SECURITIES- CENIZA BAR NOTES

Terms:
SECURITIES AND REGULATION
CODE 1. Issuer: This is originator, maker obligor or creator of the
security In short, this is the entity that is authorized by the
commission to offer ,sell or promote the sale to the public of
its equity bonds, instrument and other forms of security.
( RA 8799)
2. Broker: A special person engaged in the business of
buying and selling of securities for the account of others.
What are the objectives of the SRC and its IRR?
Nb: The duties of agent under the law is deemd to be written
1. Organize socially economic conscious and self-regulating into their agreement. Therefore, the stockholder are not only
markets liable for SRC but also civil code.
2. Encourage wide public ownership of business enterprise
3. Promote the development of capital market
4. protect the investors 3. Dealer: One who buys and sells securities for his or her
5. Ensure full and timely disclosure of material information own account in the ordinary course of business where the
6. Minimize if not eliminate, fraudulent or manipulative purpose f the business is to trade.
devices and practices that creates distortions in a free
market. 4. Associated person: An employee therefor whom directly
exercises control of the supervisory authority, but does not
include a salesman or agent or a person whose functions are
What are Securities?
solely clerical or ministerial.
Shares, participation or interest in a corporation or in a
commercial enterprise or profit making venture and This is an entity, including an unincorporated entity such as
evidenced by a certificate, contract, instrument whether partnership over which an investor has significant influence
written or electronic in character an that is neither a subsidiary nor an interest in joint venture,

Examples:

1. Shares of stocks, bonds, debentures, notes evidences SELF-REGULATORY

of indebtedness, asset-backed securities;
2. Investment contracts, certificates of interest or
participation in a profit sharing agreement, certifies of
deposit for a future subscription; Regulates Itself- a system whereby the price is self-
3. Fractional undivided interests in oil, gas or other regulated by the open market and by consumers. The
mineral rights; government should not regulate the free market more than
4. Derivatives like option and warrant what it is absolutely necessary. One that is authorized by the
5. proprietary or nonproprietary membership certificates commission to 1. Enforce compliance with relevant
in corporations; and provisions of the code, and rules and regulation and to
Certificates of assignments, certificates of participation, promulgate and enforce its own rules have been approved
trust certificates, voting trust certificates or similar by the commission by their members and or their participants
instruments and to enforce fair, ethical and efficient practice in the
securities and commodity future industries including
securities and commodities exchange.

The SEC is now authorized to reorganize itself, streamline its

REGULATION OF structure and operation upgrade its human resource
SECURITIES MARKET component and increase the compensation of the personnel.
The law however is silent on the qualification of
PROFESSIONAL chairperson and associate commissioner n the field of
securities and will allow anybody who has a political backup
without adequate qualification to be appointed to the
position.
Exchange : It is an organized marketplace or facility that
brings together a buyer and seller and executes trades of
securities or commodities. In delegating the regulation to SRO the congress delegated
it regulatory powers. These regulatory pwes are to be
delegated in lieu of direct regulation y the SEC related
Registration; No person shall engage in the business of organization
buying and selling securities in the Philippines as a broker,
dealer or as a salesman or an associated person of any
broker or dealer unless registered with the commission. Regulatory Structure under the SRC:
SECURITIES- CENIZA BAR NOTES

1. First- Level Regulatory Entity

PSE vs Ordinary Corporation
This is subject to review, regulation and supervision of the
SEC as the second level regulatory entity. The regulatory
jurisdiction of the SRO is defined under Section 40.2 of the
SRC which provides that SRO is to comply with the provision PSE is not an ordinary corporation, although it is clothed with
of this code, the rules and regulations thereunder and its the markings of a corporate entity, its functions as the
own rules and enforce compliance therwith. primary channel though which the vessels of capital trade
apply. The relevance of the PSE to the continued operation
CIMC: PSE Established the CMIC as its indepdent and and filtration of the securities transaction in the country gives
enforcement compliance monitoring arm. it a distinct color or importance such that government
interference is justified.

Section 1. Jurisdiction of CMIC. CMIC shall have the

jurisdiction to investigate and resolve: (1) All violations of the
Securities Laws or these Rules by Trading Participants, and; ADJUDICATORY AND
(2) Trading-Related Irregularities and Unusual Trading
REGULATORY POWER OF THE
Activities involving Issuers, based on any of the following
SECURITY AND EXCHANGE
complaints, findings, reports or determinations:
COMMISISON
(a) Written complaints filed directly with CMIC by customers,
Trading Participants, or any aggrieved party for alleged
violation of the Securities Laws or these Rules;
(b) Examination Findings of CMIC based on regular annual
examinations or for cause examinations of Trading The proper parties that can bring controversy and can cause
Participants; an exercise by the SEC of its original and exclusive
(c) Reports of Trading-related Irregularities or Unusual jurisdiction would be all those which are adversely
Trading Activities; and affected by the transfer of the pilfered certificate of
(d) Matters which CMIC has determined should be stock. Any preemptive judgment by the SEC without
investigated and resolved to enforce the Securities Laws and exercising both its adjudicatory and regulatory power is
these Rules, including matters referred to CMIC by the premature
Commission, the Clearing Agency, and the Exchange,
including the [Disclosure Department].
The SEC has both regulatory and adjudicative function.
Under its regulatory responsibilities, the SEC may pass
upon application for or may suspend or revoke certificate of
registration, partnership and association, compel legal and
regulatory compliance as well as the imposition of fines and
other penalties for violation of the RSA.
JURISDICTION:
Regulatory power; The imposition by the SEC of a fine. The
SEC is a real party in interest and not a nominal party.

Section 53 of the SRC : Criminal Complaints for violation of Relative to its adjudicatory power the SC has
the Rules and Regulation shall be enforced and jurisdiction over controversies involving
administered by the SEC and shall be referred to the DOJ for
preliminary investigation. a. Intra-corporate Dispute and partnership relations or
appointment.
All complaints for the violation of the Code and any of its
implementing rules and regulation must be filed with the b. State and corporate affairs n relation to the legal existence
SEC. Where the complaint is criminal in nature, the SEC of the corporation partnership association or to other
shall endorse the same to the DOJ for preliminary franchise.
investigation and prosecution( Baviera v. Paglinwan)
c. Investors, and corporate affairs particularly in respect to
schemes, such as fraudulent employed by the directors,
officers, business associate and other stockholders, partners
or members of the registered firm
Business Judgment Rule
d. Petition for suspension of payment filed by corporation,
partnership or association that possess sufficient property
that covers all their debts but which foresee the impossibility
As a general rule, the SEC and the courts are barred from of meeting them when they respectfully falls due or
intruding into the business judgment of a corporation when possessing insufficient asset to cover their liabilities of said
the same is made in good faith. entities are upon petition motu proprio are placed under the
rehabilitation receiver of management committee. ( SEC v.
CA)
SECURITIES- CENIZA BAR NOTES

The revocation of registration does not mean that the issuer

CEASE AND DESIST ORDER is already excused from complying with its reported
obligation to the SEC in regard to securities and other
related activities. Corporation whose registration of
securities and permits to sell the same have violation of
Under the SRC, there are two essential requirement that SRC and implementing rules and regulation this shall be
must be complied with by the SEC before it may issue a covered by the applicable rules of reportorial
requirement.
cease and desist order. First, it must conduct proper
investigation or verification. Second, there must be a
finding that the act or practice , unless restrained will
operate as a fraud on investors or otherwise cause a grave REGISTRATION REQUIREMENT
or irreparable injury or prejudice to the investing public.

Requisite:

1. There must be a proper investigation and verification Section 8. Requirement of Registration of Securities.–
8.1. Securities shall not be sold or offered for sale or
a. A clarificatory conference cannot be considered as proper distribution within the Philippines, without a registration
investigation or verification enough to justify the cease and statement duly filed with and approved by the
Commission. Prior to such sale, information on the
desist order as it was merely an initial stage of the
securities, in such form and with such substance as the
proceeding Commission may prescribe, shall be made available to
each prospective purchaser.
2. For investigation and verification to e proper, it must be
conducted by the petitioner before and not after the cease
and desi order in question. General Rule: Securities shall not be sold or offered or sale
or distributed within the Philippines without registration
2. There must be a finding from the investigation conducted statement duly filed with and approved by the commission.
that the practice will operate as a fraud on the investor or Prior to such sale , information on the securities in such form
otherwise cause a grave and irreparable injury to the and with such substance as the commission may prescribe
investing public shall be made available to the prospective purchaser.

a. Requirement implies that the act to e restrained must be

determined after conducting reasonable proper investigation NB: If it is not a security, there is no need for a registration
as seen in the case of power homes.
and verification ( Investigate check if the practice will
constitute fraud)
Purpose:

1. Sale of securities in the Philippines.

2. Offer to sell or distribute securities within the Philippines
3. Dissemination of information relating to an offering of
securities.
SEC VS. PHIL STOCK EXCHANGE
Duty to make information Available:

Prior to the sale, information on the securities in such form

The SEC has the authority to refuse permit a registration and with such substance as the SEC may prescribe shall be
statement to become effective or revoke the effectivity on made available to each prospective purchaser.
any ground enumerated above.
Full Disclosure:
SEC PHIL STOCK EXCHANGE
The SEC has the power to May refuse listing of The SEC is not only concerned with the requirement that full
determine whether the securities of issuers who do disclosure of information is given to the public. The SEC is
securities may be traded not meet the qualification also concerned with the merit of securities themselves and
and standard imposed by the issuer
the exchange. The PSE
since it is the primary
In the full disclosure system, the SEC does not give
market for securities is
assurance that every security is suitable, with the adoption of
equipped to exercise
the full disclosure system, full flow of material investor
judgment in the manner
decision is being assured.
appropriate for business.

The only standard which must be met in registering

The order of revocation will not exempt the company for its
securities is adequate and accurate disclosure of the
reportorial obligation. The corporations whose registration
required material facts covering the company and securities
of securiites to the public have been revoked for
it proposes to sell.
violation of the SRC and implementing rues shall
continue to be covered by reportorial requirements.
SECURITIES- CENIZA BAR NOTES

Public Offering 3. (c) Certificates issued by a receiver or by a

trustee in bankruptcy duly approved by the
Definition: Any offering of securities to the public or to proper adjudicatory body.
anyone whether solicited or unsolicited.
Ratio: There is no need to register because the rehabilitation
a. Presumption: Any solicitation or presentation of securities
court has already approved the same in a rehabilitation
for sale through any of the modes shall be presumed to be a
proceeding. Less likehood certificate used to defraud the
pubic offering
investing party.
i. Publication in any newspaper , magazine and
printed newspaper
ii. Presentation in any public or commercial place
iii. Advertisement
4. (d) Any security or its derivatives the sale or
iv. Distribution and or making available flyer,
transfer of which, by law, is under the
brochures or any offering material in a public or
supervision and regulation of the Office of the
commercial place.
Insurance Commission, Housing and Land Use
Rule Regulatory Board, or the Bureau of
Internal Revenue.

Exempt from REGISTRATION Ratio:These are state agencies . These government

agencies are expected to uphold decency in the
– NOT REPORTORIAL performance of duties. There is a presumption that one
regularly performs duties.

General Rule: The SRC requires the filing with the approval 5. . Any securities issued by the bank except its own
by the SEC of a registration statement before the same is shares of stock
sold to the public.
Ratio : These issuance by the bank is already regulated by
Ratio: The issuer of the security can be trusted as the the Banco Central of Pilipinas.
Philippine Government or government or issuer of another
country.

EXEMPT SECURITIES: REGISTRATION Exempt Transaction

1. (a) Any security issued or guaranteed by the

Government of the Philippines, or by any
political subdivision or agency thereof, or by The Security involved in an exempt transaction is not at all
any person controlled or supervised by, and itself exempt but the circumstances under which the security
acting as an instrumentality of said is sold makes the registration unnecessary.
Government.
Section 10. Exempt Transactions. – 10.1. The
Ratio: Investors are adequately protected because these are requirement of registration under Subsection 8.1 shall
issued and sold by the government over which a particular not apply to the sale of any security in any of the
government agency exercises regulatory or supervisory following transactions:
action. Hence, the investor is deemed as adequately
protected. (a) At any judicial sale, or sale by an executor,
administrator, guardian or receiver or trustee in
2. Any security issued or guaranteed by the insolvency or bankruptcy.
government of any country with which the
Philippines maintains diplomatic relations, or 1. Since the transaction is regulated by the courts
by any state, province or political subdivision the public interest and protection of the court is
thereof on the basis of reciprocity: Provided, protected.
That the Commission may require compliance
with the form and content for disclosures the
Commission may prescribe. (b) By or for the account of a pledge holder, or
mortgagee or any of a pledge lien holder selling of
offering for sale or delivery in the ordinary course of
Ratio: The SEC prescribes rules for disclosure with respect business and not for the purpose of avoiding the
to the offerings of securities by a foreign government as provision of this Code, to liquidate a bonafide debt, a
investors need disclosure to these offering of securities. ( ie : security pledged in good faith as security for such debt.
bonds, shares issued by the foreign government) . The ratio
to protect the investor is already present since the likelihood
that the investor is to be defrauded is not present. Prior to the PPSA, if the sale of the pledge item is
made, there is no need to register because the purpose is to
liquidate a particular obligation.
SECURITIES- CENIZA BAR NOTES

(c) An isolated transaction in which any security is sold, can be converted to common share the conversion of the
offered for sale, subscription or delivery by the owner shares in exchange of the preferred share is delivery of the
therefore, or by his representative for the owner’s common share. There is no need for SEC approval
account, such sale or offer for sale or offer for sale,
subscription or delivery not being made in the course of
(h) Broker’s transaction, executed upon customer’s
repeated and successive transaction of a like character
orders, on any registered Exchange or other trading
by such owner, or on his account by such
market.
representative and such owner or representative not
being the underwriter of such security.
Ratio: Supposed an investor who would like to purchase a
share of stock. An investor has a broker, ask the latter to
Ratio: Only one transaction
purchase 100 share of A at P10 per share. This is exempt
this broker transaction done at the customer order is not
(d) The distribution by a corporation actively engaged in required to be registered.
the business authorized by its articles of incorporation,
of securities to its stockholders or other security
(i) Subscriptions for shares of the capitals stocks of a
holders as a stock dividend or other distribution out of
corporation prior to the incorporation thereof or in
surplus.
pursuance of an increase in its authorized capital stocks
under the Corporation Code, when no expense is
Ratio: When the corporation pays securities to their own incurred, or no commission, compensation or
stockholders the payment of this stock dividend need not be remuneration is paid or given in connection with the
registered with the SEC, because the likelihood to defraud is sale or disposition of such securities, and only when the
not present as the stockholder are already a part of the purpose for soliciting, giving or taking of such
corporation. The additional shares are merely dividend subscription is to comply with the requirements of such
coming form surplus profit of the corporation. law as to the percentage of the capital stock of a
corporation which should be subscribed before it can be
registered and duly incorporated, or its authorized,
(e) The sale of capital stock of a corporation to its own
capital increase.
stockholders exclusively, where no commission or other
remuneration is paid or given directly or indirectly in
connection with the sale of such capital stock. Ratio:

Ratio : The corporation ask the existing stockholder to 1. pre-Incorporation Subscription: No. There is no need for
subscribe additional share. There is no need to register the registration the corporation is not yet established
same to the SEC. Stockholder already a part of the
organization.There is no outsiders
2. Established: The corporation needed additional capital ,
and require the existing stockholder additional capital
(f) The issuance of bonds or notes secured by mortgage issuance does not need to be registered.
upon real estate or tangible personal property, when the
entire mortgage together with all the bonds or notes
(j) The exchange of securities by the issuer with the
secured thereby are sold to a single purchaser at a
existing security holders exclusively, where no
single sale.
commission or other remuneration is paid or given
directly or indirectly for soliciting such exchange.
Ratio: Suppose there is an extrajudicial foreclosure, and the
sale is awarded to the highest bidder.This is a sale to
RatioThe Corporation approach the existing preferred share
liquidate an unpaid obligation done to a single transaction.
holder, asking the latter, to exchange common share ( no
commission) no more registration with the SEC.* Palit
(g) The issue and delivery of any security in exchange common ko para sa preferred mo wala additional
for any other security of the same issuer pursuant to a
right of conversion entitling the holder of the security
(k) The sale of securities by an issuer to fewer than
surrendered in exchange to make such
twenty (20) persons in the Philippines during any twelve-
conversion: Provided, That the security so surrendered
month period.
has been registered under this Code or was, when sold,
exempt from the provision of this Code, and that the
security issued and delivered in exchange, if sold at the Ratio: If the issuer of the security issues a short term
conversion price, would at the time of such conversion commercial creditor to only 15 creditor. There is no need to
fall within the class of securities entitled to registration register ( 19 lender lender)
under this Code. Upon such conversion the par value of
the security surrendered in such exchange shall be
(l) Offer or sale of securities to qualified buyer
deemed the price at which the securities issued and
under section 101.1( code).
delivered in such exchange are sold.

(i) Bank;
Ratio: There are cases where the corporation can issue
(ii) Registered investment house;
preferred shares but these are convertible at the option of
(iii) Insurance company;
the corporation. Supposed the corporation issued preferred
(iv) Pension fund or retirement plan
share to subscribers convertible, and it provides a condition
maintained by the Government of the
that the corporation at its discretion that a preferred share
Philippines or any political
SECURITIES- CENIZA BAR NOTES

subdivision thereof or manage by a Definition: Tender offer means a public, open offer or
bank or other persons authorized by invitation( usually announced in a newspaper
the Bangko Sentral to engage in trust advertisement) by a prospective acquirer to all
functions; stockholder of a publicly traded corporation ( the target
(v) Investment company or; corporation) to tender their stock for sale at the specified
(vi) Such other person as the price during a specified time , subject to the tendering of a
Commission may rule by determine minimum and maximum number of shares.
as qualified buyers, on the basis of
such factors as financial
Ex; There is a prospective investor, who wanted to purchase
sophistication, net worth, knowledge,
as share of stock in the hands of the shareholder. The intent
and experience in financial and
of the prospective investor, should be communicated to the
business matters, or amount of
existing shareholders and for the existing shareholder to
assets under management.
tender their shares to be acquired by their prospective
investor. These prospective investor acquires the share for a
Qualified Buyer: One who is not vulnerable to be defrauded. premium.
These are well versed, as to the sale of security . There is
no requirement of registration, they are already protected my
If the stockholder wanted to sell their shares , then the
legal , financial accountant and financial adviser.
incoming investor have to purchase the shares not only form
one but to several stockholder in a proportionate number.
Common Ground: If the transaction will not in any way And if the total number of share is more than what a
defraud the investor, then it is exempt from registration. stockholder acquire it will be proportionately decreased.

MANDATORY TENDER OFFER RULE

Public Company:
Any person or group of person acting in concert
who intends to acquire thirty fie percent ( 35%) of the
outstanding voting shares or such outstanding voting
If a company is considered as a public company then it is shares that are sufficient to gain control of the board in
not exempt to submit report under the SRC. a public company in one or more transaction within a
period of twelve months, shall disclose such intention and
A corporation with a class of equity shares listed in the contemporaneously make a tender offer for the percentage
exchange or with assets in excess of Fifty-Million pesos sought to all holders of such securities within the said period.
and having two hundred or more holders at least two-
hundred of which are holding at least one hundred Ex:
shares (100) of class of its equity share.
If the investor is acquiring share , and the total percentage is
Kinds of Public Company
35% in one year, there must be a tender offer requirement.
1. Listed ( Automatic a Public Company under the SRC) They cannot just purchase from one stockholder because
the total amount is 35% hence it must be a tender offer to all.
2. Those who fall under the capital requirement:
Q: Is there is a requirement mandatory tender offer if 10%
a. Asset Size
b. Number of shareholders at least 200
c. Number of shares held by the shareholder not A: No. No need for a mandatory tender offer, but if after
less than 100 shares of a class of equity security acquiring the ten percent, sufficient to gain control of the
board ( 50+1%) he or she must also make a tender offer.

Q: Is a company offering its stocks to specific group of

people not a public company?

Prohibition on Fraud ,Manipulation and

A: No. This is not a factor, as a contemplated by the SERC ,
a public company is not limited to those companies whose Insider Trading
shares of stock are publicly listed, even companies like the
bank whose shares are offered to specific group of people Price Manipulation: Any fraudulent act or series of fraudulent
are considered as public company as long as it complies actions designed to alter the true prices of securities through
with the requisite provided by the law (Phil Veterans vs. malevolent pegging, fixing or stabilizing of price of such
Callangan) security.

Examples of Price Manipulation Scheme

Tender offer
1. Painting the tape: Engaging in a series of transaction in
securities that are reported publicly to give the impression
of activity or price movement in security.
SECURITIES- CENIZA BAR NOTES

5. A person who learns such information by communication

form any of the following insider.
2. Marking the close: Buying and selling securities at the
close of the market in an effort to alter the closing price of
the security. What are the duties of the Insider when he is trading
securities?
3. Wash Sale: Engaging in transaction in which there is
no genuine change in actual ownership of a security. It shall be unlawful for an insider to sell or buy
security of the issuer while in possession of material
information with respect to the issuer or security that is not
4. Squeezing the float : Taking advantage of a shortage generally available to the public unless:
of securities in the market by controlling the demand side
and exploiting market congestion during such shortage in
a way to create artificial prices. Exemption:

5. Boiler Room Operation where in a room , there will be a. The insider proves that the information was not
well trained salesman operating over several phones and gained from such relationship
using high-pressure sales talk to get investor to invest in
the securities offered.
Ex: The director was not around when the information was
discussed. The director gained by the knowledge from the
6. Scalping: Where a person like an investment advisor broker not by virtue of the relationship
purchases securities for his or her own account before
recommending that security and then sells the share at a
b. If the other party selling to or buying form
profit upon the rise in the market price following the
the insider ( or his agent) is identified, ,the
recommendation.
insider proves that

7. Daisy Chain: The pattern of fictious trading activity by

a. He disclosed the information to the other
which a group of person or persons who lures innocent
party
people into the scheme

Both of them knows of the said information. The director

8. Flipping: Operating where one office buys a particular
disclosed why they are selling the shares
stock for custoemrs while another office simultaneously
recommends that its customers sell the stock with the
stock being shifted from one office to another and the firm b. that he had reason to believe that the other
makes a profit and the brokers earn their commission. party had no reason to believe that the other
party otherwise is also in possession of the
information

When the president rendered the report, the director was

there, because they were both listening to the same
INSIDER TRADING information as reported to the president

What is a material Information?

Definition: The trading of a public company’s stock or other

securities based on material, non public information These are information which may result in the change of
about the company. Trading by specific insider, such as market price or value of any of the issuer’s securities or may
employee is commonly permitted so long as they do not rely potentially affect the investment decision of the investor.
on material information in the public domain. This gives the
insider an unfair advantage in the market, since it puts the What is a material non-public information
interest of the insider above those to whom he or she owes a
fiduciary duty and hence in effect influences the value of the
company’s stock a.Non-Public/ material It has not been generally disclosed to
the public and would likely affect the market price of the
security after being disseminated to the public
PARTIES

b. Would be considered by a reasonable person as important

1. Issuer under the circumstance in determining his course of action
2. Director, or officer or a person controlling the issuer whether to buy, sell or hold a security.
3. Persons whose relationship or former relationship to the
issuer gives or gave him access to material information
about the issuer or the security that is not generally available When is an information deemed as material non-public
to the public \
4. A government employee, or director of an exchange, a.It has not been generally disclosed to the public and would
clearing agency, and or self regulatory organization who has likely affect the market price of the security after being
access to material information about an issuer or security disseminated to the public and the lapse of a reasonable
that is not generally available to the public time for the market to absorb the information
SECURITIES- CENIZA BAR NOTES

b. It would be considered by a reasonable person as In case of Queensland officer, they are held solidarily liable due to
important under circumstance in determining his course of commodity futures contract
action whether to buy, sell or hold security
6. Civil liability on account of insider trading ( Section 61)
q: Is the removal of janitor material? No, but the removal of
the director is

Nature /Qualification of
Investment Contract vs Commission
members of the SEC
Q: if the petitioner has a software and sold it to the buyer and
if the buyer was able to get more buyers to buy the same he
or she will be given commission. The SEC is a collegial body composed of chairperson and
four commissioner appointed by the President for a term of
A: Here, the clients of PCI does not make an investment, seven years each and who shall serve as such until their
they buy a product of some value to them and make use of successor has been appointed and qualified .
the website to enable the person to have internet access to
what he had to offer. The payment of the commission is Qualification of Members of the SEC
merely incentives to down right seller to bring more
customers. Therefore , the same is not an investment
contract. 1. Natural born citizens of the Philippines

Q: Does the salesman need to sign the contract for it to be 2. At least fourty years of age of the chairperson and at
liable ? least thirty five years of age for the commissioner

A:No.When the investor is uninformed and turns over his 3. Of good moral character of unquestionable integrity of
money to others depending on their representation and known probity and patriotism and with recognized
honesty and skill in managing it competence in social and economic discipline

4. The majority of the commissioner including the

chairperson shall be members of the Philippine bar
Instances when civil indemnity
be allowed
Powers and Functions of the
SEC
Violation of the terms of the SRC: 1. Criminal 2. Civil and 3.
Administrative

1. Civil Liabilities on account of False registration statement

1. Have jurisdiction and supervision over all corporation,
( Section 56) partnership or association who are grantees of the
primary franchise and or license or permit that was issued
The submission of the false registration led to losses sustained by by the Government
the investor.
2. Formulate polices and recommendation on issues,
2. Civil Liabilities arising in connection with the prospectus, concerning the securities, market, advise congress and other
communication and reports ( Section 57) government agencies on all aspect of securities market
and propose legislation and amendment thereto
Suppose the issuer submitted to the issuer financial report which
contains false, inaccurate erroneous data can the issuer be held Rule Making powers of the SEC: Mandate of the SEC for
civilly liable? government regulator
A; Yes. If the investor is made to believe that the investment is very 3. Approve, reject , suspend revoke or require
good because of the report submitted. The court ruled that Yes the amendment to registration statement, and registration
issuer can be held liable and licensing applications.

3. Civil liability for fraud in connection with securities Rule: The SEC can amendment a registration statement. A
transaction ( Section 58) particular statement can only be registered when approved
by the SEC: Registration statement submitted to the SEC.
4. Civil liability for manipulation of security prices ( Section Here the SEC act on the registration statement by
59) approving, rejecting, suspend , revoke or require
amendment .
The corporation and issuer are liable civilly/

5. Civil Liability with respect to Commodity futures contract 4. Regulate, investigate or supervise the activities of
and pre-need plans ( Section 60) persons to ensure compliance
SECURITIES- CENIZA BAR NOTES

5.Supervise, monitor or suspend or take over the

activities or exchange clearing agencies with other SRO

SRO: Puerto Azul the SEC was existing that the SEC has
power over PSE( SRO). While you have the power over the
SRO you have to respect the business judgment of the
governor unless the decision of the court in absence of
malice or bad faith.

6. Impose sanctions for violation of laws, and rules and

regulation and orders issued in pursuant thereto.

The SEC can impose administrative sanctions

7. Prepare and approve, amend or repeal rules and
regulation and orders and issue opinion and provide
guidance on and supervise compliance with such rules
and regulation and orders

SEC has the rule making power, they can come up with their
own implementing rule. SEC come out with the rules to
implement SRC.

8.Enlist and aid and support of and or deputize any and

all enforcement agencies of the Government civil or
military as well as private institution , corporation, firm
association of person in the implementation of person in
the implementation of its powers and functions under
the SRC
Enlist the support of the government and the military ( in
case of pyramiding scams)

9.Issue cease and desist order to prevent fraud or injury

in the investing public

The SEC to prevent the fraud.

10. Punish for contempt of the SEC both direct and

indirect in accordance with the pertinent provision of
and penalties prescribed by the Rules of Court.

There is a contempt power on the part of the SEC

11. Compel the officers o any registered corporation or

association to call meetings of the stockholders or
members thereof under its supervision

Bernas case

12. Issue Subpoena duces tecum and summon witness

to appear in any proceeding of the commission and In
appropriate cases order the examination search and
seizure of all documents, papers of the entity of person
under investigation as may be necessary for the proper
disposition of the cases before it.

13. Suspend or revoke after proper notice and hearing

the franchise or certificate of registration of corporation
partnership or association upon any of the grounds
provided by law

14. exercise such other powers as may be deemed

provided by law as well as those which may be implied
from or which are necessary or incidental to the carrying
out of express powers granted by the Commission to
achieve the objective and purposes of such.