Securities Regulation Code

Question 1

What is the Republic Act of SRC? Its purpose?

Answer 1

Republic Act No. 8799 to protect the investing public

Question 2

What are securities?

Answer 2

Shares, participation, or interest in a corporation or in a commercial enterprise or any profit-making venture

Question 3

Securities are evidenced by what?

Answer 3

Contracts, certificates, instruments

Question 4

What form does the evidences of a security need to take?

Answer 4

Either written or electronic

Question 5

What is the main feature of a security?

Answer 5

It is acquired with the expectation of asset appreciation or increase in value primarily throught the efforts of another

Question 6

What are investment contracts?

Answer 6

a contract, transaction or scheme where a person invest their money in a common enterpise and is led to expect profits primarily from the efforts of others

Question 7

What are the requisites of an investment contract?

Answer 7

1. An investment of money
2. In a common enterprise
3. With expectation of profits
4. Primarily from the efforts of others (Modified Howey Test)

Question 8

What is the Howey Test? and how is the Philippines using it in a modified way?

Answer 8

The Howey Test defines an investment contract as a contract wherein the profit to come from solely the efforts of others. The Philippines modifies this by changing the word solely to primarily.

Question 9

How does the SRC protect the investors from fraudulent securities?

Answer 9

1. No security can be sold or offered within the PH without being registered through a registration statement, filed, and approved by the SEC
2. Prior to sale, information about the security shall be available to prospective buyers
3. The SEC may audit the firm applying for registrations whenever deemed necessary

Question 10

What are the steps in registration of a Security

Answer 10

1. Sworn Registration Statement
2. Payment
3. Publication
4. Order of Declaration
5. Prospectus

Question 11

What are the requisites of a Sworn Registration Statement?

Answer 11

1. Signatories of Executive Officer (EO), Principal Operating Officer (POE), Principal Financial Officer (PFO), Controller, Principal Accounting Officer (PAO) , Corporate Secretary (CS)
2. Written consent of named expert
3. A written certification of selling shareholders to the accuracy of the registration statement

Question 12

Payment of the filing fees shall not exceed?

Answer 12

1/10 of 1% of the aggregate price at which the securities are to be offered

Question 13

How often should the notice of registrationg filing be publicized?

Answer 13

Once for two consecutive weeks in two newspapers of general circulation

Question 14

How many days after the date of filing should the SEC give a decision?

Answer 14

45 days or by such later date to which the issuer has consented

Question 15

Attached with the registration statement, and is a document that serves as an oath that all requirements and statements in the registration are correct?

Answer 15

Prospectus

Question 16

What is the rationale of exempt securities?

Answer 16

Securities that are issued by the government are already guaranteed because of its nature (assumption that the government is just and honest)

Question 17

What are the securities that are exempted from registration?

Answer 17

1. Security Issued or guaranteed by the government or by any institution or indvidual representing it
2. Security issued or guaranteed by the government of any country which are in diplomatic relations with the philippines
3. Cerificates issued by a receiver or by trustee in bankruptcy duly approved by the proper adjudicatory body
4. Any security under the supervision of Office of Insurance Commission (OIC), Housing and Land Use Regulatory Board (HLURB), or the Bureau of Internal Revenue (BIR)
5. Any security issued by a bank except its own share.

Question 18

Are securities issued by pakistan exempt from registration (assuming that it has no diplomatic relations with the PH)

Answer 18

No

Question 19

What is the basis upon the exemption of securities of countries that the Philippines has diplomatic relations with?

Answer 19

Reciprocity

Question 20

Why are securities under the supervision of OIC, HLURB, and BIR exempt?

Answer 20

To avoid overlapping jurisdiction

Question 21

Are securities owned by banks exempted from registration?

Answer 21

No, on the basis that it is acting as a profit-making venture rather than an intermediary which is what is exempted from registration.

Question 22

How many persons should it be to be a transaction exempted from registration?

Answer 22

fewer than 20 during any twelve month period

Question 23

When would a exchange of securities be considered an exempt transaction?

Answer 23

When the issuer and the entity exchanged with did not pay anything or commission is paid for the exchange

Question 24

What is type of capital stock is an exempt transaction and why?

Answer 24

Subscrption shares of the capital stock of a corporation PRIOR to incorporations or for increasing it authorized capital stock

Question 25

A broker's transaction is exempt from registration if?

Answer 25

It is executed upon a customer's order on any registered exchange

Question 26

When are issuance of bonds or notes securd by mortgage upon real estate or tangible property exempt transactions?

Answer 26

when the entire mortgage along with the notes or bonds secured are sold to a single purchaser at a single sale

Question 27

Whaat law is the basis for the exemption of judicial sale in insolvency or bankruptcy

Answer 27

insolvency law

Question 28

Distribution of a corporation of its securities is exempted because of?

Answer 28

The revised corporation code. It is considered as stock dividends and therefore doent require registration

Question 29

Repeated transactions are not required to be registered to the SEC?

Answer 29

False, because only isolated transactions are exempted.

Question 30

The sale of securities to any nunmber of the following buyers are exempted from registration.

Answer 30

1. Banks 2. Registered Investment House 3. Insurance Company 4. Pension Fund or retirement plan maintained by the government 5. Investment company

Question 31

The annual report of an issuer must be compose of what financial reports?

Answer 31

Balance Sheet, Proft and Loss, Cash Flows CERTIFIED BY A CPA

Question 32

What are the requisites for an issuer to report to the SEC?

Answer 32

1. Which has sold a class of its securities pursuant to a registration 2. With a class of securities listed for trading in an exchange 3. With assets of at least 50 million pesos and having 200 or more holders each having 100 shares of a class of its equity securities.

Question 33

What is the exception to the reporting requirement number 3?

Answer 33

The obilgation to report will diminish 90 days after notification to the SEC that the number of its holders holding at least one hundred shares have been reduced to less than 100

Question 34

How does the SRC protect the public?

Answer 34

1. Require full disclosure of information to the public regarding the securities being offerend and the issuers including the approval of registration statements and prospectus 2. Regular submition of reports 3. Close monitoring of securities and persons such as brokers, issuers and the exchange itslf 4. Prohibiting and penalizing fraud 5. Giving SEC the powers and functions

Question 35

What is a tender offer?

Answer 35

offer by a person or group of person to the stockholders of a corporation to tender their shares for purchase

Question 36

What is the purpose for the rules on tender offer?

Answer 36

To provide the minority shareholders with protection and to provide them with a fair price for their share

Question 37

What is the requirement for a mandatory tender offer?

Answer 37

When a person tries to acquire at least 35% of any calss of any equity security of a 1. Listed Corportation 2. Corporations with 50M assets and Shareholders of at least 200 each having at least 100 share over a period of 12 months

Question 38

Is the 35% mandatory requirement an absolute rule?

Answer 38

No, because it would still apply even if it is less than 35% if it constitutes over 51% of the total outstanding equity securities of the public company.

Question 39

Does the tender offer rule apply to indirect acquisitions?

Answer 39

Yes.

Question 40

Purchase of shares are exempt from the mandatory tender offer if?

Answer 40

It is part of the unissiued capital stock and it does not exceed 50% or more ownership of shares

Question 41

Purchase of shares from ___ in Authorized capital Stock is ____

Answer 41

an increase, exempt

Question 42

Purchase in connection with ____ proceedings involving a duly constituted pledge or security arrangement where the acquisition is made by the ____ or ___

Answer 42

foreclosure, debtor, creditor

Question 43

Purchases by the government that are exempt from mandatory tender offer rule?

Answer 43

purchases in connection with privatization

Question 44

Purchases in connection with _______________ under court supervision.

Answer 44

corporate rehabilitation

Question 45

Purchases through an ________ at the prevailing market price are exempt from the tender offer rule

Answer 45

open market

Question 46

Merger or consideration ar eexempt from the tender offer rule

Answer 46

False. It should be consolidation

Question 47

How many days prior to the commencement of the tender offer must you do the tender offer requirements?

Answer 47

2 business days

Question 48

What is the SEC Form required that you file for tender offer

Answer 48

19-1

Question 49

What must you do with the form prior to the commencmenet of the offer

Answer 49

Hand deliver a copy to the target company at tits principal executive office and to each exchange where the class of security is listed for trading

Question 50

How many days must you report the results of the tender off to the commission

Answer 50

not later than 10 days after the termination of the tender offer

Question 51

Who can be an insider?

Answer 51

1. The issuer 2. A director or officer of the issuer or a peron controlling the issuer 3. A person whose relationship or former relationship to the issuer gives or gave him access to material non public information 4. A person who learns such information by a communication from any of the foregoing

Question 52

When can a person with material non-public information buy or sell a security?

Answer 52

1. when he can prove that the information was not gained from an insider 2. If the other party is identified and he 2.1 Disclosed the information or; 2.2 Had reason to believe that the other person knows it as well

Question 53

Will a person who receives information regarding non public information be considered an insider?

Answer 53

Yes. Whether he acts on it or not.