SECTION 19. TENDER OFFERS 5.

WHEN REQUIRED TO MAKE TENDER OFFER

FOR ALL OUTSTANDING EQUITY SHARES
MANDATORY TENDER OFFER RULE If any acquisition that would result in OWNERSHIP
It is a publicly announced intention by a person acting OF OVER FIFTY PERCENT (50%) OF THE
alone or in concert with other persons to acquire equity TOTAL OUTSTANDING EQUITY SECURITIES
securities of a “public company.” It is an offer by the OF A PUBLIC COMPANY, the acquirer shall be
acquiring person to stockholders of a public company for required to make a tender offer under this Rule for all the
them to tender their shares therein on the terms specified outstanding equity securities to all remaining
in the offer stockholders of the said company at a price supported by
a fairness opinion provided by an independent financial
PURPOSE: to protect minority shareholders against advisor or equivalent third party. The acquirer in such a
any scheme that dilutes the share value of their tender offer shall be required to accept all securities
investments. It gives the minority shareholders the tendered.
chance to exit the company under reasonable terms,
giving them the opportunity to sell their shares at the EXEMPTIONS FROM THE MANDATORY
same price as those of the majority shareholders TENDER OFFER REQUIREMENT
MANDATORY TENDER OFFERS Unless the acquisition of equity securities is intended to
1. Any person or group of persons acting in concert, who circumvent or defeat the objectives of the tender offer
intends to acquire FIFTEEN PERCENT (15%) OF rules, the mandatory tender offer requirement shall not
EQUITY SECURITIES IN A PUBLIC COMPANY apply to the following:
IN ONE OR MORE TRANSACTIONS WITHIN A  Any purchase of securities from the unissued
PERIOD OF TWELVE (12) MONTHS, shall file a capital stock; Provided, the acquisition WILL
declaration to that effect with the Commission. NOT RESULT TO A FIFTY PERCENT
2. WHEN REQUIRED TO DISCLOSE THE (50%) OR MORE OWNERSHIP OF
INTENTION AND TO MAKE TENDER OFFER SECURITIES by the purchaser or such
FOR THE PERCENTAGE SOUGHT TO ALL percentage that is sufficient to gain control of
HOLDERS OF SUCH SECURITIES the board
Any person or group of persons acting in concert, who  Any purchase of securities from an increase in
intends to acquire THIRTY FIVE PERCENT (35%) authorized capital stock
OF THE OUTSTANDING VOTING SHARES OR  Purchase in connection with foreclosure
SUCH OUTSTANDING VOTING SHARES THAT proceedings involving a duly constituted
ARE SUFFICIENT TO GAIN CONTROL OF THE pledge or security arrangement where the
BOARD IN A PUBLIC COMPANY IN ONE OR acquisition is made by the debtor or creditor
MORE TRANSACTIONS WITHIN A PERIOD OF  Purchases in connection with a privatization
TWELVE (12) MONTHS, shall disclose such intention undertaken by the government of the Philippines
and contemporaneously make a tender offer for the  Purchases in connection with corporate
percentage sought to all holders of such securities within rehabilitation under court supervision
the said period.  Purchases in the open market at the prevailing
If the tender offer is OVERSUBSCRIBED, the market Price
aggregate amount of securities to be acquired at the close  Merger or consolidation
of such tender offer shall be proportionately Purchasers of securities in the foregoing transactions
distributed across selling shareholders with whom the shall, however, comply with the disclosure and other
acquirer may have been in private negotiations and other obligations under SRC Rules 18.1 and 23.
shareholders. For purposes of SRC Rule 19.2.2, the last
sale that meets the threshold shall not be consummated TENDER OFFER (Take-Over Bids)
until the closing and completion of the tender offer. A publicly announced intention by a person acting alone
3. WHEN NOT REQUIRED TO MAKE TENDER or in concert with other persons to acquire equity
OFFER securities of a public company
Any person or group of persons acting in concert, who PUBLIC COMPANY
intends to ACQUIRE THIRTY FIVE PERCENT A public company can either be:
(35%) OF THE OUTSTANDING VOTING SHARES  A corporation listed in an exchange
OR SUCH OUTSTANDING VOTING SHARES  A corporation with assets of AT LEAST
THAT ARE SUFFICIENT TO GAIN CONTROL FIFTY MILLIO PESOS (50,000,000) and
OF THE BOARD IN A PUBLIC COMPANY having two hundred (200) or more
THROUGH THE EXCHANGE TRADING SYSTEM stockholders holding at least one hundred
shall NOT be required to make a tender offer even if (100) shares each
such person or group of persons acting in concert acquire TENDER OFFER MATERIALS
the remainder through a block sale if, after acquisition (i) the Offeror's formal offer, including all the material
through the Exchange trading system, they fail to terms and conditions of the tender offer and all their
acquire their target of thirty five percent (35%) or amendments;
such outstanding voting shares that is sufficient to (ii) the related transmittal letter (whereby equity
gain control of the board. securities of the target company that are sought in the
4. WHEN REQUIRED TO MAKE TENDER OFFER tender offer may be transmitted to the Offeror or its
FOR OUTSTANDING VOTING SHARES depository) and all their amendments; and
Any person or group of persons acting in concert, who (iii) press releases, advertisements, letters and other
intends to acquire THIRTY FIVE PERCENT (35%) documents published by the Offeror or sent or given by
OF THE OUTSTANDING VOTING SHARES OR the Offeror to security holders which, directly or
SUCH OUTSTANDING VOTING SHARES THAT indirectly, solicit, invite or request tenders of the equity
ARE SUFFICIENT TO GAIN CONTROL OF THE securities being sought in the tender offer.
BOARD IN A PUBLIC COMPANY DIRECTLY
FROM ONE OR MORE STOCKHOLDERS SHALL
BE REQUIRED TO MAKE A TENDER OFFER
FOR ALL THE OUTSTANDING VOTING
SHARES. The sale of shares pursuant to the private
transaction or block sale shall not be completed prior to
the closing and completion of the tender offer.
 PROCEDURE OF MAKING TENDER OFFER against the take-over bid by resorting to different
1. By filing with the SEC a DECLARATION to make a methods of resistance that include:
tender offer 1. LEVERAGED BUYOUT – some of the components
2. By furnishing the issuer or the originator of the of the corporation buy all the outstanding capital stock
security a statement containing such information held by the public
required under Sec 17 of the SRC: 2. POISON PILL – issuance of shares that can be
Ö Annual Report (balance sheet; profit and loss redeemed if there is take-over
statement 3. CROWN JEWEL – the target corporation sells its
Ö Periodical reports for interim fiscal periods most valuable asset
3. By publishing all requests or invitations for tender or 4. WHITE NIGHT – the target corporation looks for
materials, making a tender offer or requesting or inviting preferable third party investor/s who will make a more
letters of such a security favorable offer

Copies of any additional material soliciting or requesting MARGIN TRADING

such tender offers subsequent to the initial solicitation or The customer purchases stocks by advising only a
request shall contain such information as the portion of the purchase price with the broker extending
Commission may prescribe, and shall be filed with the credit or making loan for balance due.
Commission and sent to the issuer not later than the PROHIBITED PRACTICES
time copies of such materials are first published or sent The following acts are prohibited in any tender offer:
or given to security holders. » To employ any devise, scheme or artifice TO
Any SOLICITATION OR RECOMMENDATION to DEFRAUD ANY PERSON
the holders of such a security to accept or reject a » To MAKE ANY UNTRUE STATEMENT
tender offer or request or invitation for tenders shall be OF A MATERIAL FACT OR TO OMIT TO
made in accordance with such rules and regulations as STATE A MATERIAL FACT necessary in
the Commission may prescribe. order to make the statements made, in the light
of the circumstances under which they are
made, not misleading
» To engage in any act, practice or course of
Securities deposited pursuant to a tender offer or request
business which operates or would operate as A
or invitation for tenders MAY BE WITHDRAWN BY
FRAUD OR DECEIT upon any person
OR ON BEHALF OF THE DEPOSITOR:
 AT ANY TIME throughout the period that
SECTION 20. PROXY SOLICITATIONS
the tender offer remains open and if the
securities deposited have not been previously
Proxies must be issued and proxy solicitation must be
accepted for payment, and
made in accordance with rules and regulations to be
 AT ANY TIME AFTER SIXTY (60) DAYS
issued by the Commission.
from the date of the original tender offer or
Proxies must be:
request or invitation,
except as the Commission may otherwise prescribe.  IN WRITING,
Where the securities offered EXCEED THAT WHICH  SIGNED BY THE STOCKHOLDER or his
A PERSON OR GROUP OF PERSONS IS BOUND duly authorized representative and
OR WILLING TO TAKE UP AND PAY FOR, the  FILED BEFORE THE SCHEDULED
securities that are subject of the tender offer shall be MEETING with the corporate secretary.
taken up as nearly as may be pro rata, disregarding Unless otherwise provided in the proxy, it shall be
fractions, according to the number of securities deposited VALID ONLY FOR THE MEETING FOR WHICH
by each depositor. The provisions of this subsection shall IT IS INTENDED. No proxy shall be valid and
also apply to securities deposited WITHIN TEN (10) effective for a PERIOD LONGER THAN FIVE (5)
DAYS after notice of an increase in the consideration YEARS AT ONE TIME.
offered to security holders, as described in paragraph No broker or dealer shall give any proxy, consent or
(e) of this subsection, is first published or sent or given authorization, in respect of any security carried for the
to security holders. account of a customer, to a person other than the
Where any person varies the terms of a tender offer or customer, WITHOUT THE EXPRESS WRITTEN
request or invitation for tenders before the expiration AUTHORIZATION OF SUCH CUSTOMER.
thereof by increasing the consideration offered to A broker or dealer who holds or acquires the proxy for
holders of such securities, such person shall PAY THE AT LEAST TEN PER CENTUM (10%) or such
INCREASED CONSIDERATION TO EACH percentage as the Commission may prescribe of the
SECURITY HOLDER WHOSE SECURITIES ARE outstanding share of the issuer, shall submit a report
TAKEN UP AND PAID FOR whether or not such identifying the beneficial owner WITHIN TEN (10)
securities have been taken up by such person before the DAYS AFTER SUCH ACQUISITION, for its own
variation of the tender offer or request or invitation. account or customer, to the issuer of the security, to the
Exchange where the security is traded and to the
MINI TENDER OFFER Commission.
It is a type of third-party offer made to a company’s
shareholders as AN ATTEMPT TO PURCHASE THE PROXY
UNDERLYING SHARES. Unlike in conventional Refers to the proxy, consent or authorization referred in
tenders, mini-tenders usually involve LESS THAN 5% Sec 20 of SRC
OF THE COMPANY’S OUTSTANDING SHARES SOLICIT/SOLICITATION
and typically represent a discount compared to the The term solicit/solicitation shall include:
stock’s current market price  Any request for a proxy or authorization
 Any request to execute or not to execute, or to
BEACHHEAD ACQUISITION revoke, a proxy or authorization
Occurs when certain persons who may want to acquire  The furnishing of a form of proxy or other
shares “quietly” by gradually accumulating shares in a communication to security holders under
target company circumstances reasonably calculated to result in
the procurement, withholding or revocation of a
DEFENSES proxy
The components of the target corporation may defend The term shall NOT apply to:
  The performance by any person of ministerial Exchange, on Form 23-A indicating the
acts on behalf of a person soliciting a proxy amount of securities of such issuer of which
 Any solicitation made otherwise than on behalf he is the beneficial owner
of the issuer where the total number of persons » WITHIN TEN (10) CALENDAR DAYS
solicited is not more than nineteen (19) AFTER THE CLOSE OF EACH
CALENDAR MONTH thereafter, if there has
SECTION 21. FEES FOR TENDER OFFERS AND been any change in such ownership during the
CERTAIN PROXY SOLICITATIONS month, file a statement with the Commission
and with the Exchange, if the security is listed
At the time of filing with the Commission of any on an Exchange, on Form 23-B indicating his
statement required under Section 19 for any tender offer ownership at the close of the calendar month
or Section 72.2 for issuer repurchases, or Section 20 for and such changes in his ownership as have
proxy or consent solicitation, the Commission may occurred during that calendar month
require hat the person making such filing pay a fee of
NOT MORE THAN ONE-TENTH Notify the Commission if his direct or indirect
(1/10) OF ONE PERCENTUM (1%) of: beneficial ownership of securities FALLS BELOW
 The proposed aggregate purchase price in the TEN PERCENT (10%), or if he CEASES TO BE AN
case of a transaction under Sections 20 or 72.2 OFFICER OR DIRECTOR OF THE ISSUER. After
 The proposed payment in cash, and the value filing such notification, he shall no longer be required to
of any securities or property to be file Form
transferred in the acquisition, merger or 23-B.
consolidation, or the cash and value of any However, a newly appointed officer, who has no
securities proposed to be received upon the beneficial ownership over the shares of the company,
sale or disposition of such assets in the case of shall notify the Commission of such fact WITHIN
a solicitation under Section 20. The TEN (10) CALENDAR DAYS FROM SUCH
Commission shall prescribe by rule diminishing APPOINTMENT.
fees in inverse proportion to the value of the
aggregate price of the offering If the security is listed on an Exchange, the report shall
be filed on that Exchange in accordance with the rules of
SECTION 22. INTERNAL RECORD KEEPING AND the Exchange, but NOT MORE THAN FIVE (5)
ACCOUNTING CONTROLS CALENDAR DAYS AFTER SUCH PERSON
BECAME BENEFICIAL OWNER.
Every issuer which has a class of securities that satisfies
the requirements of subsection 17.2 shall: Ö The filing with the Exchange may be deemed as
 Make and keep books, records, and accounts filing with the Commission pursuant to a
which, in reasonable detail accurately and fairly Memorandum of Agreement between the
reflect the transactions and dispositions of assets Exchange and the Commission; Provided that,
of the issuer the Memorandum of Agreement shall provide
 Devise and maintain a system of internal for the ability of the Commission to download
accounting controls sufficient to provide and upload the same information made available
reasonable assurances that: to the Exchange.
o transactions and access to assets are For the purpose of preventing the unfair use of
pursuant to management authorization information which may have been obtained by such
o financial statements are prepared in beneficial owner, director, or officer by reason of his
conformity with generally accepted relationship to the issuer, any profit realized by him
accounting principles that are adopted from any purchase and sale, or any sale and purchase, of
by the Accounting Standards Council any equity security of such issuer WITHIN ANY
and the rules promulgated by the PERIOD OF LESS THAN SIX (6) MONTHS, unless
Commission with regard to the such security was acquired in good faith in connection
preparation of financial statements with a debt previously contracted, shall INURE TO
o recorded assets are compared with AND BE RECOVERABLE BY THE ISSUER,
existing assets at reasonable intervals irrespective of any intention of holding the security
and differences are reconciled purchased or of not repurchasing the security sold FOR
A PERIOD EXCEEDING SIX (6) MONTHS.
SECTION 23. TRANSACTIONS OF DIRECTORS,
OFFICERS AND PRINCIPAL STOCKHOLDERS SUIT TO RECOVER SUCH PROFIT may be
instituted before the Regional Trial Court by the issuer,
Every person who is: or by the owner of any security of the issuer in the name
 directly or indirectly the beneficial owner of and in behalf of the issuer if the issuer shall fail or refuse
MORE THAN TEN PER CENTUM (10%) to bring such suit WITHIN SIXTY (60) DAYS AFTER
OF ANY CLASS OF ANY EQUITY REQUEST OR SHALL FAIL DILIGENTLY TO
SECURITY which satisfies the requirements of PROSECUTE THE SAME thereafter, but no such suit
Subsection 17.2, or shall be brought MORE THAN TWO (2) YEARS
 a DIRECTOR OR AN OFFICER OF THE AFTER THE DATE SUCH PROFIT WAS
ISSUER OF SUCH SECURITY REALIZED. This subsection shall not be construed to
shall: cover any transaction where such beneficial owner was
» WITHIN TEN (10) CALENDAR DAYS not such both at the time of the purchase and sale, or the
AFTER THE EFFECTIVE DATE OF THE sale and purchase, of the security involved, or any
REGISTRATION STATEMENT for that transaction or transactions which the Commission by
security, or WITHIN TEN (10) CALENDAR rules and regulations may exempt as not comprehended
DAYS AFTER HE BECOMES SUCH within the purpose of this subsection.
BENEFICIAL OWNER, DIRECTOR OR It shall be UNLAWFUL for any such beneficial owner,
OFFICER, subsequent to the effective date of director, or officer, directly or indirectly, to sell any
the registration statement, whichever is earlier, equity security of such issuer if the person selling the
file a statement with the Commission, and with security or his principal:
the Exchange, if the security is listed on an  Does not own the security sold; or
  If owning the security, does not deliver it devices such as marking the close, painting the
against such sale within twenty (20) days tape, squeezing the float, hype and dump, boiler
thereafter, or does not within five (5) days room operations and such other similar devices
after such sale deposit it in the mails or other » It is the practice of inflating the price of a stock
usual channels of transportation; but no through a system of pretended purchases
person shall be deemed to have violated this MANIPULATION OF SECURITY PRICES –
subsection if he proves that notwithstanding the Circulating Information to Affect the Price of a
exercise of good faith he was unable to make Security
such delivery or deposit within such time, or (c) To circulate or disseminate information that the
that to do so would cause undue inconvenience price of any security listed in an Exchange will or is
or expense. likely to rise or fall because of manipulative market
The provisions of Subsection 23.2 shall not apply to operations of any one or more persons conducted for the
any purchase and sale, or sale and purchase, and the purpose of raising or depressing the price of the security
provisions of Subsection 23.3 shall not apply to any for the purpose of inducing the purchase or sale of such
sale, of an equity security not then or thereafter held security
by him in an investment account, by a dealer in the (d) To make false or misleading statement with
ordinary course of his business and incident to the respect to any material fact, which he knew or had
establishment or maintenance by him of a primary or reasonable ground to believe was so false or misleading,
secondary market, otherwise than on an Exchange, for for the purpose of inducing the purchase or sale of any
such security. The Commission may, by such rules and security listed or traded in an Exchange
regulations as it deems necessary or appropriate in the MANIPULATION OF SECURITY PRICES –
public interest, define and prescribe terms and conditions Price Fixing
with respect to securities held in an investment account (e) To effect, either alone or others, any series of
and transactions made in the ordinary course of business transactions for the purchase and/or sale of any
and incident to the establishment or maintenance of a security traded in an Exchange for the purpose of
primary or secondary market. pegging, fixing or stabilizing the price of such security,
unless otherwise allowed by this Code or by rules of the
SECTION 24. MANIPULATION OF SECURITY Commission
PRICES; DEVICES AND PRACTICES No person shall use or employ, in connection with the
purchase or sale of any security any manipulative or
It shall be UNLAWFUL for any person acting for deceptive device or contrivance. Neither shall any short
himself or through a dealer or broker, directly or sale be effected nor any STOP-LOSS ORDER be
indirectly: executed in connection with the purchase or sale of any
MANIPULATION OF TRADE VOLUME security except in accordance with such rules and
(a) To create a false or misleading appearance of regulations as the Commission may prescribe as
active trading in any listed security traded in an necessary or appropriate in the public interest or for the
Exchange or any other trading market: protection of investors.
 WASH TRADE – By effecting any The foregoing provisions notwithstanding, the
transaction in such security which involves Commission, having due regard to the public interest and
no change in the beneficial ownership thereof the protection of investors, may, by rules and
» The operation of simultaneously buying and regulations, allow certain acts or transactions that may
selling the exact same stock so no change otherwise be prohibited under this Section.
of ownership occurs and yet creates the
illusion that the security has been traded COMMON FORMS OF PRICE MANIPULATION
1. PAINTING THE TAPE – market players makes
 ORDER MATCHING OR IMPROPERLY several trades of a certain security between themselves in
MATCH ORDERS – By entering an order or an attempt to create the appearance of substantial trading
orders for the purchase or sale of such activity and thus influence its price
security with the knowledge that a simultaneous 2. MARKING THE CLOSE – buying and selling the
order or orders of substantially the same size, securities at the close of the market in an effort to alter
time and price, for the sale or purchase of any the closing price of the security because a higher closing
such security, has or will be entered by or for prices makes it more attractive as a first option at the re-
the same or different parties opening of the market the next trading day
» It involves a transaction where both the buy 3. HYPE AND DUMP – engaging in buying activity at
and the sell orders are entered at the same increasingly higher prices and then selling the securities
time with the same price and quantity by in the market at higher securities
different but colluding parties 4. WASH SALES – engaging in transactions in which
there is no change in beneficial ownership or a security
 By performing similar act where there is no 5. SQUEEZING THE FLOAT – taking advantage of a
change in beneficial ownership shortage of securities in the market by controlling the
PRICE MANIPULATION (Market Rigging or demand side and exploiting the market congestion
Jiggling) during such shortages in a way as to create artificial
(b) To effect, alone or with others, a series of prices
transactions in securities that: 6. Disseminating false or misleading market information
(i) Raises their price to induce the purchase through media, including the internet, or any other
of a security, whether of the same or a different means to move the price of a security in a direction that
class of the same issuer or of a controlling, is favorable to a position held or a transaction
controlled, or commonly controlled company by 7. Other types of prohibited conduct and/or manipulative
others; practices which include, among others, the creation of
(ii) Depresses their price to induce the sale of temporary funds for the purpose of engaging in other
a security, whether of the same or a different manipulative practices
class, of the same issuer or of a controlling,
controlled, or commonly controlled company by MARGIN TRADING or SHORT SALE
others; or Any sale of a security which the seller does not own or
(iii) Creates active trading to induce such a any sale which is consummated by the delivery of a
purchase or sale through manipulative security borrowed by, or for the account of the seller
with the commitment of the seller or securities borrower It shall be unlawful for any person, directly or indirectly,
TO RETURN OR DELIVER SAID SECURITIES in connection with the purchase or sale of any securities
OR THEIR EQUIVALENT TO THE LENDER on a to:
determined or determinable future date.  Employ any DEVICE, SCHEME, OR
A person shall be deemed to own a security if: ARTIFICE TO DEFRAUD
 he or his agent has title to it;  Obtain money or property by means of ANY
 he has purchased, or has entered into an UNTRUE STATEMENT OF A MATERIAL
unconditional contract, binding on both parties FACT OR ANY OMISSION TO STATE A
thereto, to purchase it and has not yet received MATERIAL FACT necessary in order to make
it; the statements made, in the light of the
 he owns a security convertible into or circumstances under which they were made, not
exchangeable for it and has tendered such misleading
security for conversion or exchange;  Engage in any act, transaction, practice or
 he has an option to purchase or acquire it and course of business which operates or would
has exercised such option; or operate as a FRAUD OR DECEIT upon any
 he has rights or warrants to subscribe to it person
and has exercised such rights or warrants MARKET SECURITIES FRAUD
provided, however, that a person shall be MANIPULATION
deemed to own securities only to the extent he involves engaging in involve the direct and
has a net long position in such securities. transactions which are outright embezzlement of
QUALIFIED SECURITY intended or calculated to an investor. The fraud or
The term qualified security shall mean a listed security deceive the investing deception is employed
that is eligible for short selling in accordance with the public by creating false directly against another
following standards: sense of demand or person and damages is
 market capitalization; market activity. However, necessary to make the
 tradability; investors may or may not issuer or seller of securities
 liquidity; and “fall” for these schemes. It liable.
 with other applicable guidelines as may be is not necessary for an
prescribed by the Commission. investor to be defrauded
before a market player can
MANDATORY CLOSE-OUT
be held liable for market
A contract involving a short sale which has not resulted
manipulation. It is
in a delivery by the Broker Dealer within the settlement
sufficient that he performs
period must be closed by the Broker Dealer either by
acts which are intended to
purchasing for cash or guaranteed delivery, securities of
defraud.
like kind and quantity on the next business day after
A Broker Dealer, Associated Person or salesman of a
settlement date, unless such purchase cannot be effected
Broker Dealer, a paying agent, transfer agent, trustee, or
within said period for justifiable reasons in which case,
any other person acting in a similar fiduciary capacity,
notification in writing shall be made with the Exchange
who has received information as to the ownership of
and the Commission, or in accordance with rules of the
securities, shall NOT:
clearing agency that shall clear and settle the
transactions.  make use of such information for the purpose
of soliciting or making purchases, sales or
The Commission may, motu proprio or upon
exchanges of securities or,
recommendation of the Exchange
 prohibit short selling in the Exchange  except as provided in SRC Rule 30.2.9, provide
indefinitely or for such period as it may deem such information to any person who does not
proper FOR THE PROTECTION OF THE need such information to fulfill his
INVESTORS responsibilities under the Code
It shall be Unlawful for any:
 prohibit short selling in any Exchange as an
emergency measure or whenever such short  Person to represent that he HAS BEEN
selling is NECESSARY OR APPROPRIATE REGISTERED AS A SECURITIES
IN THE PUBLIC INTEREST INTERMEDIARY with the Commission
unless such person is registered under the Code.
Registration under the Corporation Code shall
not be deemed to be registration under the Code
SECTION 25. REGULATION OF OPTION TRADING
 Broker Dealer to represent that the
No member of an Exchange shall, directly or indirectly registration of the Broker Dealer under the
endorse or guarantee the performance of any put, call, Code, or the failure of the Commission to
straddle, option or privilege in relation to any security deny, suspend, or revoke such registration,
registered on a securities exchange. indicates in any way that THE COMMISSION
HAS PASSED UPON OR APPROVED the
financial standing, business, or conduct of such
The terms "PUT", "CALL", "STRADDLE",
Broker Dealer, or the merits of any security or
"OPTION", or "PRIVILEGE" shall not include any
any transaction/s conducted thereby
registered warrant, right or convertible security.
 Person to represent that a security is a particular
PUT – a transferrable option or offer to deliver a given
type of security WHEN SUCH
number of shares of a stock at a stated price at any given
REPRESENTATION IS INCONSISTENT
time during a stated period
with a stated definition under the Code or rules
or regulations adopted thereunder
CALL – transferrable option to buy a specified number  Person to represent that a security to be sold,
of shares at a stated price transferred, pledged, mortgaged,
encumbered, used for delivery, or any other
STRADDLE – combination of put and call purpose to another entity or itself has been
legally authorized by the registered owner
SECTION 26. FRAUDULENT TRANSACTIONS WHEN SUCH REPRESENTATION IS NOT
TRUE and documented in writing at the time
SECURITIES FRAUD and date it was used
  Person, whether as principal or agent, to buy,  would be considered by a reasonable person
sell or deal in securities or solicit investments important under the circumstances in
in securities and other investment contracts, determining his course of action whether to buy,
unless he is a registered broker, dealer or sell or hold a security
licensed salesman of a broker dealer and the
securities are registered under the Code or It shall be UNLAWFUL for any insider to
exempt from registration pursuant to Sections 9 communicate material nonpublic information about
and 10 thereof. the issuer or the security to any person who, by virtue
DEALING IN SECURITIES of the communication, becomes an insider as defined
includes making or offering to make with any person, or in Subsection 3.8, where the insider communicating the
inducing or attempting to induce any person to enter into information knows or has reason to believe that such
or to offer to enter into any agreement for or with a view person will likely buy or sell a security of the issuer
to acquiring, disposing of, subscribing for securities. while in possession of such information.
SOLICITATION UNLAWFUL PURCHASE OR SALE OF
the act of seeking or asking for business or information SECURITIES SUBJECT TO TENDER OFFER
and including the act of providing information about a It shall be UNLAWFUL where a tender offer has
security or investment product being offered for sale commenced or is about to commence for:
with the view of making another person a client or  Any person (other than the tender offeror) who
closing or bringing in a sale or purchase of security or IS IN POSSESSION OF MATERIAL
investment product. The solicitor need not be a signatory NONPUBLIC INFORMATION RELATING
to any contract relative to such offer or sale of the TO SUCH TENDER OFFER, to buy or sell
security. the securities of the issuer that are sought or to
INVESTMENT CONTRACT be sought by such tender offer if such person
a contract, transaction or scheme (collectively knows or has reason to believe that the
"contract") whereby a person invests his money in a information is nonpublic and has been acquired
common enterprise and is led to expect profits primarily directly or indirectly from the tender offeror,
from the efforts of others. An investment contract is those acting on its behalf, the issuer of the
presumed to exist whenever a person seeks to use the securities sought or to be sought by such tender
money or property of others on the promise of profits. offer, or any insider of such issuer; and
COMMON ENTERPRISE  COMMUNICATION OF NON-PUBLIC
deemed created when two (2) or more investors "pool" MATERIAL INFORMATION WITH
their resources, creating a common enterprise, even if the RESPECT TO TENDER OFFER – Any
promoter receives nothing more than a broker's tender offeror, those acting on its behalf, the
commission issuer of the securities sought or to be sought
by such tender offer, and any insider of such
SECTION 27. INSIDER’S DUTY TO DISCLOSE issuer to communicate material nonpublic
WHEN TRADING information relating to the tender offer to any
other person where such communication is
ACTS CONSTITUTING INSIDER TRADING likely to result in a violation of Subsection 27.4
INSIDER TRADING PROPER (a)(i). ↑
It shall be unlawful for an insider to sell or buy a For purposes of this subsection the term "SECURITIES
security of the issuer, while in possession of material OF THE ISSUER SOUGHT OR TO BE SOUGHT
information with respect to the issuer or the security that BY SUCH TENDER OFFER" shall include any
is not generally available to the public, unless: securities convertible or exchangeable into such
 The insider proves that the information was securities or any options or rights in any of the foregoing
not gained from such relationship; or securities.
 If the other party selling to or buying from the
insider (or his agent) is identified, the insider
proves:
o that he disclosed the information to
the other party, or
o that he had reason to believe that the
other party otherwise is also in INSIDER
possession of the information Means:
PRESUMPTION  the issuer
A purchase or sale of a security of the issuer made by an  a director or officer (or person performing
insider defined in Subsection 3.8, or such insider's similar functions) of, or a person controlling the
spouse or relatives by affinity or consanguinity within issuer
the second degree, legitimate or common-law, shall be  a person whose relationship or former
presumed to have been effected while in possession of relationship to the issuer gives or gave him
material nonpublic information if transacted after such access to material information about the issuer
information came into existence but prior to or the security that is not generally available to
dissemination of such information to the public and the the public
lapse of a reasonable time for the market to absorb such  a government employee, or director, or officer
information: Provided, however , That this presumption of an exchange, clearing agency and/or self-
shall be rebutted upon a showing by the purchaser or regulatory organization who has access to
seller that he was not aware of the material nonpublic material information about an issuer or a
information at the time of the purchase or sale. security that is not generally available to the
COMMUNICATION OF MATERIAL NON- public
PUBLIC INFORMATION RESULTING IN  a person who learns such information by a
INSIDER TRADING communication from any of the foregoing
 It has not been generally disclosed to the public insiders
and would likely affect the market price of the TIPPER/TIPEE THEORY
security after being disseminated to the public A person who acquires material non-public information
and the lapse of a reasonable time for the market from an insider is also engaged in insider trading
to absorb the information