Securities Regulation Code

Question 1

SRC aims to protect investing public.

In what ways?
1. full disclosure of information
(a) approval of registration statement
(b) approval of prospectus
2. regular submission of material information
3. close monitoring of securities
4. grant SEC necessary powers

Answer 1

Yes

Question 2

Broker vs Dealer
- Broker → for account of others
- Dealer → ordinary course of business

Answer 2

Yes

Question 3

Who is the implementing agency of SRC?

Answer 3

SEC

Question 4

Securities
- shares of stocks
- bonds, debentures, notes
- asset-backed securities
- investment contracts
- fractional undivided interest in OIL/GAS
- options and warrants
- certificates
- others

Answer 4

Yes

Question 5

Requisites of Investment Contract
- invest money
- in a common enterprise
- expectation of profits
- primarily from effort of others (not solely)

Answer 5

Yes

Question 6

Registration of Securities
- need to have registration statement

Procedure for Registration
- payment of filing fees → what is the maximum?
- publication → 2 general newspapers once for 2 consecutive weeks
- approved or rejected → within 45 days after date of filing or date to which issuer consented
- if approved → prospectus under oath

Answer 6

1/10 of 1% of aggregate price

Question 7

Securities Exempt from Registration (GRIB)

Reason : Issuer is trusted / regulated by another government agency

• by Government of PH + other country (with diplomatic relations)
• ?
• regulated by Insurance Commission, Housing and Land Use Rule Regulatory Board, or BIR
• ?

Answer 7

• by Receiver or Trustee in bankruptcy duly approved by proper adjudicatory body
• by Bank (XPN : bank’s own shares of stock)

Question 8

Transactions Exempt from Registration (BICEPS SMILE Q)

Reason : Transactions are small / limited / approved by court (public is not affected)

• Broker’s transaction
• ?
• right of Conversion
• ?
• Private placement → sale to fewer than 20 persons
• Stock dividends
• ?
• ?
• Insolvency → judicial sale
• ?
• ?
• Qualified Buyers → bank, registered investment house or company, insurance company, pension fund (maintained by government or bank)

Answer 8

• Isolated transaction
• Exclusive sale → capital stock to own stockholders (no renumeration is given)
• Subcription 25/25 rule → pre-incorporation or for increase in capital stock (no renumeration is given)
• Mortgage-backed securities → sold to purchaser at a single date
• to Liquidate a bonafide debt → in the ordinary course of business
• Exclusive exchange of securities → by issuer with existing holders (no renumeration is given)

Question 9

Filing of General Information Sheet
- within 30 days from…

Stock Corporation ?
Nonstock Corporation ?
Foreign Corporation ?

Answer 9

Stock Corporation - date of annual stockholder meeting
Nonstock Corporation - date of annual member meeting
Foreign Corporation - anniversary of issuance of SEC license

Question 10

Filing of Annual Financial Statements
- if fiscal year → within 120 days from end of fiscal year

EXCEPTIONS
- broker dealers ?
- listed companies ?

AFS → must be stamped by BIR

Answer 10

broker dealers - 110 days
listed companies - 105 days

Question 11

Tender Offer
- intention to acquire outstanding securities of a public company
- Purpose → to protect minority

Answer 11

Yes

Question 12

When is Tender Offer mandatory?
- acquire at least ? of a (1) listed company (2) public company

Public Company
- with asset of at least ? AND at least ? shareholders each having at least ? shares

% → applies also to indirect acquisitions

Answer 12

• at least 35% (over a period of 12 months)
• less than 35% but will result to ownership of over 50%

Public Company
- assets → at least 50M
- shareholders → at least 200
- shares → at least 100

AND → dapat both requirements macomply

Question 13

Transactions Exempt from Mandatory Tender Offer

any purchase of securities
- from unissued capital stock (will not result to 50% ownership)
- from increase in authorized capital stock
- in connection with foreclosure proceedings
- in connection with privatization by the government
- in connection with corporate rehabilitation under court supervision
- through open market (at market price)
- merger or consolidation

Answer 13

Yes

Question 14

Insider → has access to material non-public information
- issuer
- director or officer
- with relation to the ones above
- government employees
- tippee → directly from ones above

Insider Trading
- insider transacts on the securities
- unlawful
- XPN : if person can prove that the information is not gained from an insider
- XPN : if person can prove that he disclosed the info to the other party or he had reason to believe the other party has access to the same info (other party → identified)

Answer 14

Yes