCommissionofanyofferofsettlementwilloccuronly
upontheissuanceofasummaryoffindings,andanorderoftheCommission
andshallbecomeeffectiveonlyuponpublicdisclosurethereofonthe
Commission'swebpageand/orinsuchothermanner.Suchdisclosuremaybe
madewithoutadeterminationofguiltonthepartoftheproposerandshall
includethenameoftheproposer,sectionsoftheCodeandrulesand
regulationsadoptedthereunderinvolved,andapplicableconditions.
SRCRULE66.3

1.

ConfidentialTreatmentofInformationFiledwiththeCommission
Any person required to file any application, report or document (hereinafter collectively
referred to as the "report") with the Commission under Section 8 or 17 of the Code may
remove any confidential information from such required report, provided that he files with
theCommissionsuchconfidentialinformationinasupplementalreportprominentlylabeled
"CONFIDENTIAL", together with a request for confidential treatment of the report and the
specificgroundsforthegrantthereofandcomplieswiththisRuleprovided,however, that
theCommissionmayrequiredisclosureofsuchconfidentialinformation.

2.

Forpurposesofthisrule,confidentialinformationshall include, but is not limited to, such

matters as trade secrets, commercial or financial information that has been prepared by
analystswithinoroutsideacompanyforstrategicpurposesandsimilarinformationwhich
raisesconcernsforbusinessconfidentiality.

3.

The Commission shall maintain the confidentiality of the information contained in the
supplemental report, pending a determination by the Corporation Finance Department in
consultation with the Office of the General Counsel as to the validity of the request for
confidentialtreatment.

4.

Within seven (7) days from receipt of the special report, the Corporation Finance
Department shall make a determination regarding the confidentiality of the information

containedinthesupplementalreport.
5.

IfitisdeterminedbytheCorporationFinanceDepartmentthatconfidentialtreatmentisnot
warranted with respect to all or part of the information in question, the person requesting
confidential treatment of the information will be notified of this decision by telephone,
followedupbywrittennotificationsentbymail.Suchnoticewillalsoadvisesuchpersonthat
he has the right, which shall be exercised no later than within ten (10) days of receipt of
notification by telephone, to request that the Commission En Bancreconsider such
determination.

6.

A request for reconsideration shall be in writing and include additional factors for the
CommissionEnBanctoconsider.

7.

The Commission En Banc may reconsider such determination only once and its
administrativedecisionshallnotbesubjecttojudicialreview.

8.

IftheCommissionEnBancmakesadeterminationthatanyoralloftheinformationinthe
supplemental report is not entitled to confidential treatment, the person who submitted the
request shall promptly make an amended filing with the Commission containing such
information.
SRCRULE68
SpecialAccountingRules
Rule68hasalreadybeenamendedinFebruary2003.
SRCRULE72.1
GeneralRulesandRegulationsforFilingofSECFormswiththeSecuritiesandExchange
Commission

1.

ApplicableRulesandForms
TheformandcontentoffilingswiththeCommissionpursuanttotheCode,andrulesadopted

thereunder,shallconformtotheapplicablerulesandformsasineffectontheinitialfiling
datethereofandtotheprovisionshereof.
2.

3.

NumberofCopiesBindingSignatures
A.

Exceptasprovidedinaparticularform,three(3)copiesofthecompletefiling,
includingexhibitsandallotherpapersanddocumentsfiledaspartthereof,shall
befiledwiththeCommission.Eachcopyshallbebound,inoneormoreparts,
withoutstiffcovers.Thebindingshallbeontheleftsideinsuchamannerasto
leavethereadingmatterlegible.Atleastone(1)copyofthefilingshallbe
manuallysignedbythepersonsspecifiedintheappropriateruleand/orrelated
form.Unsignedcopiesshallbeconformed.Allthree(3)copies(originalandtwo
(2)conformed)areforCommissionuseonly,includingone(1)copyforthe
publicreferenceroom.

B.

Eachconformedcopyshallbeidenticalincontent,pageorder,andpagination
totheoriginalfilingincludingthemaindocument,itstableofcontents,andany
sections,exhibits,attachments,orothermaterialsappurtenantthereto.

C.

Duplicatedorfacsimileversionsofmanualsignaturesofpersonsrequiredto
signanydocumentfiledorsubmittedtotheCommissionundertheCodeshall
beconsideredmanualsignaturesforpurposesoftheCodeandrulesand
regulationsthereunder,providedthat,theoriginalmanuallysigneddocumentis
retainedbythefilerforaperiodoffive(5)yearsanduponrequestthefiler
furnishestheCommissionorthestafftheoriginalmanuallysigneddocument.

RequirementsastoPaper,Printing,LanguageandPagination
A.

Allfilingsshallbefiledusingblackinkongoodquality,unglazed,whiteletter
sizedpaper81/2x11inchesinsize,oronA4sizedpaper,insofaras

practicable.Totheextentthatthereductionoflargerdocumentswouldrender
themillegible,suchdocumentsmaybefiledonpaperlargerthan81/2x11
inchesinsize.Alloriginalandconformedpagesshallbeutilizedononeside
only,withtheexceptionofaprospectuswhichmaybetwosided.
B.

Allfilings,and,insofaraspracticable,allpapersanddocumentsfiledaspart
thereofshallbeprinted,lithographed,mimeographedortypewritten.However,
thestatementoranyportionthereofmaybepreparedbyanysimilarprocess
which,intheopinionoftheCommission,producescopiessuitablefora
permanentrecord.Irrespectiveoftheprocessused,allcopiesofanysuch
materialshallbeclear,easilyreadableandsuitableforrepeatedphotocopying
shallbesubmittedonpapernotlessinquality,legibility,anddurabilitytothat
producedbyastandardcopyingmachineingoodworkingorderandshallnot
besubmittedoncarbonpaperoronlightweightonionskinpaper.Debitsin
creditcategoriesandcreditsindebitcategoriesshallbedesignatedsoastobe
clearlydistinguishableassuchonphotocopies.

C.

AllfilingsshallbeintheEnglishlanguage.Ifanyexhibitorotherpaperor
documentfiledaspartoftheregistrationstatementisinaforeignlanguage,it
shallbeaccompaniedbyasummary,versionortranslationintheEnglish
language.AlldocumentsexecutedoutsidethePhilippinesmustbeauthenticated
bytheEmbassy,ConsulateorLegationofthePhilippinesinthecountrywhere
thedocumentoriginated.

D.

Themanuallysignedoriginal(orinthecaseofduplicateoriginals,one
duplicateoriginal)ofallfilings,andallconformedcopies,includingregistration
statements,applications,statements,reportsorotherdocumentsshallbe
numberedsequentially(inadditiontoanyinternalnumberingwhichotherwise
maybepresent)byhandwritten,typed,printedorotherlegibleformofnotation
fromthefirstpagethroughthelastpageofthatdocumentandanyexhibitor
attachmentthereto.Further,thetotalnumberofpagescontainedinanumbered
originalandineachnumberedandconformedcopyshallbesetforthonthe
firstpageofthedocument.

E.

Thebodyofallprintedstatementsandreportsandallnotestofinancial
statementsandothertabulardataincludedthereinshallbeinprominenttypeat
leastaslargeandaslegibleas10pointtype.However,totheextentnecessary
forconvenientpresentation,financialstatementsandothertabulardata,
includingtabulardatainnotes,maybeinatleastaslargeandaslegibleas8
pointtype.Allsuchtypeshallbeleadedatleast2points.

F.

Alloriginalandconformedcopiesshallbesubmittedundercoverofastandard
coverpagewhichshallidentifythespecificfilingformtypeorformamendment
orresponsetoashowcauseletter,theperiodendeddateforanyreportor
generalinformationsheetorfinancialstatementorotherperiodbasedfiling,the
completecompanynameandprincipalbusinessaddressandmaintelephone
number,thefiscalyearenddateofthecompany,theSECidentification
number,theSECFileNumberifthefilingisanamended,revised,
supplementaryorposteffectiveprospectusoranamendmenttoanytypeof
registrationortransactionfiling,eachtypeofCommissionregistrationcurrently
effectiveforthefilingentityandsuchotherinformationasmayberequiredby
theCommissionfromtimetotimeoncoverpagesforallSECfilingsorforany
specifictypeoffiling.FromtimetotimetheCommissionwillpublishalist
showingtheSECfilingformtypescurrentlyineffectsothatapplicantsand
registrantscancomplywiththerequirementtoindicatethespecificformtypeon
thestandardcoverpage.

4.

InformationUnknownorNotReasonablyAvailable
Otherthanfinancialstatements,informationrequiredneedbegivenonlyinsofarasitisknown

or reasonably available to the registrant. If any required information is unknown and not
reasonably available to the registrant, either because obtaining such would involve
unreasonable effort or expense, or because it rests peculiarly within the knowledge of
anotherpersonnotaffiliatedwiththeregistrant,theinformationmaybeomitted,subjectto
thefollowingconditions:

5.

A.

Theregistrantshallgivesuchinformationonthesubjectasitpossessesorcan
acquirewithoutunreasonableeffortorexpense,togetherwiththesources
thereofor,

B.

Theregistrantshallincludeastatementeithershowingthatunreasonableeffort
orexpensewouldbeinvolvedorindicatingtheabsenceofanyaffiliationwiththe
personwithinwhoseknowledgetheinformationrestsandstatingtheresultofa
requestmadetosuchpersonfortheinformation.

SupplementalInformation
The Commission or its staff may, where it is deemed appropriate, request supplemental

informationconcerningthefilingoranyofthecontentthereof.
6.

cCEAHT

PlaceofFiling
AllfilingssubjecttotheprovisionsofthisRuleshallbefiledwiththeCommissionbypersonal

delivery,orsuchothermodeastheCommissionmayprescribetofacilitatesubmissions.
7.

8.

PreparationofFilingsGenerally
A.

Allfilingsshallcontainthenumbersandcaptionsofallitemsoftheappropriate
form,butthetextoftheitemsmaybeomittedprovidedtheanswerstheretoare
sopreparedastoindicatetothereaderthecoverageoftheitemswithoutthe
necessityofhisreferringtothetextoftheitemsorinstructionsthereto.
However,whereanyitemrequiresinformationtobegivenintabularform,itshall
begiveninsubstantiallythetabularformspecifiedintheitem.Allinstructions,
whetherappearingundertheitemsoftheformorelsewheretherein,aretobe
omitted.Unlessexpresslyprovidedotherwise,ifanyitemisinapplicableorthe
answertheretoisinthenegative,anappropriatestatementtothateffectshallbe
made.

B.

Theregistrantmayfilesuchexhibitsasitmaydesireinadditiontothose
requiredbytheappropriateform.Suchexhibitsshallbesomarkedasto
indicateclearlythesubjectmatterstowhichtheyrefer.

C.

Inanycasewheretwoormoreindentures,contracts,franchises,orother
documentsrequiredtobefiledasexhibitsaresubstantiallyidenticalinall
materialrespectsexceptastothepartiesthereto,thedatesofexecution,or
otherdetails,theregistrantneedfileacopyofonlyoneofsuchdocuments,with
ascheduleidentifyingtheotherdocumentsomittedandsettingforththematerial
detailsinwhichsuchdocumentsdifferfromthedocumentofwhichacopyis
filed.TheCommissionmayatanytimeinitsdiscretionrequirethefilingof
copiesofanydocumentsoomitted.

PreparationofRegistrationStatementandProspectus
A.

Inadditiontotheprovisionsofparagraphs1through7hereof,thefollowing
provisionsshallapplytothepreparationandfilingofregistrationstatements:
i.

Aregistrationstatementshallconsistofthefacingsheetoftheapplicable
formcrossreferencesheetaprospectuscontainingtheinformation
calledforbyPartIofsuchformtheinformation,listofexhibits,

undertakingsandsignaturesrequiredtobesetforthinPartIIofsuch
formfinancialstatementsandschedulesexhibitsanyotherinformation
ordocumentsfiledaspartoftheregistrationstatementandall
documentsorinformationincorporatedbyreferenceintheforegoing
(whetherornotrequiredtobefiled).

B.

ii.

Allgeneralinstructions,instructionstoitemsoftheform,andinstructions
astofinancialstatements,exhibits,orprospectusesaretobeomitted
fromtheregistrationstatementinallcases.

iii.

Theprospectusshallcontaintheinformationcalledforbyallofitemsof
PartIoftheapplicableform.Acopyoftheprospectusmaybefiledasa
partoftheregistrationstatementinlieuoffurnishingtheinformationin
itemandanswerform.Whereveracopyoftheprospectusisfiledinlieu
ofinformationinitemandanswerform,thetextoftheitemsoftheformis
tobeomittedfromtheregistrationstatement,aswellasfromthe
prospectus,excepttotheextentprovidedinthenextparagraph.

iv.

Whereanyitemofaformcallsforinformationnotrequiredtobe
includedintheprospectus,generallyPartIIofsuchform,thetextofsuch
items,includingthenumbersandcaptionsthereof,togetherwiththe
answerstheretoshallbefiledwiththeprospectusundercoverofthe
facingsheetoftheformasapartoftheregistrationstatement.However,
thetextofsuchitemsmaybeomittedprovidedtheanswersareso
preparedastoindicatethecoverageoftheitemwithoutthenecessityof
referencetothetextoftheitem.Ifanysuchitemisinapplicable,orthe
answertheretoisinthenegative,astatementtothateffectshallbemade.
Anyfinancialstatementsnotrequiredtobeincludedintheprospectus
shallalsobefiledasapartoftheregistrationstatementproper,unless
incorporatedbyreferencepursuanttoSRCRule12.2

Securitiestobeissuedasaresultofstocksplits,stockdividendsandanti
dilutionprovisionsandintereststobeissuedpursuanttocertainemployee
benefitplans.
i.

Ifaregistrationstatementpurportstoregistersecuritiestobeoffered
pursuanttotermswhichprovideforachangeintheamountofsecurities
beingofferedorissuedtopreventdilutionresultingfromstocksplits,
stockdividendsorsimilartransactions,suchregistrationstatementshall,
unlessotherwiseexpresslyprovided,bedeemedtocovertheadditional
securitiestobeofferedorissuedinconnectionwithanysuchprovision.

ii.

Ifpriortocompletionofthedistributionofthesecuritiescoveredbya
registrationstatement,additionalsecuritiesofthesameclassareissued
orissuableasaresultofastocksplitorstockdividend,theregistration
statementshall,unlessotherwiseexpresslyprovidedtherein,bedeemed
tocoversuchadditionalsecuritiesresultingfromthesplitof,orthestock
dividendon,theregisteredsecurities.Ifpriortocompletionofthe
distributionofthesecuritiescoveredbyaregistrationstatement,allthe
securitiesofaclasswhichincludestheregisteredsecuritiesare
combinedbyareversesplitintoalesseramountofsecuritiesofthesame
class,theamountofundistributedsecuritiesofsuchclassdeemedtobe
coveredbytheregistrationstatementshallbeproportionatelyreduced.If
paragraph6(B)(i)ofthisruleisnotapplicable,theregistrationstatement
shallbeamendedpriortotheofferingofsuchadditionalorlesseramount
ofsecuritiestoreflectthechangeintheamountofsecuritiesregistered.

iii.

Wherearegistrationstatementrelatestosecuritiestobeoffered

pursuanttoanemployeebenefitplan,includinginterestsinsuchplanthat
constituteseparatesecuritiesrequiredtoberegisteredundertheCode,
suchregistrationstatementshallbedeemedtoregisteranindeterminate
amountofsuchplaninterests.
9.

AdditionalInformation
Inadditiontotheinformationexpresslyrequiredtobeincludedinaregistrationstatementor

report,thereshallbeaddedsuchfurthermaterialinformation,ifany,asmaybenecessary
to make the required statements, in the light of the circumstances under which they are
madenotmisleading.
10.

Amendments
Allamendmentsshallbefiledundercoveroftheformamended,markedwiththeletter"A"to

designatethedocumentasanamendment,e.g.,"17A/A1","17A/A2"andincompliance
with pertinent requirements applicable to statements and reports. Amendments filed
pursuant to this paragraph shall set forth the complete text of each item as amended.
Amendmentsshallbenumberedsequentiallyandbefiledseparatelyforeachstatementor
reportamended.
Amendments to a registration statement may be filed either before or after registration

becomeseffectivepursuanttoSRCRule14.
11.

DisclaimerofControl
Iftheexistenceofcontroloftheregistrantisopentoreasonabledoubtinanyinstance,the

registrant may disclaim the existence of such. In such case, however, the registrant shall
statethematerialfactspertinentthereto.
12.

IncorporationbyReference
Except as otherwise provided in SRC Rule 12.2 paragraph (2), information may be

incorporated by reference in answer, or partial answer, to any item required in a filing

governedbytheprovisionsofthisRule.
13.

IncompleteReports
All reports shall comply with the full disclosure requirements of the Rules. Any report which

shallbefoundtobemateriallyincompleteshallbeconsideredordeemednotfiled.
SRCRULE72.2
ProcedureforFilingRequestforExemptiveReliefunderSec.72.1oftheCode
[newprovision]
1.

Any person may seek relief from any provision of the Code and the rules adopted
thereunderbyfilingaletterrequestwhichshallstatethefollowing:
a.

thespecificruleororder,requirementorprohibitionfromwhichreliefisbeing
sought

b.

thelegalbasisorjustificationfortheexemptionand

c.

thename,address,andtelephonenumber/softheapplicant.

2.

The letterrequest shall be filed with the appropriate Operating Department which has
jurisdictionovertheissuesubjectoftherequest.Theapplicantshallpaythecorresponding
filingfeeintheamountofFiveThousandPesos(P5,000)orsuchotheramountasmaybe
prescribedbytheCommission.

3.

The Operating Department shall review the letterrequest. It may, if deemed necessary,
conduct a hearing on such request. Thereafter, it shall make the appropriate
recommendationtotheCommissionEnBanc.

4.

The Commission shall issue the Order either granting or denying the request. The same

shall become final and executory upon due notice to the applicant. The Commission may
also opt to publish the Order in the Commission's website or in any other manner it may
deemexpedient.
SRCRULE76
RepealingClause
[newprovision]
All rules and regulations, circulars, orders, memoranda, or any part thereof and the rules
and regulations promulgated by persons required to be registered under the SRC or any part
thereof,inconflictwithorcontrarytotheseRulesoranyportionhereof,areherebyrepealedor
modifiedaccordingly.
SRCRULE78
Effectivity
TheseRulesshalltakeeffectfifteen(15)daysafteritspublicationintwo(2)newspapersof
generalcirculation.
December30,2003,MandaluyongCity,Philippines.
(SGD.)LILIAR.BAUTISTA
Chairperson

(SGD.)FEELOISAC.GLORIA
Commissioner

(SGD.)JOSELIAJ.POBLADOR
Commissioner

(SGD.)MA.JUANITAE.CUETO
Commissioner

(SGD.)JESUSENRIQUEG.MARTINEZ
Commissioner

Footnotes
*
1.

Basedonleadingpracticesoncorporategovernance.Explanationshallbeprovidedincaseof
noncompliance.
Thethresholdsoffifteenpercent(15%)ormoreforasingleacquisitionorthirtypercent(30%)for
creepingacquisitionasprovidedforinSection19oftheCodeareincreasedtothirtyfivepercent
(35%),pendingthepassageoftheproposedamendmentstotheSRC.