SECTION 1. Title. — This shall be known as "The Securities Regulation Code".

SECTION 2. Declaration of State Policy. — The State shall establish a socially conscious, free market that regulates itself, encourage the widest participation of ownership in enterprises, enhance the democratization of wealth, promote the development of the capital market, protect investors, ensure full and fair disclosure about securities, minimize if not totally eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market.

To achieve these ends, this Securities Regulation Code is hereby enacted.

SECTION 3. Definition of Terms. — 3.1. "Securities" are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instrument, whether written or electronic in character. It includes:

(a) Shares of stock, bonds, debentures, notes, evidences of indebtedness, asset-backed securities;

(b) Investment contracts, certificates of interest or participation in a profit sharing agreement, certificates of deposit for a future subscription;

(c) Fractional undivided interests in oil, gas or other mineral rights;

(d) Derivatives like option and warrants;

(e) Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments;

(f) Proprietary or nonproprietary membership certificates in corporations; and

(g) Other instruments as may in the future be determined by the Commission.

3.2. "Issuer" is the originator, maker, obligor, or creator of the security.

3.3. "Broker" is a person engaged in the business of buying and selling securities for the account of others.

3.4. "Dealer" means any person who buys and sells securities for his/her own account in the ordinary course of business.

3.5. "Associated person of a broker or dealer" is an employee thereof who, directly exercises control of supervisory authority, but does not include a salesman, or an agent or a person whose functions are solely clerical or ministerial.

3.6. "Clearing agency" is any person who acts as intermediary in making deliveries upon payment to effect settlement in securities transactions.

3.7. "Exchange" is an organized marketplace or facility that brings together buyers and sellers and executes trades of securities and/or commodities.

3.8. "Insider" means: (a) the issuer; (b) a director or officer (or person performing similar functions) of, or a person controlling the issuer; (c) a person 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 to the public; (d) a government employee, or director, or officer of an exchange, clearing agency and/or self-regulatory organization who has access to material information about an issuer or a security that is not generally available to the public; or (e) a person who learns such information by a communication from any of the foregoing insiders.

3.9. "Pre-need plans" are contracts which provide for the performance of future services or the payment of future monetary considerations at the time of actual need, for which planholders pay in cash or installment at stated prices, with or without interest or insurance coverage and includes life, pension, education, interment, and other plans which the Commission may from time to time approve.

3.10. "Promoter" is a person who, acting alone or with others, takes initiative in founding and organizing the business or enterprise of the issuer and receives consideration therefor.

3.11. "Prospectus" is the document made by or on behalf of an issuer, underwriter or dealer to sell or offer securities for sale to the public through a registration statement filed with the Commission.

3.12. "Registration statement" is the application for the registration of securities required to be filed with the Commission.

3.13. "Salesman" is a natural person, employed as such or as an agent, by a dealer, issuer or broker to buy and sell securities.

3.14. "Uncertificated security" is a security evidenced by electronic or similar records.

3.15. "Underwriter" is a person who guarantees on a firm commitment and/or declared best effort basis the distribution and sale of securities of any kind by another company.

SECTION 4. Administrative Agency. — 4.1. This Code shall be administered by the Securities and Exchange Commission (hereinafter referred to as the "Commission") as a collegial body, composed of a Chairperson and four (4) Commissioners, appointed by the President for a term of seven (7) years each and who shall serve as such until their successor shall have been appointed and qualified. A Commissioner appointed to fill a vacancy occurring prior to the expiration of the term for which his/her predecessor was appointed, shall serve only for the unexpired portion of such term. The incumbent Chairperson and Commissioners at the effectivity of this Code, shall serve the unexpired portion of their terms under Presidential Decree No. 902-A. Unless the context indicates otherwise, the term "Commissioner" includes the Chairperson.

4.2. The Commissioners must be natural-born citizens of the Philippines, at least forty (40) years of age for the Chairperson and at least thirty-five (35) years of age for the Commissioners, of good moral character, of unquestionable integrity, of known probity and patriotism, and with recognized competence in social and economic disciplines: Provided, That the majority of Commissioners, including the Chairperson, shall be members of the Philippine Bar.

4.3. The Chairperson is chief executive officer of the Commission. The Chairperson shall execute and administer the policies, decisions, orders and resolutions approved by the Commission and shall have the general executive direction and supervision of the work and operation of the Commission and of its members, bodies, boards, offices, personnel and all its administrative business.

4.4. The salary of the Chairperson and the Commissioners shall be fixed by the President of the Philippines based on an objective classification system, at a sum comparable to the members of the Monetary Board and commensurate to the importance and responsibilities attached to the position.

4.5. The Commission shall hold meetings at least once a week for the conduct of business or as often as may be necessary upon call of the Chairperson or upon the request of three (3) Commissioners. The notice of the meeting shall be given to all Commissioners and the presence of three (3) Commissioners shall constitute a quorum. In the absence of the Chairperson, the most senior Commissioner shall act as presiding officer of the meeting.

4.6. The Commission may, for purposes of efficiency, delegate any of its functions to any department or office of the Commission, an individual Commissioner or staff member of the Commission except its review or appellate authority and its power to adopt, alter and supplement any rule or regulation.

The Commission may review upon its own initiative or upon the petition of any interested party any action of any department or office, individual Commissioner, or staff member of the Commission.

SECTION 5. Powers and Functions of the Commission. — 5.1. The Commission shall act with transparency and shall have the powers and functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions:

(a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or permit issued by the Government;

(b) Formulate policies and recommendations on issues concerning the securities market, advise Congress and other government agencies on all aspects of the securities market and propose legislation and amendments thereto;

(c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications;

(d) Regulate, investigate or supervise the activities of persons to ensure compliance;

(e) Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other SROs;

(f) Impose sanctions for the violation of laws and the rules, regulations and orders issued pursuant thereto;

(g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide guidance on and supervise compliance with such rules, regulations and orders;

(h) Enlist the aid and support of and/or deputize any and all enforcement agencies of the Government, civil or military as well as any private institution, corporation, firm, association or person in the implementation of its powers and functions under this Code;

(i) Issue cease and desist orders to prevent fraud or injury to the investing public;

(j) Punish for contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court;

(k) Compel the officers of any registered corporation or association to call meetings of stockholders or members thereof under its supervision;

(l) Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases, order the examination, search and seizure of all documents, papers, files and records, tax returns, and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it, subject to the provisions of existing laws;

(m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law; and

(n) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws.

5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, That the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.

SECTION 6. Indemnification and Responsibilities of Commissioners. — 6.1. The Commission shall indemnify each Commissioner and other officials of the Commission, including personnel performing supervision and examination functions for all costs and expenses reasonably incurred by such persons in connection with any civil or criminal actions, suits or proceedings to which they may be or made a party by reason of the performance of their functions or duties, unless they are finally adjudged in such actions or proceedings to be liable for gross negligence or misconduct.

In the event of settlement or compromise, indemnification shall be provided only in connection with such matters covered by the settlement as to which the Commission is advised by external counsel that the persons to be indemnified did not commit any gross negligence or misconduct.

The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be paid by the Commission in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Commissioner, officer or employee to repay the amount advanced should it ultimately be determined by the Commission that he/she is not entitled to be indemnified as provided in this subsection.

6.2. The Commissioners, officers and employees of the Commission who willfully violate this Code or who are guilty of negligence, abuse or acts of malfeasance or fail to exercise extraordinary diligence in the performance of their duties shall be held liable for any loss or injury suffered by the Commission or other institutions as a result of such violation, negligence, abuse, malfeasance, or failure to exercise extraordinary diligence.

Similar responsibility shall apply to the Commissioners, officers and employees of the Commission for (1) the disclosure of any information, discussion or resolution of the Commission of a confidential nature, or about the confidential operations of the Commission, unless the disclosure is in connection with the performance of official functions with the Commission or with prior authorization of the Commissioners; or (2) the use of such information for personal gain or to the detriment of the government, the Commission or third parties: Provided, however, That any data or information required to be submitted to the President and/or Congress or its appropriate committee, or to be published under the provisions of this Code shall not be considered confidential.

SECTION 7. Reorganization. — 7.1. To achieve the goals of this Code, consistent with Civil Service laws, the Commission is hereby authorized to provide for its reorganization, to streamline its structure and operations, upgrade its human resource component and enable it to more efficiently and effectively perform its functions and exercise its powers under this Code.

7.2. All positions of the Commission shall be governed by a compensation and position classification systems and qualification standards approved by the Commission based on a comprehensive job analysis and audit of actual duties and responsibilities. The compensation plan shall be comparable with the prevailing compensation plan in the Bangko Sentral ng Pilipinas and other government financial institutions and shall be subject to periodic review by the Commission no more than once every two (2) years without prejudice to yearly merit reviews or increases based on productivity and efficiency. The Commission shall, therefore, be exempt from laws, rules, and regulations on compensation, position classification and qualification standards. The Commission shall, however, endeavor to make its system conform as closely as possible with the principles under the Compensation and Position Classification Act of 1989 (Republic Act No. 6758, as amended).

SECTION 8. Requirement of Registration of Securities. — 8.1. Securities shall not be sold or offered for sale or distribution within the Philippines, without a registration statement duly filed with and approved by the Commission. Prior to such sale, information on the securities, in such form and with such substance as the Commission may prescribe, shall be made available to each prospective purchaser.

8.2. The Commission may conditionally approve the registration statement under such terms as it may deem necessary.

8.3. The Commission may specify the terms and conditions under which any written communication, including any summary prospectus, shall be deemed not to constitute an offer for sale under this Section.

8.4. A record of the registration of securities shall be kept in a Register of Securities in which shall be recorded orders entered by the Commission with respect to such securities. Such register and all documents or information with respect to the securities registered therein shall be open to public inspection at reasonable hours on business days.

8.5. The Commission may audit the financial statements, assets and other information of a firm applying for registration of its securities whenever it deems the same necessary to insure full disclosure or to protect the interest of the investors and the public in general.

SECTION 9. Exempt Securities. — 9.1. The requirement of registration under Subsection 8.1 shall not as a general rule apply to any of the following classes of securities:

(a) Any security issued or guaranteed by the Government of the Philippines, or by any political subdivision or agency thereof, or by any person controlled or supervised by, and acting as an instrumentality of said Government.

(b) Any security issued or guaranteed by the government of any country with which the Philippines maintains diplomatic relations, or by any state, province or political subdivision thereof on the basis of reciprocity: Provided, That the Commission may require compliance with the form and content of disclosures the Commission may prescribe.

(c) Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the proper adjudicatory body.

(d) Any security or its derivatives the sale or transfer of which, by law, is under the supervision and regulation of the Office of the Insurance Commission, Housing and Land Use Regulatory Board, or the Bureau of Internal Revenue.

(e) Any security issued by a bank except its own shares of stock.

9.2. The Commission may, by rule or regulation after public hearing, add to the foregoing any class of securities if it finds that the enforcement of this Codewith respect to such securities is not necessary in the public interest and for the protection of investors.

SECTION 10. Exempt Transactions. — 10.1. The requirement of registration under Subsection 8.1 shall not apply to the sale of any security in any of the following transactions:

(a) At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee in insolvency or bankruptcy.

(b) By or for the account of a pledge holder, or mortgagee or any other similar lien holder selling or offering for sale or delivery in the ordinary course of business and not for the purpose of avoiding the provisions of this Code, to liquidate a bona fide debt, a security pledged in good faith as security for such debt.

(c) An isolated transaction in which any security is sold, offered for sale, subscription or delivery by the owner thereof, or by his representative for the owner's account, such sale or offer for sale, subscription or delivery not being made in the course of repeated and successive transactions of a like character by such owner, or on his account by such representative and such owner or representative not being the underwriter of such security.

(d) The distribution by a corporation, actively engaged in the business authorized by its articles of incorporation, of securities to its stockholders or other security holders as a stock dividend or other distribution out of surplus.

(e) The sale of capital stock of a corporation to its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale of such capital stock.

(f) The issuance of bonds or notes secured by mortgage upon real estate or tangible personal property, where the entire mortgage together with all the bonds or notes secured thereby are sold to a single purchaser at a single sale.

(g) The issue and delivery of any security in exchange for any other security of the same issuer pursuant to a right of conversion entitling the holder of the security surrendered in exchange to make such conversion: Provided, That the security so surrendered has been registered under this Code or was, when sold, exempt from the provisions of this Code, and that the security issued and delivered in exchange, if sold at the conversion price, would at the time of such conversion fall within the class of securities entitled to registration under this Code. Upon such conversion the par value of the security surrendered in such exchange shall be deemed the price at which the securities issued and delivered in such exchange are sold.

(h) Broker's transactions, executed upon customer's orders, on any registered Exchange or other trading market.

(i) Subscriptions for shares of the capital stock of a corporation prior to the incorporation thereof or in pursuance of an increase in its authorized capital stock under the Corporation Code, when no expense is incurred, or no commission, compensation or remuneration is paid or given in connection with the sale or disposition of such securities, and only when the purpose for soliciting, giving or taking of such subscriptions is to comply with the requirements of such 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 capital increased.

(j) The exchange of securities by the issuer with its existing security holders exclusively, where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.

(k) The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines during any twelve-month period.

(l) The sale of securities to any number of the following qualified buyers:

(i) Bank;

(ii) Registered investment house;

(iii) Insurance company;

(iv) Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or managed by a bank or other persons authorized by the Bangko Sentral to engage in trust functions;

(v) Investment company; or

(vi) Such other person as the Commission may by rule determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management.

10.2. The Commission may exempt other transactions, if it finds that the requirements of registration under this Code is not necessary in the public interest or for the protection of the investors such as by reason of the small amount involved or the limited character of the public offering.

10.3. Any person applying for an exemption under this Section, shall file with the Commission a notice identifying the exemption relied upon on such form and at such time as the Commission by rule may prescribe and with such notice shall pay to the Commission a fee equivalent to one-tenth (1/10) of one percent (1%) of the maximum aggregate price or issued value of the securities.

SECTION 11. Commodity Futures Contracts. — No person shall offer, sell or enter into commodity futures contracts except in accordance with rules, regulations and orders the Commission may prescribe in the public interest. The Commission shall promulgate rules and regulations involving commodity futures contracts to protect investors to ensure the development of a fair and transparent commodities market.

SECTION 12. Procedure for Registration of Securities. — 12.1. All securities required to be registered under Subsection 8.1 shall be registered through the filing by the issuer in the main office of the Commission, of a sworn registration statement with respect to such securities, in such form and containing such information and documents as the Commission shall prescribe. The registration statement shall include any prospectus required or permitted to be delivered under Subsections 8.2, 8.3 and 8.4.

12.2. In promulgating rules governing the content of any registration statement (including any prospectus made a part thereof or annexed thereto), the Commission may require the registration statement to contain such information or documents as it may, by rule, prescribe. It may dispense with any such requirement, or may require additional information or documents, including written information from an expert, depending on the necessity thereof or their applicability to the class of securities sought to be registered.

12.3. The information required for the registration of any kind, and all securities, shall include, among others, the effect of the securities issue on ownership, on the mix of ownership, especially foreign and local ownership.

12.4. The registration statement shall be signed by the issuer's executive officer, its principal operating officer, its principal financial officer, its comptroller, its principal accounting officer, its corporate secretary or persons performing similar functions accompanied by a duly verified resolution of the board of directors of the issuer corporation. The written consent of the expert named as having certified any part of the registration statement or any document used in connection therewith shall also be filed. Where the registration statement includes shares to be sold by selling shareholders, a written certification by such selling shareholders as to the accuracy of any part of the registration statement contributed to by such selling shareholders shall also be filed.

12.5. (a) Upon filing of the registration statement, the issuer shall pay to the Commission a fee of not more than one-tenth (1/10) of one per centum (1%) of the maximum aggregate price at which such securities are proposed to be offered. The Commission shall prescribe by rule diminishing fees in inverse proportion the value of the aggregate price of the offering.

(b) Notice of the filing of the registration statement shall be immediately published by the issuer, at its own expense, in two (2) newspapers of general circulation in the Philippines, once a week for two (2) consecutive weeks, or in such other manner as the Commission by rule shall prescribe, reciting that a registration statement for the sale of such security has been filed, and that the aforesaid registration statement, as well as the papers attached thereto are open to inspection at the Commission during business hours, and copies thereof, photostatic or otherwise, shall be furnished to interested parties at such reasonable charge as the Commission may prescribe.

12.6. Within forty-five (45) days after the date of filing of the registration statement, or by such later date to which the issuer has consented, the Commission shall declare the registration statement effective or rejected, unless the applicant is allowed to amend the registration statement as provided in Section 14 hereof. The Commission shall enter an order declaring the registration statement to be effective if it finds that the registration statement together with all the other papers and documents attached thereto, is on its face complete and that the requirements have been complied with. The Commission may impose such terms and conditions as may be necessary or appropriate for the protection of the investors.

12.7. Upon effectivity of the registration statement, the issuer shall state under oath in every prospectus that all registration requirements have been met and that all information are true and correct as represented by the issuer or the one making the statement. Any untrue statement of fact or omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading shall constitute fraud.

SECTION 13. Rejection and Revocation of Registration of Securities. — 13.1. The Commission may reject a registration statement and refuse registration of the security thereunder, or revoke the effectivity of a registration statement and the registration of the security thereunder after due notice and hearing by issuing an order to such effect, setting forth its findings in respect thereto, if it finds that:

(a) The issuer:

(i) Has been judicially declared insolvent;

(ii) Has violated any of the provisions of this Code, the rules promulgated pursuant thereto, or any order of the Commission of which the issuer has notice in connection with the offering for which the registration statement has been filed;

(iii) Has been or is engaged or is about to engage in fraudulent transactions;

(iv) Has made any false or misleading representation of material facts in any prospectus concerning the issuer or its securities;

(v) Has failed to comply with any requirement that the Commission may impose as a condition for registration of the security for which the registration statement has been filed; or

(b) The registration statement is on its face incomplete or inaccurate in any material respect or includes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading; or

(c) The issuer, any officer, director or controlling person of the issuer, or person performing similar functions, or any underwriter has been convicted, by a competent judicial or administrative body, upon plea of guilty, or otherwise, of an offense involving moral turpitude and/or fraud or is enjoined or restrained by the Commission or other competent judicial or administrative body for violations of securities, commodities, and other related laws.

For purposes of this subsection, the term "competent judicial or administrative body" shall include a foreign court of competent jurisdiction as provided for under the Rules of Court.

13.2. The Commission may compel the production of all the books and papers of such issuer, and may administer oaths to, and examine the officers of such issuer or any other person connected therewith as to its business and affairs.

13.3. If any issuer shall refuse to permit an examination to be made by the Commission, its refusal shall be ground for the refusal or revocation of the registration of its securities.

13.4. If the Commission deems it necessary, it may issue an order suspending the offer and sale of the securities pending any investigation. The order shall state the grounds for taking such action, but such order of suspension although binding upon the persons notified thereof, shall be deemed confidential, and shall not be published. Upon the issuance of the suspension order, no further offer or sale of such security shall be made until the same is lifted or set aside by the Commission. Otherwise, such sale shall be void.

13.5. Notice of issuance of such order shall be given to the issuer and every dealer and broker who shall have notified the Commission of an intention to sell such security.

13.6. A registration statement may be withdrawn by the issuer only with the consent of the Commission.

SECTION 14. Amendments to the Registration Statement. — 14.1. If a registration statement is on its face incomplete or inaccurate in any material respect, the Commission shall issue an order directing the amendment of the registration statement. Upon compliance with such order, the amended registration statement shall become effective in accordance with the procedure mentioned in Subsection 12.6 hereof.

14.2. An amendment filed prior to the effective date of the registration statement shall recommence the forty-five (45) days period within which the Commission shall act on a registration statement. An amendment filed after the effective date of the registration statement shall become effective only upon such date as determined by the Commission.

14.3. If any change occurs in the facts set forth in a registration statement, the issuer shall file an amendment thereto setting forth the change.

14.4. If, at any time, the Commission finds that a registration statement contains any false statement or omits to state any fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may conduct an examination, and, after due notice and hearing, issue an Order suspending the effectivity of the registration statement. If the statement is duly amended, the suspension order may be lifted.

14.5. In making such examination the Commission or any officer or officers designated by it may administer oaths and affirmations and shall have access to, and may demand the production of, any books, records or documents relevant to the examination. Failure of the issuer, underwriter, or any other person to cooperate, or his obstruction or refusal to undergo an examination, shall be a ground for the issuance of a suspension order.

SECTION 15. Suspension of Registration. — 15.1. If, at any time, the information contained in the registration statement filed is or has become misleading, incorrect, inadequate or incomplete in any material respect, or the sale or offering for sale of the security registered thereunder may work or tend to work a fraud, the Commission may require from the issuer such further information as may in its judgment be necessary to enable the Commission to ascertain whether the registration of such security should be revoked on any ground specified in this Code. The Commission may also suspend the right to sell and offer for sale such security pending further investigation, by entering an order specifying the grounds for such action, and by notifying the issuer, underwriter, dealer or broker known as participating in such offering.

15.2. The refusal to furnish information required by the Commission may be a ground for the issuance of an order of suspension pursuant to Subsection 15.1. Upon the issuance of any such order and notification to the issuer, underwriter, dealer or broker known as participating in such offering, no further offer or sale of any such security shall be made until the same is lifted or set aside by the Commission. Otherwise, such sale shall be void.

15.3. Upon issuance of an order of suspension, the Commission shall conduct a hearing. If the Commission determines that the sale of any security should be revoked, it shall issue an order prohibiting sale of such security.

Until the issuance of a final order, the suspension of the right to sell, though binding upon the persons notified thereof, shall be deemed confidential, and shall not be published, unless it shall appear that the order of suspension has been violated after notice. If, however, the Commission finds that the sale of the security will neither be fraudulent nor result in fraud, it shall forthwith issue an order revoking the order of suspension, and such security shall be restored to its status as a registered security as of the date of such order of suspension.

SECTION 16. Pre-Need Plans. — No person shall sell or offer for sale to the public any pre-need plan except in accordance with rules and regulations which the Commission shall prescribe. Such rules shall regulate the sale of pre-need plans by, among other things, requiring the registration of pre-need plans, licensing persons involved in the sale of pre-need plans, requiring disclosures to prospective plan holders, prescribing advertising guidelines, providing for uniform accounting system, reports and record keeping with respect to such plans, imposing capital, bonding and other financial responsibility, and establishing trust funds for the payment of benefits under such plans.

SECTION 17. Periodic and Other Reports of Issuers. — 17.1. Every issuer satisfying the requirements in Subsection 17.2 hereof shall file with the Commission:

(a) Within one hundred thirty-five (135) days, after the end of the issuer's fiscal year, or such other time as the Commission may prescribe, an annual report which shall include, among others, a balance sheet, profit and loss statement and statement of cash flows, for such last fiscal year, certified by an independent certified public accountant, and a management discussion and analysis of results of operations; and

(b) Such other periodical reports for interim fiscal periods and current reports on significant developments of the issuer as the Commission may prescribe as necessary to keep current information on the operation of the business and financial condition of the issuer.

17.2. The reportorial requirements of Subsection 17.1 shall apply to the following:

(a) An issuer which has sold a class of its securities pursuant to a registration under Section 12 hereof: Provided, however, That the obligation of such issuer to file reports shall be suspended for any fiscal year after the year such registration became effective if such issuer, as of the first day of any such fiscal year, has less than one hundred (100) holders of such class of securities or such other number as the Commission shall prescribe and it notifies the Commission of such;

(b) An issuer with a class of securities listed for trading on an Exchange; and

(c) An issuer with assets of at least Fifty million pesos (P50,000,000.00) or such other amount as the Commission shall prescribe, and having two hundred (200) or more holders each holding at least one hundred (100) shares of a class of its equity securities: Provided, however, That the obligation of such issuer to file reports shall be terminated ninety (90) days after notification to the Commission by the issuer that the number of its holders holding at least one hundred (100) shares is reduced to less than one hundred (100).

17.3. Every issuer of a security listed for trading on an Exchange shall file with the Exchange a copy of any report filed with the Commission under Subsection 17.1 hereof.

17.4. All reports (including financial statements) required to be filed with the Commission pursuant to Subsection 17.1 hereof shall be in such form, contain such information and be filed at such times as the Commission shall prescribe, and shall be in lieu of any periodical or current reports or financial statements otherwise required to be filed under the Corporation Code.

17.5. Every issuer which has a class of equity securities satisfying any of the requirements in Subsection 17.2 shall furnish to each holder of such equity security an annual report in such form and containing such information as the Commission shall prescribe.

17.6. Within such period as the Commission may prescribe preceding the annual meeting of the holders of any equity security of a class entitled to vote at such meeting, the issuer shall transmit to such holders an annual report in conformity with Subsection 17.5.

SECTION 18. Reports by Five per centum (5%) Holders of Equity Securities. — 18.1. In every case in which an issuer satisfies the requirements of Subsection 17.2 hereof, any person who acquires directly or indirectly the beneficial ownership of more than five per centum (5%) of such class or in excess of such lesser per centum as the Commission by rule may prescribe, shall, within ten (10) days after such acquisition or such reasonable time as fixed by the Commission, submit to the issuer of the security, to the Exchange where the security is traded, and to the Commission a sworn statement containing the following information and such other information as the Commission may require in the public interest or for the protection of investors:

(a) The personal background, identity, residence, and citizenship of, and the nature of such beneficial ownership by, such person and all other persons by whom or on whose behalf the purchases are effected; in the event the beneficial owner is a juridical person, the lines of business of the beneficial owner shall also be reported;

(b) If the purpose of the purchases or prospective purchases is to acquire control of the business of the issuer of the securities, any plans or proposals which such persons may have that will effect a major change in its business or corporate structure;

(c) The number of shares of such security which are beneficially owned, and the number of shares concerning which there is a right to acquire, directly or indirectly, by: (i) such person, and (ii) each associate of such person, giving the background, identity, residence, and citizenship of each such associate; and

(d) Information as to any contracts, arrangements, or understanding with any person with respect to any securities of the issuer including but not limited to transfer, joint ventures, loan or option arrangements, puts or calls, guarantees or division of losses or profits, or proxies naming the persons with whom such contracts, arrangements, or understanding have been entered into, and giving the details thereof.

18.2. If any change occurs in the facts set forth in the statements, an amendment shall be transmitted to the issuer, the Exchange and the Commission.

18.3. The Commission, may permit any person to file in lieu of the statement required by Subsection 17.1 hereof, a notice stating the name of such person, the shares of any equity securities subject to Subsection 17.1 which are owned by him, the date of their acquisition and such other information as the Commission may specify, if it appears to the Commission that such securities were acquired by such person in the ordinary course of his business and were not acquired for the purpose of and do not have the effect of changing or influencing the control of the issuer nor in connection with any transaction having such purpose or effect.

SECTION 19. Tender Offers. — 19.1. (a) Any person or group of persons acting in concert who intends to acquire at least fifteen percent (15%) of any class of any equity security of a listed corporation or of any class of any equity security of a corporation with assets of at least Fifty million pesos (P50,000,000.00) and having two hundred (200) or more stockholders with at least one hundred (100) shares each or who intends to acquire at least thirty percent (30%) of such equity over a period of twelve (12) months shall make a tender offer to stockholders by filing with the Commission a declaration to that effect; and furnish the issuer, a statement containing such of the information required in Section 17 of this Code as the Commission may prescribe. Such person or group of persons shall publish all requests or invitations for tender, or materials making a tender offer or requesting or inviting letters of such a security. Copies of any additional material soliciting or requesting such tender offers subsequent to the initial solicitation or request shall contain such information as the Commission may prescribe, and shall be filed with the Commission and sent to the issuer not later than the time copies of such materials are first published or sent or given to security holders.

(b) Any solicitation or recommendation to the holders of such a security to accept or reject a tender offer or request or invitation for tenders shall be made in accordance with such rules and regulations as the Commission may prescribe.

(c) Securities deposited pursuant to a tender offer or request or invitation for tenders may be withdrawn by or on behalf of the depositor at any time throughout the period that the tender offer remains open and if the securities deposited have not been previously accepted for payment, and at any time after sixty (60) days from the date of the original tender offer or request or invitation, except as the Commission may otherwise prescribe.

(d) Where the securities offered exceed that which a person or group of persons is bound or willing to take up and pay for, the securities that are subject of the tender offer shall be taken up as nearly as may be pro rata, disregarding fractions, according to the number of securities deposited by each depositor. The provisions of this subsection shall also apply to securities deposited within ten (10) days after notice of an increase in the consideration offered to security holders, as described in paragraph (e) of this subsection, is first published or sent or given to security holders.

(e) Where any person varies the terms of a tender offer or request or invitation for tenders before the expiration thereof by increasing the consideration offered to holders of such securities, such person shall pay the increased consideration to each security holder whose securities are taken up and paid for whether or not such securities have been taken up by such person before the variation of the tender offer or request or invitation.

19.2. It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation. The Commission shall, for the purposes of this subsection, define and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative.

SECTION 20. Proxy Solicitations. — 20.1. Proxies must be issued and proxy solicitation must be made in accordance with rules and regulations to be issued by the Commission.

20.2. Proxies must be in writing, signed by the stockholder or his duly authorized representative and filed before the scheduled meeting with the corporate secretary.

20.3. Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it is intended. No proxy shall be valid and effective for a period longer than five (5) years at one time.

20.4. No broker or dealer shall give any proxy, consent or authorization, in respect of any security carried for the account of a customer, to a person other than the customer, without the express written authorization of such customer.

20.5. A broker or dealer who holds or acquires the proxy for at least ten per centum (10%) or such percentage as the Commission may prescribe of the outstanding share of the issuer, shall submit a report identifying the beneficial owner within ten (10) days after such acquisition, for its own account or customer, to the issuer of the security, to the Exchange where the security is traded and to the Commission.

SECTION 21. Fees for Tender Offers and Certain Proxy Solicitations. — At the time of filing with the Commission of any statement required under Section 19 for any tender offer or Section 72.2 for issuer repurchases, or Section 20 for proxy or consent solicitation, the Commission may require that the person making such filing pay a fee of not more than one-tenth (1/10) of one percentum (1%) of:

21.1. The proposed aggregate purchase price in the case of a transaction under Sections 20 or 72.2; or

21.2. The proposed payment in cash, and the value of any securities or property to be transferred in the acquisition, merger or consolidation, or the cash and value of any securities proposed to be received upon the sale or disposition of such assets in the case of a solicitation under Section 20. The Commission shall prescribe by rule diminishing fees in inverse proportion to the value of the aggregate price of the offering.

SECTION 22. Internal Record Keeping and Accounting Controls. — Every issuer which has a class of securities that satisfies the requirements of Subsection 17.2 shall:

22.1. Make and keep books, records, and accounts which, in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the issuer;

22.2. Devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (a) Transactions and access to assets are pursuant to management authorization; (b) Financial statements are prepared in conformity with generally accepted accounting principles that are adopted by the Accounting Standards Council and the rules promulgated by the Commission with regard to the preparation of financial statements; and (c) Recorded assets are compared with existing assets at reasonable intervals and differences are reconciled.

SECTION 23. Transactions of Directors, Officers and Principal Stockholders. — 23.1. Every person who is directly or indirectly the beneficial owner of more than ten per centum (10%) of any class of any equity security which satisfies the requirements of Subsection 17.2, or who is a director or an officer of the issuer of such security, shall file, at the time either such requirement is first satisfied or within ten days after he becomes such a beneficial owner, director, or officer, a statement with the Commission and, if such security is listed for trading on an Exchange, also with the Exchange, of the amount of all equity securities of such issuer of which he is the beneficial owner, and within ten (10) days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file with the Commission, and if such security is listed for trading on an Exchange, shall also file with the Exchange, a statement indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.

23.2. For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer within any period of less than six (6) months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention of holding the security purchased or of not repurchasing the security sold for a period exceeding six (6) months. Suit to recover such profit may be instituted before the Regional Trial Court by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer shall fail or refuse to bring such suit within sixty (60) days after request or shall fail diligently to prosecute the same thereafter, but no such suit shall be brought more than two (2) years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.

23.3. It shall be unlawful for any such beneficial owner, director, or officer, directly or indirectly, to sell any equity security of such issuer if the person selling the security or his principal: (a) Does not own the security sold; or (b) If owning the security, does not deliver it against such sale within twenty (20) days thereafter, or does not within five (5) days after such sale deposit it in the mails or other usual channels of transportation; but no person shall be deemed to have violated this subsection if he proves that notwithstanding the exercise of good faith he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.

23.4. The provisions of Subsection 23.2 shall not apply to any purchase and sale, or sale and purchase, and the provisions of Subsection 23.3 shall not apply to any sale, of an equity security not then or thereafter held by him in an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market, otherwise than on an Exchange, for such security. The Commission may, by such rules and regulations as it deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

SECTION 24. Manipulation of Security Prices; Devices and Practices. — 24.1 It shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly:

(a) To create a false or misleading appearance of active trading in any listed security traded in an Exchange or any other trading market (hereafter referred to purposes of this Chapter as "Exchange"):

(i) By effecting any transaction in such security which involves no change in the beneficial ownership thereof;

(ii) By entering an order or orders for the purchase or sale of such security with the knowledge that a simultaneous order or orders of substantially the same size, time and price, for the sale or purchase of any such security, has or will be entered by or for the same or different parties; or

(iii) By performing similar act where there is no change in beneficial ownership.

(b) To effect, alone or with others, a series of transactions in securities that: (i) Raises their price to induce the purchase of a security, whether of the same or a different class of the same issuer or of a controlling, controlled, or commonly controlled company by others; (ii) Depresses their price to induce the sale of a security, whether of the same or a different class, of the same issuer or of a controlling, controlled, or commonly controlled company by others; or (iii) Creates active trading to induce such a purchase or sale through manipulative devices such as marking the close, painting the tape, squeezing the float, hype and dump, boiler room operations and such other similar devices.

(c) To circulate or disseminate information that the price of any security listed in an Exchange will or is likely to rise or fall because of manipulative market operations of any one or more persons conducted for the purpose of raising or depressing the price of the security for the purpose of inducing the purchase or sale of such security.

(d) To make false or misleading statement with respect to any material fact, which he knew or had reasonable ground to believe was so false or misleading, for the purpose of inducing the purchase or sale of any security listed or traded in an Exchange.

(e) To effect, either alone or others, any series of transactions for the purchase and/or sale of any security traded in an Exchange for the purpose of pegging, fixing or stabilizing the price of such security, unless otherwise allowed by this Code or by rules of the Commission.

24.2. No person shall use or employ, in connection with the purchase or sale of any security any manipulative or deceptive device or contrivance. Neither shall any short sale be effected nor any stop-loss order be executed in connection with the purchase or sale of any security except in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.

24.3. The foregoing provisions notwithstanding, the Commission, having due regard to the public interest and the protection of investors, may, by rules and regulations, allow certain acts or transactions that may otherwise be prohibited under this Section.

SECTION 25. Regulation of Option Trading. — No member of an Exchange shall, directly or indirectly endorse or guarantee the performance of any put, call, straddle, option or privilege in relation to any security registered on a securities exchange.

The terms "put", "call", "straddle", "option", or "privilege" shall not include any registered warrant, right or convertible security.

SECTION 26. Fraudulent Transactions. — It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securitiesto:

26.1. Employ any device, scheme, or artifice to defraud;

26.2. Obtain money or property by means of any untrue statement of a material fact of any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or

26.3. Engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person.

SECTION 27. Insider's Duty to Disclose When Trading. — 27.1. It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material information with respect to the issuer or the security that is not generally available to the public, unless: (a) The insider proves that the information was not gained from such relationship; or (b) If the other party selling to or buying from the insider (or his agent) is identified, the insider proves: (i) that he disclosed the information to the other party, or (ii) that he had reason to believe that the other party otherwise is also in possession of the information. A purchase or sale of a security of the issuer made by an insider defined in Subsection 3.8, or such insider's spouse or relatives by affinity or consanguinity within the second degree, legitimate or common-law, shall be presumed to have been effected while in possession of material nonpublic information if transacted after such information came into existence but prior to dissemination of such information to the public and the lapse of a reasonable time for the market to absorb such information: Provided, however, That this presumption shall be rebutted upon a showing by the purchaser or seller that he was not aware of the material nonpublic information at the time of the purchase or sale.

27.2. For purposes of this Section, information is "material nonpublic" if: (a) 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 and the lapse of a reasonable time for the market to absorb the information; or (b) would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sell or hold a security.

27.3. It shall be unlawful for any insider to communicate material nonpublic information about the issuer or the security to any person who, by virtue of the communication, becomes an insider as defined in Subsection 3.8, where the insider communicating the information knows or has reason to believe that such person will likely buy or sell a security of the issuer while in possession of such information.

27.4. a) It shall be unlawful where a tender offer has commenced or is about to commence for:

(i) Any person (other than the tender offeror) who is in possession of material nonpublic information relating to such tender offer, to buy or sell the securities of the issuer that are sought or to be sought by such tender offer if such person knows or has reason to believe that the information is nonpublic and has been acquired directly or indirectly from the tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, or any insider of such issuer; and

(ii) Any tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, and any insider of such issuer to communicate material nonpublic information relating to the tender offer to any other person where such communication is likely to result in a violation of Subsection 27.4 (a)(i).

(b) For purposes of this subsection the term "securities of the issuer sought or to be sought by such tender offer" shall include any securities convertible or exchangeable into such securities or any options or rights in any of the foregoing securities.

SECTION 28. Registration of Brokers, Dealers, Salesmen and Associated Persons. — 28.1. No person shall engage in the business of buying or selling securities in the Philippines as a broker or dealer, or act as a salesman, or an associated person of any broker or dealer unless registered as such with the Commission.

28.2. No registered broker or dealer shall employ any salesman or any associated person, and no issuer shall employ any salesman, who is not registered as such with the Commission.

28.3. The Commission, by rule or order, may conditionally or unconditionally exempt from Subsections 28.1 and 28.2 any broker, dealer, salesman, associated person of any broker or dealer, or any class of the foregoing, as it deems consistent with the public interest and the protection of investors.

28.4. The Commission shall promulgate rules and regulations prescribing the qualifications for registration of each category of applicant, which shall, among other things, require as a condition for registration that:

(a) If a natural person, the applicant satisfactorily pass a written examination as to his proficiency and knowledge in the area of activity for which registration is sought;

(b) In the case of a broker or dealer, the applicant satisfy a minimum net capital as prescribed by the Commission, and provide a bond or other security as the Commission may prescribe to secure compliance with the provisions of this Code; and

(c) If located outside of the Philippines, the applicant files a written consent to service of process upon the Commission pursuant to Section 65 hereof.

28.5. A broker or dealer may apply for registration by filing with the Commission a written application in such form and containing such information and documents concerning such broker or dealer as the Commission by rule shall prescribe.

28.6. Registration of a salesman or of an associated person of a registered broker or dealer may be made upon written application filed with the Commission by such salesman or associated person. The application shall be separately signed and certified by the registered broker or dealer to which such salesman or associated person is to become affiliated, or by the issuer in the case of a salesman employed, appointed or authorized solely by such issuer. The application shall be in such form and contain such information and documents concerning the salesman or associated person as the Commission by rule shall prescribe. For purposes of this Section, a salesman shall not include any employee of an issuer whose compensation is not determined directly or indirectly on sales of securities of the issuer.

28.7. Applications filed pursuant to Subsections 28.5 and 28.6 shall be accompanied by a registration fee in such reasonable amount prescribed by the Commission.

28.8. Within thirty (30) days after the filing of any application under this Section, the Commission shall by order: (a) Grant registration if it determines that the requirements of this Section and the qualifications for registration set forth in its rules and regulations have been satisfied; or (b) Deny said registration.

28.9. The names and addresses of all persons approved for registration as brokers, dealers, associated persons or salesmen and all orders of the Commission with respect thereto shall be recorded in a Register of Securities Market Professionals kept in the office of the Commission which shall be open to public inspection.

28.10. Every person registered pursuant to this Section shall file with the Commission, in such form as the Commission shall prescribe, information necessary to keep the application for registration current and accurate, including in the case of a broker or dealer changes in salesmen, associated persons and owners thereof.

28.11. Every person registered pursuant to this Section shall pay to the Commission an annual fee at such time and in such reasonable amount as the Commission shall prescribe. Upon notice by the Commission that such annual fee has not been paid as required, the registration of such person shall be suspended until payment has been made.

28.12. The registration of a salesman or associated person shall be automatically terminated upon the cessation of his affiliation with said registered broker or dealer, or with an issuer in the case of a salesman employed, appointed or authorized by such issuer. Promptly following any such cessation of affiliation, the registered broker or dealer, or issuer, as the case may be, shall file with the Commission a notice of separation of such salesman or associated person.

SECTION 29. Revocation, Refusal or Suspension of Registration of Brokers, Dealers, Salesmen and Associated Persons. — 29.1. Registration under Section 28 of this Code may be refused, or any registration granted thereunder may be revoked, suspended, or limitations placed thereon, by the Commission if, after due notice and hearing, the Commission determines the applicant or registrant:

(a) Has willfully violated any provision of this Code, any rule, regulation or order made hereunder, or any other law administered by the Commission, or in the case of a registered broker, dealer or associated person has failed to supervise, with a view to preventing such violation, another person who commits such violation;

(b) Has willfully made or caused to be made a materially false or misleading statement in any application for registration or report filed with the Commission or a self-regulatory organization, or has willfully omitted to state any material fact that is required to be stated therein;

(c) Has failed to satisfy the qualifications or requirements for registration prescribed under Section 28 and the rules and regulations of the Commission promulgated thereunder;

(d) Has been convicted, by a competent judicial or administrative body of an offense involving moral turpitude, fraud, embezzlement, counterfeiting, theft, estafa, misappropriation, forgery, bribery, false oath, or perjury, or of a violation of securities, commodities, banking, real estate or insurance laws;

(e) Is enjoined or restrained by a competent judicial or administrative body from engaging in securities, commodities, banking, real estate or insurance activities or from willfully violating laws governing such activities;

(f) Is subject to an order of a competent judicial or administrative body refusing, revoking or suspending any registration, license or other permit under this Code, the rules and regulations promulgated thereunder, any other law administered by the Commission;

(g) Is subject to an order of a self-regulatory organization suspending or expelling him from membership or participation therein or from association with a member or participant thereof;

(h) Has been found by a competent judicial or administrative body to have willfully violated any provisions of securities, commodities, banking, real estate or insurance laws, or has willfully aided, abetted, counseled, commanded, induced or procured such violation; or

(i) Has been judicially declared insolvent.

For purposes of this subsection, the term "competent judicial or administrative body" shall include a foreign court of competent jurisdiction and a foreign financial regulator.

29.2. (a) In cases of charges against a salesman or associated person, notice thereof shall also be given the broker, dealer or issuer employing such salesman or associated person.

(b) Pending the hearing, the Commission shall have the power to order the suspension of such broker's, dealer's, associated person's or salesman's registration: Provided, That such order shall state the cause for such suspension. Until the entry of a final order, the suspension of such registration, though binding upon the persons notified thereof, shall be deemed confidential, and shall not be published, unless it shall appear that the order of suspension has been violated after notice.

29.3. The order of the Commission refusing, revoking, suspending or placing limitations on a registration as herein above provided, together with its findings, shall be entered in the Register of Securities Market Professionals. The suspension or revocation of the registration of a dealer or broker shall also automatically suspend the registration of all salesmen and associated persons affiliated with such broker or dealer.

29.4. It shall be sufficient cause for refusal, revocation or suspension of a broker's or dealer's registration, if any associated person thereof or any juridical entity controlled by such associated person has committed any act or omission or is subject to any disability enumerated in paragraphs (a) through (i) of Subsection 29.1 hereof.

SECTION 30. Transactions and Responsibility of Brokers and Dealers. — 30.1. No broker or dealer shall deal in or otherwise buy or sell, for its own account or for the account of customers, securities listed on an Exchange issued by any corporation where any stockholder, director, associated person or salesman, or authorized clerk of said broker or dealer and all the relatives of the foregoing within the fourth civil degree of consanguinity or affinity, is at the time holding office in said issuer corporation as a director, president, vice-president, manager, treasurer, comptroller, secretary or any office of trust and responsibility, or is a controlling person of the issuer.

30.2. No broker or dealer shall effect any transaction in securities or induce or attempt to induce the purchase or sale of any security except in compliance with such rules and regulations as the Commission shall prescribe to ensure fair and honest dealings in securities and provide financial safeguards and other standards for the operation of brokers and dealers, including the establishment of minimum net capital requirements, the acceptance of custody and use of securities of customers, and the carrying and use of deposits and credit balances of customers.

SECTION 31. Development of Securities Market Professionals. — The Commission, in joint undertaking with self regulatory organizations, organizations and associations of finance professionals as well as private educational and research institutions shall undertake or facilitate/organize continuing training, conferences/seminars, updating programs, research and development as well as technology transfer at the latest and advanced trends in issuance and trading of securities, derivatives, commodity trades and other financial instruments, as well as securities markets of other countries.

SECTION 32. Prohibition on Use of Unregistered Exchange; Regulation of Over-the-Counter Markets. — 32.1. No broker, dealer, salesman, associated person of a broker or dealer, or Exchange, directly or indirectly, shall make use of any facility of an Exchange in the Philippines to effect any transaction in a security, or to report such transaction, unless such Exchange is registered as such under Section 33 of this Code.

32.2. (a) No broker, dealer, salesman or associated person of a broker or dealer, singly or in concert with any other person, shall make, create or operate, or enable another to make, create or operate, any trading market, otherwise than on a registered Exchange, for the buying and selling of any security, except in accordance with rules and regulations the Commission may prescribe.

(b) The Commission may promulgate rules and regulations governing transactions by brokers, dealers, salesmen or associated persons of a broker or dealer, over any facilities of such trading market and may require such market to be administered by a self-regulatory organization determined by the Commission as capable of insuring the protection of investors comparable to that provided in the case of a registered Exchange. Such self-regulatory organization must provide a centralized marketplace for trading and must satisfy requirements comparable to those prescribed for registration of Exchanges in Section 33 of this Code.

SECTION 33. Registration of Exchanges. — 33.1. Any Exchange may be registered as such with the Commission under the terms and conditions hereinafter provided in this Section and Section 40 hereof, by filing an application for registration in such form and containing such information and supporting documents as the Commission by rule shall prescribe, including the following:

(a) An undertaking to comply and enforce compliance by its members with the provisions of this Code, its implementing rules or regulations and the rules of the Exchange;

(b) The organizational charts of the Exchange, rules of procedure, and a list of its officers and members;

(c) Copies of the rules of the Exchange; and

(d) An undertaking that in the event a member firm becomes insolvent or when the Exchange shall have found that the financial condition of its member firm has so deteriorated that it cannot readily meet the demands of its customers for the delivery of securities and/or payment of sales proceeds, the Exchange shall, upon order of the Commission, take over the operation of the insolvent member firm and immediately proceed to settle the member firm's liabilities to its customers.

33.2. Registration of an Exchange shall be granted upon compliance with the following provisions:

(a) That the applicant is organized as a stock corporation: Provided, That any registered Exchange existing prior to the effectivity of this Code shall within one (1) year reorganize as a stock corporation pursuant to a demutualization plan approved by the Commission;

(b) That the applicant is engaged solely in the business of operating an exchange: Provided, however, That the Commission may adopt rules, regulations or issue an order, upon application, exempting an Exchange organized as a stock corporation and owned and controlled by another juridical person from this restriction.

(c) Where the Exchange is organized as a stock corporation, that no person may beneficially own or control, directly or indirectly, more than five percent (5%) of the voting rights of the Exchange and no industry or business group may beneficially own or control, directly or indirectly, more than twenty percent (20%) of the voting rights of the Exchange: Provided, however, That the Commission may adopt rules, regulations or issue an order, upon application, exempting an applicant from this prohibition where it finds that such ownership or control will not negatively impact on the exchange's ability to effectively operate in the public interest.

(d) The expulsion, suspension, or disciplining of a member and persons associated with a member for conduct or proceeding inconsistent with just and equitable principles of fair trade, and for violations of provisions of this Code, or any other Act administered by the Commission, the rules, regulations and orders thereunder, or the rules of the Exchange;

(e) A fair procedure for the disciplining of members and persons associated with members, the denial of membership to any person seeking to be a member, the barring of any person from association with a member, and the prohibition or limitation of any person from access to services offered by the Exchange;

(f) That the brokers in the board of the Exchange shall comprise of not more than forty-nine percent (49%) of such board and shall proportionately represent the Exchange membership in terms of volume/value of trade and paid up capital, and that any natural person associated with a juridical entity that is a member shall himself be deemed to be a member for this purpose: Provided, That any registered Exchange existing prior to the effectivity of this Code shall immediately comply with this requirement;

(g) For the board of the Exchange to include in its composition (i) the president of the Exchange, and (ii) no less than fifty one percent (51%) of the remaining members of the board to be comprised of three (3) independent directors and persons who represent the interests of issuers, investors, and other market participants, who are not associated with any broker or dealer or member of the Exchange for a period of two (2) years prior to his/her appointment. No officer or employee of a member, its subsidiaries or affiliates or related interests shall become an independent director:Provided, however, That the Commission may by rule, regulation, or order upon application, permit the exchange organized as a stock corporation to use a different governance structure: Provided, further, That the Commission is satisfied that the Exchange is acting in the public interest and is able to effectively operate as a self-regulatory organization under this Code: Provided, finally, That any registered exchange existing prior to the effectivity of this Code shall immediately comply with this requirement.

(h) The president and other management of the Exchange to consist only of persons who are not members and are not associated in any capacity, directly or indirectly with any broker or dealer or member or listed company of the Exchange: Provided, That the Exchange may only appoint, and a person may only serve, as an officer of the exchange if such person has not been a member or affiliated with any broker, dealer, or member of the Exchange for a period of at least two (2) years prior to such appointment;

(i) The transparency of transactions on the Exchange;

(j) The equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the Exchange operates or controls;

(k) Prevention of fraudulent and manipulative acts and practices, promotion of just and equitable principles of trade, and, in general, protection of investors and the public interest; and

(l) The transparent, prompt and accurate clearance and settlement of transactions effected on the Exchange.

33.3. If the Commission finds that the applicant Exchange is capable of complying and enforcing compliance by its members, and persons associated with such members, with the provisions of this Code, its rules and regulations, and the rules of the Exchange, and that the rules of the Exchange are fair, just and adequate, the Commission shall cause such Exchange to be registered. If, after notice due and hearing, the Commission finds otherwise, the application shall be denied.

33.4. Within ninety (90) days after the filing of the application the Commission may issue an order either granting or denying registration as an Exchange, unless the Exchange applying for registration shall withdraw its application or shall consent to the Commission's deferring action on its application for a stated longer period after the date of filing. The filing with the Commission of an application for registration by an Exchange shall be deemed to have taken place upon the receipt thereof. Amendments to an application may be made upon such terms as the Commission may prescribe.

33.5. Upon the registration of an Exchange, it shall pay a fee in such amount and within such period as the Commission may fix.

33.6. Upon appropriate application in accordance with the rules and regulations of the Commission and upon such terms as the Commission may deem necessary for the protection of investors, an Exchange may withdraw its registration or suspend its operations or resume the same.

SECTION 34. Segregation and Limitation of Functions of Members, Brokers and Dealers. — 34.1. It shall be unlawful for any member-broker of an Exchange to effect any transaction on such Exchange for its own account, the account of an associated person, or an account with respect to which it or an associated person thereof exercises investment discretion: Provided, however, That this Section shall not make unlawful —

(a) Any transaction by a member-broker acting in the capacity of a market maker;

(b) Any transaction reasonably necessary to carry on an odd-lot transactions;

(c) Any transaction to offset a transaction made in error; and

(d) Any other transaction of a similar nature as may be defined by the Commission.

34.2. In all instances where the member-broker effects a transaction on an Exchange for its own account or the account of an associated person or an account with respect to which it exercises investment discretion, it shall disclose to such customer at or before the completion of the transaction it is acting for its own account: Provided, further, That this fact shall be reflected in the order ticket and the confirmation slip.

34.3. Any member-broker who violates the provisions of this Section shall be subject to the administrative sanctions provided in Section 54 of this Code.

SECTION 35. Additional Fees of Exchanges. — In addition to the registration fee prescribed in Section 33 of this Code, every Exchange shall pay to the Commission, on a semestral basis on or before the tenth day of the end of every semester of the calendar year, a fee in such an amount as the Commission shall prescribe, but not more than one-hundredth of one per centum (1%) of the aggregate amount of the sales of securities transacted on such Exchange during the preceding calendar year, for the privilege of doing business, during the preceding calendar year or any part thereof.

SECTION 36. Powers with Respect to Exchanges and Other Trading Market. — 36.1. The Commission is authorized, if in its opinion such action is necessary or appropriate for the protection of investors and the public interest so requires, summarily to suspend trading in any listed security on any Exchange or other trading market for a period not exceeding thirty (30) days or, with the approval of the President of the Philippines, summarily to suspend all trading on any securities Exchange or other trading market for a period of more than thirty (30) but not exceeding ninety (90) days: Provided, however, That the Commission, promptly following the issuance of the order of suspension, shall notify the affected issuer of the reasons for such suspension and provide such issuer with an opportunity for hearing to determine whether the suspension should be lifted.

36.2. Wherever two (2) or more Exchanges or other trading markets exist, the Commission may require and enforce uniformity of trading regulations in and/or between or among said Exchanges or other trading markets.

36.3. In addition to the existing Philippine Stock Exchange, the Commission shall have the authority to determine the number, size and location of stock Exchanges, other trading markets and commodity Exchanges and other similar organizations in the light of national or regional requirements for such activities with the view to promote, enhance, protect, conserve or rationalize investment.

36.4. The Commission, having due regard to the public interest, the protection of investors, the safeguarding of securities and funds, and maintenance of fair competition among brokers, dealers, clearing agencies, and transfer agents, shall promulgate rules and regulations for the prompt and accurate clearance and settlement of securities transactions.

36.5. (a) The Commission may establish or facilitate the establishment of trust funds which shall be contributed by Exchanges, brokers, dealers, underwriters, transfer agents, salesmen and other persons transacting in securities, as the Commission may require, for the purpose of compensating investors for the extraordinary losses or damage they may suffer due to business failure or fraud or mismanagement of the persons with whom they transact, under such rules and regulations as the Commission may from time to time prescribe or approve in the public interest.

(b) The Commission may, having due regard to the public interest or the protection of investors, regulate, supervise, examine, suspend or otherwise discontinue such and other similar funds under such rules and regulations which the Commission may promulgate, and which may include taking custody and management of the fund itself as well as investments in and disbursements from the funds under such forms of control and supervision by the Commission as it may from time to time require. The authority granted to the Commission under this subsection shall also apply to all funds established for the protection of investors, whether established by the Commission or otherwise.

SECTION 37. Registration of Innovative and Other Trading Markets. — The Commission, having due regard for national economic development, shall encourage competitiveness in the market by promulgating within six (6) months upon the enactment of this Code, rules for the registration and licensing of innovative and other trading markets or Exchanges covering, but not limited to, the issuance and trading of innovative securities, securities of small, medium, growth and venture enterprises, and technology-based ventures pursuant to Section 33 of this Code.

SECTION 38. Independent Directors. — Any corporation with a class of equity securities listed for trading on an Exchange or with assets in excess of Fifty million pesos (P50,000,000.00) and having two hundred (200) or more holders, at least of two hundred (200) of which are holding at least one hundred (100) shares of a class of its equity securities or which has sold a class of equity securities to the public pursuant to an effective registration statement in compliance with Section 12 hereof shall have at least two (2) independent directors or such independent directors shall constitute at least twenty percent (20%) of the members of such board, whichever is the lesser. For this purpose, an "independent director" shall mean a person other than an officer or employee of the corporation, its parent or subsidiaries, or any other individual having a relationship with the corporation, which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

SECTION 39. Associations of Securities Brokers, and Dealers, and Other Securities Related Organizations. — 39.1. The Commission shall have the power to register as a self-regulatory organization, or otherwise grant licenses, and to regulate, supervise, examine, suspend or otherwise discontinue, as a condition for the operation of organizations whose operations are related to or connected with the securities market such as but not limited to associations of brokers and dealers, transfer agents, custodians, fiscal and paying agents, computer services, news disseminating services, proxy solicitors, statistical agencies, securities rating agencies, and securities information processors which are engaged in the business of: (a) Collecting, processing, or preparing for distribution or publication, or assisting, participating in, or coordinating the distribution or publication of, information with respect to transactions in or quotations for any security; or (b) Distributing or publishing, whether by means of a ticker tape, a communications network, a terminal display device, or otherwise, on a current and continuing basis, information with respect to such transactions or quotations. The Commission may prescribe rules and regulations which are necessary or appropriate in the public interest or for the protection of investors to govern self-regulatory organizations and other organizations licensed or regulated pursuant to the authority granted in Subsection 39.1 including the requirement of cooperation within and among, and electronic integration of the records of, all participants in the securities market to ensure transparency and facilitate exchange of information.

39.2. An association of brokers and dealers may be registered as a securities association pursuant to Subsection 39.3 by filing with the Commission an application for registration in such form as the Commission, by rule, may prescribe containing the rules of the association and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.

39.3. An association of brokers and dealers shall not be registered as a securities association unless the Commission determines that:

(a) The association is so organized and has the capacity to be able to carry out the purposes of this Code and to comply with, and to enforce compliance by its members and persons associated with its members, with the provisions of this Code, the rules and regulations thereunder, and the rules of the association.

(b) The rules of the association, notwithstanding anything in the Corporation Code to the contrary, provide that:

(i) Any registered broker or dealer may become a member of the association;

(ii) There exist a fair representation of its members to serve on the Board of Directors of the association and in the administration of its affairs, and that any natural person associated with a juridical entity that is a member shall himself be deemed to be a member for this purpose;

(iii) The Board of Directors of the association includes in its composition: (a) The president of the association and (b) Persons who represent the interests of issuers and public investors and are not associated with any broker or dealer or member of the association; that the president and other management of the association not be a member or associated with any broker, dealer or member of the association;

(iv) For the equitable allocation of reasonable dues, fees, and other charges among members and issuers and other persons using any facility or system which the association operates or controls;

(v) For the prevention of fraudulent and manipulative acts and practices, the promotion of just and equitable principles of trade, and, in general, the protection of investors and the public interest;

(vi) That its members and persons associated with its members shall be appropriately disciplined for violation of any provision of this Code, the rules or regulations thereunder, or the rules of the association;

(vii) That a fair procedure for the disciplining of members and persons associated with members, the denial of membership to any person seeking membership therein, the barring of any person from becoming associated with a member thereof, and the prohibition or limitation by the association of any person with respect to access to services offered by the association or a member thereof.

39.4. (a) A registered securities association shall deny membership to any person who is not a registered broker or dealer.

(b) A registered securities association may deny membership to, or condition the membership of, a registered broker or dealer if such broker or dealer:

(i) Does not meet the standards of financial responsibility, operational capability, training, experience, or competence that are prescribed by the rules of the association; or

(ii) Has engaged, and there is a reasonable likelihood it will again engage, in acts or practices inconsistent with just and equitable principles of fair trade.

(c) A registered securities association may deny membership to a registered broker or dealer not engaged in a type of business in which the rules of the association require members to be engaged: Provided, however, That no registered securities association may deny membership to a registered broker or dealer by reason of the amount of business done by the broker or dealer.

A registered securities association may examine and verify the qualifications of an applicant to become a member in accordance with procedures established by the rules of the association.

(d) A registered securities association may bar a salesman or person associated with a broker or dealer from being employed by a member or set conditions for the employment of a salesman or associated if such person:

(i) Does not meet the standards of training, experience, or competence that are prescribed by the rules of the association; or

(ii) Has engaged, and there is a reasonable likelihood he will again engage, in acts or practices inconsistent with just and equitable principles of fair trade.

A registered securities association may examine and verify the qualifications of an applicant to become a salesman or associated person employed by a member in accordance with procedures established by the rules of the association. A registered association also may require a salesman or associated person employed by a member to be registered with the association in accordance with procedures prescribed in the rules of the association.

39.5. In any proceeding by a registered securities association to determine whether a person shall be denied membership, or barred from association with a member, the association shall provide notice to the person under review of the specific grounds being considered for denial, afford him an opportunity to defend against the allegations, and keep a record of the proceedings. A determination by the association to deny membership shall be supported by a statement setting forth the specific grounds on which the denial is based.

SECTION 40. Powers with Respect to Self-Regulatory Organizations. — 40.1. Upon the filing of an application for registration as an Exchange under Section 33, a registered securities association under Section 39, a registered clearing agency under Section 42, or other self-regulatory organization under this Section, the Commission shall have ninety (90) days within which to either grant registration or institute a proceeding to determine whether registration should be denied. In the event proceedings are instituted, the Commission shall have two hundred seventy (270) days within which to conclude such proceedings at which time it shall, by order, grant or deny such registration.

40.2. Every self-regulatory organization shall comply with the provisions of this Code, the rules and regulations thereunder, and its own rules, and enforce compliance therewith, notwithstanding any provision of the Corporation Code to the contrary, by its members, persons associated with its members or its participants.

40.3. (a) Each self-regulatory organization shall submit to the Commission for prior approval any proposed rule or amendment thereto, together with a concise statement of the reason and effect of the proposed amendment.

(b) Within sixty (60) days after submission of a proposed amendment, the Commission shall, by order, approve the proposed amendment. Otherwise, the same may be made effective by the self-regulatory organization.

(c) In the event of an emergency requiring action for the protection of investors, the maintenance of fair and orderly markets, or the safeguarding of securities and funds, a self-regulatory organization may put a proposed amendment into effect summarily: Provided, however, That a copy of the same shall be immediately submitted to the Commission.

40.4. The Commission is further authorized, if after making appropriate request in writing to a self-regulatory organization that such organization effect on its own behalf specified changes in its rules and practices and, after due notice and hearing it determines that such changes have not been effected, and that such changes are necessary, by rule or regulation or by order, may alter, abrogate or supplement the rules of such self-regulatory organization in so far as necessary or appropriate to effect such changes in respect of such matters as:

(a) Safeguards in respect of the financial responsibility of members and adequate provision against the evasion of financial responsibility through the use of corporate forms or special partnerships;

(b) The supervision of trading practices;

(c) The listing or striking from listing of any security;

(d) Hours of trading;

(e) The manner, method, and place of soliciting business;

(f) Fictitious accounts;

(g) The time and method of making settlements, payments, and deliveries, and of closing accounts;

(h) The transparency of securities transactions and prices;

(i) The fixing of reasonable rates of fees, interest, listing and other charges, but not rates of commission;

(j) Minimum units of trading;

(k) Odd-lot purchases and sales;

(l) Minimum deposits on margin accounts; and

(m) The supervision, auditing and disciplining of members or participants.

40.5. The Commission, after due notice and hearing, is authorized, in the public interest and to protect investors:

(a) To suspend for a period not exceeding twelve (12) months or to revoke the registration of a self-regulatory organization, or to censure or impose limitations on the activities, functions, and operations of such self-regulatory organization, if the Commission finds that such a self-regulatory organization has willfully violated or is unable to comply with any provision of this Code or of the rules and regulations thereunder, or its own rules, or has failed to enforce compliance therewith by a member of, person associated with a member, or a participant in such self-regulatory organization;

(b) To expel from a self-regulatory organization any member thereof or any participant therein who is subject to an order of the Commission under Section 29 of this Code or is found to have willfully violated any provision of this Code or suspend for a period not exceeding twelve (12) months for violation of any provision of this Code or any other laws administered by the Commission, or the rules and regulations thereunder, or effected, directly or indirectly, any transaction for any person who, such member or participant had reason to believe, was violating in respect of such transaction any of such provisions; and

(c) To remove from office or censure any officer or director of a self-regulatory organization if it finds that such officer or director has violated any provision of this Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of such self-regulatory organization, abused his authority, or without reasonable justification or excuse has failed to enforce compliance with any of such provisions.

40.6. (a) A self-regulatory organization is authorized to discipline a member of or participant in such self-regulatory organization, or any person associated with a member, including the suspension or expulsion of such member or participant, and the suspension or bar from being associated with a member, if such person has engaged in acts or practices inconsistent with just and equitable principles of fair trade or in willful violation of any provision of the Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of the self-regulatory organization. In any disciplinary proceeding by a self-regulatory organization (other than a summary proceeding pursuant to paragraph (b) of this subsection) the self-regulatory organization shall bring specific charges, provide notice to the person charged, afford the person charged with an opportunity to defend against the charges, and keep a record of the proceedings. A determination to impose a disciplinary sanction shall be supported by a written statement of the offense, a summary of the evidence presented and a statement of the sanction imposed.

(b) A self-regulatory organization may summarily: (i) Suspend a member, participant or person associated with a member who has been or is expelled or suspended from any other self-regulatory organization; or (ii) Suspend a member who the self-regulatory organization finds to be in such financial or operating difficulty that the member or participant cannot be permitted to continue to do business as a member with safety to investors, creditors, other members, participants or the self-regulatory organization: Provided, That the self-regulatory organization immediately notifies the Commission of the action taken. Any person aggrieved by a summary action pursuant to this paragraph shall be promptly afforded an opportunity for a hearing by the association in accordance with the provisions of paragraph (a) of this subsection. The Commission, by order, may stay a summary action on its own motion or upon application by any person aggrieved thereby, if the Commission determines summarily or after due notice and hearing (which hearing may consist solely of the submission of affidavits or presentation of oral arguments) that a stay is consistent with the public interest and the protection of investors.

40.7. A self-regulatory organization shall promptly notify the Commission of any disciplinary sanction on any member thereof or participant therein, any denial of membership or participation in such organization, or the imposition of any disciplinary sanction on a person associated with a member or a bar of such person from becoming so associated. Within thirty (30) days after such notice, any aggrieved person may appeal to the Commission from, or the Commission on its own motion within such period, may institute review of, the decision of the self-regulatory organization, at the conclusion of which, after due notice and hearing (which may consist solely of review of the record before the self-regulatory organization), the Commission shall affirm, modify or set aside the sanction. In such proceeding the Commission shall determine whether the aggrieved person has engaged or omitted to engage in the acts and practices as found by the self-regulatory organization, whether such acts and practices constitute willful violations of this Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of the self-regulatory organization as specified by such organization, whether such provisions were applied in a manner consistent with the purposes of this Code, and whether, with due regard for the public interest and the protection of investors the sanction is excessive or oppressive.

40.8. The powers of the Commission under this section shall apply to organized exchanges and registered clearing agencies.

SECTION 41. Prohibition on Use of Unregistered Clearing Agency. — It shall be unlawful for any broker, dealer, salesman, associated person of a broker or dealer, or clearing agency, directly or indirectly, to make use of any facility of a clearing agency in the Philippines to make deliveries in connection with transactions insecurities or to reduce the number of settlements of securities transactions or to allocate securities settlement responsibilities or to provide for the central handling of securities so that transfers, loans and pledges and similar transactions can be made by bookkeeping entry or otherwise to facilitate the settlement of securities transactions without physical delivery of securities certificates, unless such clearing agency is registered as such under Section 42 of this Code or is exempted from such registration upon application by the clearing agency because, in the opinion of the Commission, by reason of the limited volume of transactions which are settled using the clearing agency, it is not practicable and not necessary or appropriate in the public interest or for the protection of investors to require such registration.

SECTION 42. Registration of Clearing Agencies. — 42.1. Any clearing agency may be registered as such with the Commission under the terms and conditions hereinafter provided in this Section, by filing an application for registration in such form and containing such information and supporting documents as the Commission by rule shall prescribe, including the following:

(a) An undertaking to comply and enforce compliance by its participants with the provisions of this Code, and any amendment thereto, and the implementing rules or regulations made or to be made thereunder, and the clearing agency's rules;

(b) The organizational charts of the Exchange, its rules of procedure, and a list of its officers and participants;

(c) Copies of the clearing agency's rules.

42.2. No registration of a clearing agency shall be granted unless the rules of the clearing agency include provision for:

(a) The expulsion, suspension, or disciplining of a participant for violations of this Code, or any other Act administered by the Commission, the rules, regulations, and orders thereunder, or the clearing agency's rules;

(b) A fair procedure for the disciplining of participants, the denial of participation rights to any person seeking to be a participant, and the prohibition or limitation of any person from access to services offered by the clearing agency;

(c) The equitable allocation of reasonable dues, fees, and other charges among participants;

(d) Prevention of fraudulent and manipulative acts and practices, promotion of just and equitable principles of trade, and, in general, protection of investors and the public interest;

(e) The transparent, prompt and accurate clearance and settlement of transactions in securities handled by the clearing agency; and

(f) The establishment and oversight of a fund to guarantee the prompt and accurate clearance and settlement of transactions executed on an exchange, including a requirement that members each contribute an amount based on their volume and a relevant percentage of the daily exposure of the four (4) largest trading brokers which adequately reflects trading risks undertaken or pursuant to another formula set forth in Commission rules or regulations or order, upon application: Provided, however, That a clearing agency engaged in the business of a securities depository shall be exempt from this requirement.

42.3. In the case of an application filed pursuant to this Section, the Commission shall grant registration if it finds that the requirements of this Code and the rules and regulations thereunder with respect to the applicant have been satisfied, and shall deny registration if it does not make such finding.

42.4. Upon appropriate application in accordance with the rules and regulations of the Commission and upon such terms as the Commission may deem necessary for the protection of investors, a clearing agency may withdraw its registration or suspend its operation or resume the same.

42.5. Section 32 of this Code shall apply to every registered clearing agency.

SECTION 43. Uncertificated Securities. — Notwithstanding Section 63 of the Corporation Code of the Philippines: 43.1. A corporation whose securities are registered pursuant to this Code or listed on a securities Exchange may:

(a) If so resolved by its Board of Directors and agreed by a shareholder, investor or securities intermediary, issue shares to, or record the transfer of some or all of its shares into the name of said shareholders, investors or, securities intermediary in the form of uncertificated securities. The use of uncertificated securities in these circumstances shall be without prejudice to the rights of the securities intermediary subsequently to require the corporation to issue a certificate in respect of any shares recorded in its name; and

(b) If so provided in its articles of incorporation and by-laws, issue all of the shares of a particular class in the form of uncertificated securities and subject to a condition that investors may not require the corporation to issue a certificate in respect of any shares recorded in their name.

43.2. The Commission by rule may allow other corporations to provide in their articles of incorporation and by-laws for the use of uncertificated securities.

43.3. Transfers of securities, including an uncertificated securities, may be validly made and consummated by appropriate book-entries in the securities accounts maintained by securities intermediaries, or in the stock and transfer book held by the corporation or the stock transfer agent and such bookkeeping entries shall be binding on the parties to the transfer. A transfer under this subsection has the effect of the delivery of a security in bearer form or duly indorsed in blank representing the quantity or amount of security or right transferred, including the unrestricted negotiability of that security by reason of such delivery. However, transfer of uncertificated shares shall only be valid, so far as the corporation is concerned, when a transfer is recorded in the books of the corporation so as to show the names of the parties to the transfer and the number of shares transferred.

However, nothing in this Code shall preclude compliance by banking and other institutions under the supervision of the Bangko Sentral ng Pilipinas and their stockholders with the applicable ceilings on shareholdings prescribed under pertinent banking laws and regulations.

SECTION 44. Evidentiary Value of Clearing Agency Record. — The official records and book entries of a clearing agency shall constitute the best evidence of such transactions between clearing agency and its participants and members, without prejudice to the right of participants' or members' clients to prove their rights, title and entitlement with respect to the book-entry security holdings of the participants or members held on behalf of the clients. However, the corporation shall not be bound by the foregoing transactions unless the corporate secretary is duly notified in such manner as the Commission may provide.

SECTION 45. Pledging a Security or Interest Therein. — In addition to other methods recognized by law, a pledge of, or release of a pledge of, a security, including an uncertificated security, is properly constituted and the instrument proving the right pledged shall be considered delivered to the creditor under Articles 2093 and 2095 of the Civil Code if a securities intermediary indicates by book-entry that such security has been credited to a specially designated pledge account in favor of the pledgee. A pledge under this subsection has the effect of the delivery of a security in bearer form or duly indorsed in blank representing the quantity or amount of such security or right pledged. In the case of a registered clearing agency, the procedures by which, and the exact time at which, such book-entries are created shall be governed by the registered clearing agency's rules. However, the corporation shall not be bound by the foregoing transactions unless the corporate secretary is duly notified in such manner as the Commission may provide.

SECTION 46. Issuer's Responsibility for Wrongful Transfer to Registered Clearing Agency. — The registration of a transfer of a security into the name of and by a registered clearing agency or its nominee shall be final and conclusive unless the clearing agency had notice of an adverse claim before the registration was made. The above provision shall be without prejudice to any rights which the claimant may have against the issuer for wrongful registration in such circumstances.

SECTION 47. Power of the Commission With Respect to Securities Ownership. — The Commission is authorized, having due regard to the public interest and the protection of investors, to promulgate rules and regulations which:

47.1. Validate the transfer of securities by book-entries rather than the delivery of physical certificates;

47.2. Establish when a person acquires a security or an interest therein and when delivery of a security to a purchaser occurs;

47.3. Establish which records constitute the best evidence of a person's interests in a security and the effect of any errors in electronic records of ownership;

47.4. Codify the rights of investors who choose to hold their securities indirectly through a registered clearing agency and/or other securities intermediaries;

47.5. Codify the duties of securities intermediaries (including clearing agencies) who hold securities on behalf of investors; and

47.6. Give first priority to any claims of a registered clearing agency against a participant arising from a failure by the participant to meet its obligations under the clearing agency's rules in respect of the clearing and settlement of transactions in securities, in a dissolution of the participant, and any such rules and regulations shall bind the issuers of the securities, investors in the securities, any third parties with interests in the securities, and the creditors of a participant of a registered clearing agency.

SECTION 48. Margin Requirements. — 48.1. For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Commission, in accordance with the credit and monetary policies that may be promulgated from time to time by the Monetary Board of the Bangko Sentral ng Pilipinas, shall prescribe rules and regulations with respect to the amount of credit that may be extended on any security. For the extension of credit, such rules and regulations shall be based upon the following standard:

An amount not greater than whichever is the higher of —

(a) Sixty-five per centum (65%) of the current market price of the security, or

(b) One hundred per centum (100%) of the lowest market price of the security during the preceding thirty-six (36) calendar months, but not more than seventy-five per centum (75%) of the current market price.

However, the Monetary Board may increase or decrease the above percentages, in order to achieve the objectives of the Government with due regard for promotion of the economy and prevention of the use of excessive credit.

Such rules and regulations may make appropriate provision with respect to the carrying of undermargined accounts for limited periods and under specified conditions; the withdrawal of funds or securities; the transfer of accounts from one lender to another; special or different margin requirements for delayed deliveries, short sales, arbitrage transactions, and securities to which letter (b) of the second paragraph of this subsection does not apply; the bases and the methods to be used in calculating loans, and margins and market prices; and similar administrative adjustments and details.

48.2. No member of an Exchange or broker or dealer shall, directly or indirectly, extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer:

(a) On any security unless such credit is extended and maintained in accordance with the rules and regulations which the Commission shall prescribe under this Section including rules setting credit in relation to net capital of such member, broker or dealer; and

(b) Without collateral or on any collateral other than securities, except (i) to maintain a credit initially extended in conformity with the rules and regulations of the Commission and (ii) in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of paragraph (a) of this subsection.

48.3. Any person not subject to Subsection 48.2 hereof shall extend or maintain credit or arrange for the extension or maintenance of credit for the purpose of purchasing or carrying any security, only in accordance with such rules and regulations as the Commission shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provisions of this Section. Such rules and regulations may impose upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by Subsection 48.2 and the rules and regulations thereunder. This subsection and the rules and regulations thereunder shall not apply:

(a) To a credit extension made by a person not in the ordinary course of business;

(b) To a loan to a dealer to aid in the financing of the distribution of securities to customers not through the medium of an Exchange; or

(c) To such other credit extension as the Commission shall exempt from the operation of this subsection and the rules and regulations thereunder upon specified terms and conditions or for stated period.

SECTION 49. Restrictions on Borrowings by Members, Brokers, and Dealers. — It shall be unlawful for any registered broker or dealer, or member of an Exchange, directly or indirectly:

49.1. To permit in the ordinary course of business as a broker or dealer his aggregate indebtedness including customers' credit balances, to exceed such percentage of the net capital (exclusive of fixed assets and value of Exchange membership) employed in the business, but not exceeding in any case two thousand percentum (2,000%), as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors.

49.2. To pledge, mortgage, or otherwise encumber or arrange for the pledge, mortgage or encumbrance of any security carried for the account of any customer under circumstances: (a) That will permit the commingling of his securities, without his written consent, with the securities of any customer; (b) That will permit such securities to be commingled with the securities of any person other than a bona fide customer; or (c) That will permit such securities to be pledged, mortgaged or encumbered, or subjected to any lien or claim of the pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of such securities. However, the Commission, having due regard to the protection of investors, may, by rules and regulations, allow certain transactions that may otherwise be prohibited under this subsection.

49.3. To lend or arrange for the lending of any security carried for the account of any customer without the written consent of such customer or in contravention of such rules and regulations as the Commission shall prescribe.

SECTION 50. Enforcement of Margin Requirements and Restrictions on Borrowing. — To prevent indirect violations of the margin requirements under Section 48, the broker or dealer shall require the customer in non-margin transactions to pay the price of the security purchased for his account within such period as the Commission may prescribe, which shall in no case exceed the prescribed settlement date. Otherwise, the broker shall sell the security purchased starting on the next trading day but not beyond ten (10) trading days following the last day for the customer to pay such purchase price, unless such sale cannot be effected within said period for justifiable reasons. The sale shall be without prejudice to the right of the broker or dealer to recover any deficiency from the customer. To prevent indirect violation of the restrictions on borrowings under Section 49, the broker shall, unless otherwise directed by the customer, pay the net sales price of the securities sold for a customer within the same period as above prescribed by the Commission: Provided, That the customer shall be required to deliver the instruments evidencing the securities as a condition for such payment upon demand by the broker.

SECTION 51. Liabilities of Controlling Persons, Aider and Abettor and Other Secondary Liability. — 51.1. Every person who, by or through stock ownership, agency, or otherwise, or in connection with an agreement or understanding with one or more other persons, controls any person liable under this Code or the rules or regulations of the Commission thereunder, shall also be liable jointly and severally with and to the same extent as such controlled persons to any person to whom such controlled person is liable, unless the controlling person proves that, despite the exercise of due diligence on his part, he has no knowledge of the existence of the facts by reason of which the liability of the controlled person is alleged to exist.

51.2. It shall be unlawful for any person, directly or indirectly, to do any act or thing which it would be unlawful for such person to do under the provisions of this Code or any rule or regulation thereunder.

51.3. It shall be unlawful for any director or officer of, or any owner of any securities issued by, any issuer required to file any document, report or other information under this Code or any rule or regulation of the Commission thereunder, without just cause, to hinder, delay or obstruct the making or filing of any such document, report, or information.

51.4. It shall be unlawful for any person to aid, abet, counsel, command, induce or procure any violation of this Code, or any rule, regulation or order of the Commission thereunder.

51.5. Every person who substantially assists the act or omission of any person primarily liable under Sections 57, 58, 59 and 60 of this Code, with knowledge or in reckless disregard that such act or omission is wrongful, shall be jointly and severally liable as an aider and abettor for damages resulting from the conduct of the person primarily liable: Provided, however, That an aider and abettor shall be liable only to the extent of his relative contribution in causing such damages in comparison to that of the person primarily liable, or the extent to which the aider and abettor was unjustly enriched thereby, whichever is greater.

SECTION 52. Accounts and Records, Reports, Examination of Exchanges, Members, and Others. — 52.1. Every registered Exchange, broker or dealer, transfer agent, clearing agency, securities association, and other self-regulatory organization, and every other person required to register under this Code, shall make, keep and preserve for such periods, records, furnish such copies thereof, and make such reports, as the Commission by its rules and regulations may prescribe. Such accounts, correspondence, memoranda, papers, books, and other records shall be subject at any time to such reasonable periodic, special or other examinations by representatives of the Commission as the Commission may deem necessary or appropriate in the public interest or for the protection of investors.

52.2. Any broker, dealer or other person extending credit, who is subject to the rules and regulations prescribed by the Commission pursuant to this Code, shall make such reports to the Commission as may be necessary or appropriate to enable it to perform the functions conferred upon it by this Code.

52.3. For purposes of this Section, the term "records" refers to accounts, correspondence, memoranda, tapes, discs, papers, books and other documents or transcribed information of any type, whether written or electronic in character.

SECTION 53. Investigations, Injunctions and Prosecution of Offenses. — 53.1. The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of this Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency, other self-regulatory organization, and may require or permit any person to file with it a statement in writing, under oath or otherwise, as the Commission shall determine, as to all facts and circumstances concerning the matter to be investigated. The Commission may publish information concerning any such violations, and to investigate any fact, condition, practice or matter which it may deem necessary or proper to aid in the enforcement of the provisions of this Code, in the prescribing of rules and regulations thereunder, or in securing information to serve as a basis for recommending further legislation concerning the matters to which this Code relates: Provided, however, That any person requested or subpoenaed to produce documents or testify in any investigation shall simultaneously be notified in writing of the purpose of such investigation: Provided, further, That all criminal complaints for violations of this Code, and the implementing rules and regulations enforced or administered by the Commission shall be referred to the Department of Justice for preliminary investigation and prosecution before the proper court: Provided, furthermore, That in instances where the law allows independent civil or criminal proceedings of violations arising from the same act, the Commission shall take appropriate action to implement the same: Provided, finally, That the investigation, prosecution, and trial of such cases shall be given priority.

53.2. For the purpose of any such investigation, or any other proceeding under this Code, the Commission or any officer designated by it is empowered to administer oaths and affirmations, subpoena witnesses, compel attendance, take evidence, require the production of any book, paper, correspondence, memorandum, or other record which the Commission deems relevant or material to the inquiry, and to perform such other acts necessary in the conduct of such investigation or proceedings.

53.3. Whenever it shall appear to the Commission that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of this Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency or other self-regulatory organization, it may issue an order to such person to desist from committing such act or practice: Provided, however, That the Commission shall not charge any person with violation of the rules of an Exchange or other self-regulatory organization unless it appears to the Commission that such Exchange or other self-regulatory organization is unable or unwilling to take action against such person. After finding that such person has engaged in any such act or practice and that there is a reasonable likelihood of continuing, further or future violations by such person, the Commission may issue ex-parte a cease and desist order for a maximum period of ten (10) days, enjoining the violation and compelling compliance with such provision. The Commission may transmit such evidence as may be available concerning any violation of any provision of this Code, or any rule, regulation or order thereunder, to the Department of Justice, which may institute the appropriate criminal proceedings under this Code.

53.4. Any person who, within his power but without cause, fails or refuses to comply with any lawful order, decision or subpoena issued by the Commission under Subsection 53.2 or Subsection 53.3 or Section 64 of this Code, shall after due notice and hearing, be guilty of contempt of the Commission. Such person shall be fined in such reasonable amount as the Commission may determine, or when such failure or refusal is a clear and open defiance of the Commission's order, decision or subpoena, shall be detained under an arrest order issued by the Commission, until such order, decision or subpoena is complied with.

SECTION 54. Administrative Sanctions. — 54.1. If, after due notice and hearing, the Commission finds that: (a) There is a violation of this Code, its rules, or its orders; (b) Any registered broker or dealer, associated person thereof has failed reasonably to supervise, with a view to preventing violations, another person subject to supervision who commits any such violation; (c) Any registrant or other person has, in a registration statement or in other reports, applications, accounts, records or documents required by law or rules to be filed with the Commission, made any untrue statement of a material fact, or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading; or, in the case of an underwriter, has failed to conduct an inquiry with reasonable diligence to insure that a registration statement is accurate and complete in all material respects; or (d) Any person has refused to permit any lawful examinations into its affairs, it shall, in its discretion, and subject only to the limitations hereinafter prescribed, impose any or all of the following sanctions as may be appropriate in light of the facts and circumstances:

(i) Suspension, or revocation of any registration for the offering of securities;

(ii) A fine of no less than Ten thousand pesos (P10,000.00) nor more than One million pesos (P1,000,000.00) plus not more than Two thousand pesos (P2,000.00) for each day of continuing violation;

(iii) In the case of a violation of Sections 19.2, 20, 24, 26 and 27, disqualification from being an officer, member of the Board of Directors, or person performing similar functions, of an issuer required to file reports under Section 17 of this Code or any other act, rule or regulation administered by the Commission;

(iv) In the case of a violation of Section 34, a fine of no more than three (3) times the profit gained or loss avoided as a result of the purchase, sale or communication proscribed by such Section; and

(v) Other penalties within the power of the Commission to impose.

54.2. The imposition of the foregoing administrative sanctions shall be without prejudice to the filing of criminal charges against the individuals responsible for the violation.

54.3. The Commission shall have the power to issue writs of execution to enforce the provisions of this Section and to enforce payment of the fees and other dues collectible under this Code.

SECTION 55. Settlement Offers. — 55.1. At any time, during an investigation or proceeding under this Code, parties being investigated and/or charged may propose in writing an offer of settlement with the Commission.

55.2. Upon receipt of such offer of settlement, the Commission may consider the offer based on timing, the nature of the investigation or proceeding, and the public interest.

55.3. The Commission may only agree to a settlement offer based on its findings that such settlement is in the public interest. Any agreement to settle shall have no legal effect until publicly disclosed. Such decision may be made without a determination of guilt on the part of the person making the offer.

55.4. The Commission shall adopt rules and procedures governing the filing, review, withdrawal, form of rejection and acceptance of such offers.

SECTION 56. Civil Liabilities on Account of False Registration Statement. — 56.1. Any person acquiring a security, the registration statement of which or any part thereof contains on its effectivity an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make such statements not misleading, and who suffers damage, may sue and recover damages from the following enumerated persons, unless it is proved that at the time of such acquisition he knew of such untrue statement or omission:

(a) The issuer and every person who signed the registration statement;

(b) Every person who was a director of, or any other person performing similar functions, or a partner in, the issuer at the time of the filing of the registration statement or any part, supplement or amendment thereof with respect to which his liability is asserted;

(c) Every person who is named in the registration statement as being or about to become a director of, or a person performing similar functions, or a partner in, the issuer and whose written consent thereto is filed with the registration statement;

(d) Every auditor or auditing firm named as having certified any financial statements used in connection with the registration statement or prospectus.

(e) Every person who, with his written consent, which shall be filed with the registration statement, has been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement, report, or valuation, which purports to have been prepared or certified by him.

(f) Every selling shareholder who contributed to and certified as to the accuracy of a portion of the registration statement, with respect to that portion of the registration statement which purports to have been contributed by him.

(g) Every underwriter with respect to such security.

56.2. If the person who acquired the security did so after the issuer has made generally available to its security holders an income statement covering a period of at least twelve (12) months beginning from the effective date of the registration statement, then the right of recovery under this subsection shall be conditioned on proof that such person acquired the security relying upon such untrue statement in the registration statement or relying upon the registration statement and not knowing of such income statement, but such reliance may be established without proof of the reading of the registration statement by such person.

SECTION 57. Civil Liabilities Arising in Connection with Prospectus, Communications and Reports. — 57.1. Any person who:

(a) Offers to sell or sells a security in violation of Chapter III, or

(b) Offers to sell or sells a security, whether or not exempted by the provisions of this Code, by the use of any means or instruments of transportation or communication, by means of a prospectus or other written or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall fail in the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him, who may sue to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.

57.2. Any person who shall make or cause to be made any statement in any report, or document filed pursuant to this Code or any rule or regulation thereunder, which statement was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, shall be liable to any person who, not knowing that such statement was false or misleading, and relying upon such statements shall have purchased or sold a security at a price which was affected by such statement, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading.

SECTION 58. Civil Liability for Fraud in Connection with Securities Transactions. — Any person who engages in any act or transaction in violation of Sections 19.2, 20 or 26, or any rule or regulation of the Commission thereunder, shall be liable to any other person who purchases or sells any security, grants or refuses to grant any proxy, consent or authorization, or accepts or declines an invitation for tender of a security, as the case may be, for the damages sustained by such other person as a result of such act or transaction.

SECTION 59. Civil Liability for Manipulation of Security Prices. — Any person who willfully participates in any act or transaction in violation of Section 24 shall be liable to any person who shall purchase or sell any security at a price which was affected by such act or transaction, and the person so injured may sue to recover the damages sustained as a result of such act or transaction.

SECTION 60. Civil Liability with Respect to Commodity Futures Contracts and Pre-need Plans. — 60.1. Any person who engages in any act or transaction in willful violation of any rule or regulation promulgated by the Commission under Section 11 or 16, which the Commission denominates at the time of issuance as intended to prohibit fraud in the offer and sale of pre-need plans or to prohibit fraud, manipulation, fictitious transactions, undue speculation, or other unfair or abusive practices with respect to commodity future contracts, shall be liable to any other person sustaining damage as a result of such act or transaction.

60.2. As to each such rule or regulation so denominated, the Commission by rule shall prescribe the elements of proof required for recovery and any limitations on the amount of damages that may be imposed.

SECTION 61. Civil Liability on Account of Insider Trading. — 61.1. Any insider who violates Subsection 27.1 and any person in the case of a tender offer who violates Subsection 27.4 (a)(i), or any rule or regulation thereunder, by purchasing or selling a security while in possession of material information not generally available to the public, shall be liable in a suit brought by any investor who, contemporaneously with the purchase or sale of securities that is the subject of the violation, purchased or sold securities of the same class unless such insider, or such person in the case of a tender offer, proves that such investor knew the information or would have purchased or sold at the same price regardless of disclosure of the information to him.

61.2. An insider who violates Subsection 27.3 or any person in the case of a tender offer who violates Subsection 27.4 (a), or any rule or regulation thereunder, by communicating material nonpublic information, shall be jointly and severally liable under Subsection 61.1 with, and to the same extent as, the insider, or person in the case of a tender offer, to whom the communication was directed and who is liable under Subsection 61.1 by reason of his purchase or sale of a security.

SECTION 62. Limitation of Actions. — 62.1. No action shall be maintained to enforce any liability created under Section 56 or 57 of this Code unless brought within two (2) years after the discovery of the untrue statement or the omission, or, if the action is to enforce a liability created under Subsection 57.1 (a), unless brought within two (2) years after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under Section 56 or Subsection 57.1 (a) more than five (5) years after the security was bona fide offered to the public, or under Subsection 57.1 (b) more than five (5) years after the sale.

62.2. No action shall be maintained to enforce any liability created under any other provision of this Code unless brought within two (2) years after the discovery of the facts constituting the cause of action and within five (5) years after such cause of action accrued.

SECTION 63. Amount of Damages to be Awarded. — 63.1. All suits to recover damages pursuant to Sections 56, 57, 58, 59, 60 and 61 shall be brought before the Regional Trial Court, which shall have exclusive jurisdiction to hear and decide such suits. The Court is hereby authorized to award damages in an amount not exceeding triple the amount of the transaction plus actual damages.

Exemplary damages may also be awarded in cases of bad faith, fraud, malevolence or wantonness in the violation of this Code or the rules and regulations promulgated thereunder.

The Court is also authorized to award attorney's fees not exceeding thirty percentum (30%) of the award.

63.2. The persons specified in Sections 56, 57, 58, 59, 60 and 61 hereof shall be jointly and severally liable for the payment of damages. However, any person who becomes liable for the payment of such damages may recover contribution from any other person who, if sued separately, would have been liable to make the same payment, unless the former was guilty of fraudulent representation and the latter was not.

63.3. Notwithstanding any provision of law to the contrary, all persons, including the issuer, held liable under the provisions of Sections 56, 57, 58, 59, 60 and 61 shall contribute equally to the total liability adjudged herein. In no case shall the principal stockholders, directors and other officers of the issuer or persons occupying similar positions therein, recover their contribution to the liability from the issuer. However, the right of the issuer to recover from the guilty parties the amount it has contributed under this Section shall not be prejudiced.

SECTION 64. Cease and Desist Order. — 64.1. The Commission, after proper investigation or verification, motu proprio, or upon verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public.

64.2. Until the Commission issues a cease and desist order, the fact that an investigation has been initiated or that a complaint has been filed, including the contents of the complaint, shall be confidential. Upon issuance of a cease and desist order, the Commission shall make public such order and a copy thereof shall be immediately furnished to each person subject to the order.

64.3. Any person against whom a cease and desist order was issued may, within five (5) days from receipt of the order, file a formal request for a lifting thereof. Said request shall be set for hearing by the Commission not later than fifteen (15) days from its filing and the resolution thereof shall be made not later than ten (10) days from the termination of the hearing. If the Commission fails to resolve the request within the time herein prescribed, the cease and desist order shall automatically be lifted.

SECTION 65. Substituted Service Upon the Commission. — Service of summons or other process shall be made upon the Commission in actions or legal proceedings against an issuer or any person liable under this Code who is not domiciled in the Philippines. Upon receipt by the Commission of such summons, the Commission shall within ten (10) days thereafter, transmit by registered mail a copy of such summons and the complaint or other legal process to such issuer or person at his last known address or principal office. The sending thereof by the Commission, the expenses for which shall be advanced by the party at whose instance it is made, shall complete such service.

SECTION 66. Revelation of Information Filed with the Commission. — 66.1. All information filed with the Commission in compliance with the requirements of this Code shall be made available to any member of the general public, upon request, in the premises and during regular office hours of the Commission, except as set forth in this Section.

66.2. Nothing in this Code shall be construed to require, or to authorize the Commission to require, the revealing of trade secrets or processes in any application, report, or document filed with the Commission.

66.3. Any person filing any such application, report or document may make written objection to the public disclosure of information contained therein, stating the grounds for such objection, and the Commission may hear objections as it deems necessary. The Commission may, in such cases, make available to the public the information contained in any such application, report, or document only when a disclosure of such information is required in the public interest or for the protection of investors; and copies of information so made available may be furnished to any person having a legitimate interest therein at such reasonable charge and under such reasonable limitations as the Commission may prescribe.

66.4. It shall be unlawful for any member, officer, or employee of the Commission to disclose to any person other than a member, officer or employee of the Commission or to use for personal benefit, any information contained in any application, report, or document filed with the Commission which is not made available to the public pursuant to Subsection 66.3.

66.5. Notwithstanding anything in Subsection 66.4 to the contrary, on request from a foreign enforcement authority of any country whose laws grant reciprocal assistance as herein provided, the Commission may provide assistance in accordance with this subsection, including the disclosure of any information filed with or transmitted to the Commission, if the requesting authority states that it is conducting an investigation which it deems necessary to determine whether any person has violated, is violating, or is about to violate any laws relating to securities or commodities matters that the requesting authority administers or enforces. Such assistance may be provided without regard to whether the facts stated in the request would also constitute a violation of law of the Philippines.

SECTION 67. Effect of Action of Commission and Unlawful Representations with Respect Thereto. — 67.1. No action or failure to act by the Commission in the administration of this Code shall be construed to mean that the Commission has in any way passed upon the merits of or given approval to any security or any transaction or transactions therein, nor shall such action or failure to act with regard to any statement or report filed with or examined by the Commission pursuant to this Code or the rules and regulations thereunder to be deemed a finding by the Commission that such statements or report is true and accurate on its face or that it is not false or misleading. It shall be unlawful to make, or cause to be made, to any prospective purchaser or seller of a security any representation that any such action or failure to act by the Commission is to be so construed or has such effect.

67.2. Nothing contained in Subsection 67.1 shall, however, be construed as an exemption from liability of an employee or officer of the Commission for any nonfeasance, misfeasance or malfeasance in the discharge of his official duties.

SECTION 68. Special Accounting Rules. — The Commission shall have the authority to make, amend, and rescind such accounting rules and regulations as may be necessary to carry out the provisions of this Code, including rules and regulations governing registration statements and prospectuses for various classes of securities and issuers, and defining accounting, technical and trade terms used in this Code. Among other things, the Commission may prescribe the form or forms in which required information shall be set forth, the items or details to be shown in the balance sheet and income statement, and the methods to be followed in the preparation of accounts, appraisal or valuation of assets and liabilities, determination of depreciation and depletion, differentiation of recurring and non-recurring income, differentiation of investment and operating income, and in the preparation, where the Commission deems it necessary or desirable, of consolidated balance sheets or income accounts of any person directly or indirectly controlling or controlled by the issuer, or any person under direct or indirect common control with, the issuer.

SECTION 69. Effect on Existing Law. — The rights and remedies provided by this Code shall be in addition to any and all other rights and remedies that may now exist. However, except as provided in Sections 56 and 63 hereof, no person permitted to maintain a suit for damages under the provisions of this Code shall recover, through satisfaction of judgment in one or more actions, a total amount in excess of his actual damages on account of the act complained of: Provided, That exemplary damages may be awarded in cases of bad faith, fraud, malevolence or wantonness in the violation of this Code or the rules and regulations promulgated thereunder.

SECTION 70. Judicial Review of Commission Orders. — Any person aggrieved by an order of the Commission may appeal the order to the Court of Appeals by petition for review in accordance with the pertinent provisions of the Rules of Court.

SECTION 71. Validity of Contracts. — 71.1. Any condition, stipulation, provision binding any person to waive compliance with any provision of this Code or of any rule or regulation thereunder, or of any rule of an Exchange required thereby, as well as the waiver itself, shall be void.

71.2. Every contract made in violation of any provision of this Code or of any rule or regulation thereunder, and every contract, including any contract for listing a security on an Exchange heretofore or hereafter made, the performance of which involves the violation of, or the continuance of any relationship or practice in violation of, any provision of this Code, or any rule or regulation thereunder, shall be void:

(a) As regards the rights of any person who, in violation of any such provision, rule or regulation, shall have made or engaged in the performance of any such contract, and

(b) As regards the rights of any person who, not being a party to such contract, shall have acquired any right thereunder with actual knowledge of the facts by reason of which the making or performance of such contract was in violation of any such provision, rule or regulation.

71.3. Nothing in this Code shall be construed:

(a) To affect the validity of any loan or extension of credit made or of any lien created prior or subsequent to the effectivity of this Code, unless at the time of the making of such loan or extension of credit or the creating of such lien, the person making such loan or extension of credit or acquiring such lien shall have actual knowledge of the facts by reason of which the making of such loan or extension of credit or the acquisition of such lien is a violation of the provisions of this Code or any rules or regulations thereunder; or

(b) To afford a defense to the collection of any debt, obligation or the enforcement of any lien by any person who shall have acquired such debt, obligation or lien in good faith, for value and without actual knowledge of the violation of any provision of this Code or any rule or regulation thereunder affecting the legality of such debt, obligation or lien.

SECTION 72. Rules and Regulations; Effectivity. — 72.1. This Code shall be self-executory. To effect the provisions and purposes of this Code, the Commission may issue, amend, and rescind such rules and regulations and orders necessary or appropriate, including rules and regulations defining accounting, technical, and trade terms used in this Code, and prescribing the form or forms in which information required in registration statements, applications, and reports to the Commission shall be set forth. For purposes of its rules or regulations, the Commission may classify persons, securities, and other matters within its jurisdiction, prescribe different requirements for different classes of persons, securities, or matters, and by rule or order, conditionally or unconditionally exempt any person, security, or transaction, or class or classes of persons, securities or transactions, from any or all provisions of this Code.

Failure on the part of the Commission to issue rules and regulations shall not in any manner affect the self-executory nature of this Code.

72.2. The Commission shall promulgate rules and regulations providing for reporting, disclosure and the prevention of fraudulent, deceptive or manipulative practices in connection with the purchase by an issuer, by tender offer or otherwise, of and equity security of a class issued by it that satisfies the requirements of Subsection 17.2. Such rules and regulations may require such issuer to provide holders of equity securities of such dates with such information relating to the reasons for such purchase, the source of funds, the number of shares to be purchased, the price to be paid for such securities, the method of purchase and such additional information as the Commission deems necessary or appropriate in the public interest or for the protection of investors, or which the Commission deems to be material to a determination by holders whether such security should be sold.

72.3. For the purpose of Subsection 72.2, a purchase by or for the issuer or any person controlling, controlled by, or under common control with the issuer, or a purchase subject to the control of the issuer or any such person, shall be deemed to be a purchased by the issuer. The Commission shall have the power to make rules and regulations implementing this subsection, including exemptive rules and regulations covering situations in which the Commission deems it unnecessary or inappropriate that a purchase of the type described in this subsection shall be deemed to be a purchase by the issuer for the purpose of some or all of the provisions of Subsection 72.2.

72.4. The rules and regulations promulgated by the Commission shall be published in two (2) newspapers of general circulation in the Philippines, and unless otherwise prescribed by the Commission, the same shall be effective fifteen (15) days after the date of the last publication.

SECTION 73. Penalties. — Any person who violates any of the provisions of this Code, or the rules and regulations promulgated by the Commission under authority thereof, or any person who, in a registration statement filed under this Code, makes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, shall, upon conviction, suffer a fine of not less than Fifty thousand pesos (P50,000.00) nor more than Five million pesos (P5,000,000.00) or imprisonment of not less than seven (7) years nor more than twenty-one (21) years, or both in the discretion of the court. If the offender is a corporation, partnership or association or other juridical entity, the penalty may in the discretion of the court be imposed upon such juridical entity and upon the officer or officers of the corporation, partnership, association or entity responsible for the violation, and if such officer is an alien, he shall in addition to the penalties prescribed, be deported without further proceedings after service of sentence.

SECTION 74. Transitory Provisions. — The Commission, as organized under existing laws, shall continue to exist and exercise its powers, functions and duties under such laws and this Code: Provided, That until otherwise mandated by a subsequent law, the Commission shall continue to regulate and supervise commodity futures contracts as provided in Section 11 and pre-need plans and the pre-need industry as provided in Section 16 of this Code.

All further requirements herein shall be complied with upon approval of this Code: Provided, however, That compliance may be deferred for such reasonable time as the Commission may determine but not to exceed one (1) year from approval of this Code: Provided, further, That securities which are being offered at the time of effectivity of this Code pursuant to an effective registration and permit, may continue to be offered and sold in accordance with the provisions of the Revised Securities Act in effect immediately prior to approval of this Code.

All unexpended funds for the calendar year, properties, equipment and records of the Securities and Exchange Commission are hereby retained by the Commission as reorganized under this Code and the amount of Two hundred million pesos (P200,000,000.00) or such amount necessary to carry out the reorganization provided in this Code is hereby appropriated.

All employees of the Commission who voluntarily retire or are separated from the service with the Commission and whose retirement or separation has been approved by the Commission, shall be paid retirement or separation benefits and other entitlements granted under existing laws.

SECTION 75. Partial Use of Income. — To carry out the purposes of this Code, the Commission is hereby authorized, in addition to its annual budget, to retain and utilize an amount equal to One hundred million pesos (P100,000,000.00) from its income.

The use of such additional amount shall be subject to the auditing requirements, standards and procedures under existing laws.

SECTION 76. Repealing Clause. — The Revised Securities Act (Batas Pambansa Blg. 178), as amended, in its entirety, and Sections 2, 4 and 8 of Presidential Decree 902-A, as amended, are hereby repealed. All other laws, orders, rules and regulations, or parts thereof, inconsistent with any provision of this Code are hereby repealed or modified accordingly.

SECTION 77. Separability Clause. — If any portion or provision of this Code is declared unconstitutional or invalid, the other portions or provisions hereof, which are not affected thereby shall continue in full force and effect.

SECTION 78. Effectivity. — This Code shall take effect fifteen (15) days after its publication in the Official Gazette or in two (2) newspapers of general circulation.

Approved: July 19, 2000

Published in The Daily Tribune and Today on July 24, 2000. Published in the Official Gazette, Vol. 97 No. 1, 182 Supp., on January 1, 2001.

RULE 1 Reference

These Rules shall be referred to as the "2015 Implementing Rules and Regulations of the Securities Regulation Code" or "2015 SRC Rules".

RULE 2 Interpretation of the Rules

Any doubt that may arise in the interpretation of these Rules shall be resolved by the Commission in a manner that would accomplish the following objectives: (i) organize a socially-conscious and self-regulating market, (ii) encourage wide public ownership of business enterprises, (iii) promote the development of the capital market, (iv) protect the investors, (v) ensure full and timely disclosure of material information, and (vi) minimize, if not eliminate, fraudulent or manipulative devices and practices that create distortions in a free market.

RULE 3 Definition of Terms

3.1. As used in these Rules, unless the context provides otherwise:

3.1.1. Associate is an entity, including an unincorporated entity such as partnership, over which the investor has significant influence and that is neither a subsidiary or an interest in a joint venture.

3.1.2. Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power (which includes the power to vote or direct the voting of such security) and/or investment returns or power (which includes the power to dispose of, or direct the disposition of such security); provided, that a person shall be deemed to have an indirect beneficial ownership interest in any security which is:

3.1.2.1. held by members of his immediate family sharing the same household;

3.1.2.2. held by a partnership in which he is a general partner;

3.1.2.3. held by a corporation in which he is a controlling shareholder; or

3.1.2.4. subject to any contract, arrangement or understanding which gives him voting power or investment power with respect to such securities; provided, that the following persons or institutions shall not be deemed to be beneficial owners of securities held by them for the benefit of third parties or in customer or fiduciary accounts in the ordinary course of business, as long as such shares were acquired by such persons or institutions without the definite and/or clear intention of effecting a change or influencing the control of the Issuer:

3.1.2.4.1. A broker dealer;

3.1.2.4.2. An investment house registered under the Investment Houses Law;

3.1.2.4.3. A bank authorized to operate by the Bangko Sentral ng Pilipinas ("BSP");

3.1.2.4.4. A duly-registered insurance company;

3.1.2.4.5. An investment company registered under the Investment Company Act;

3.1.2.4.6. A pension plan registered with and regulated by the Bureau of Internal Revenue, Insurance Commission or any other regulatory authority; and

3.1.2.4.7. An entity whose members are the persons specified above.

All securities of the same class that are beneficially owned by a person, regardless of the form of the beneficial ownership, shall be aggregated in calculating the number of shares that shall be considered as beneficially owned by such person.

A person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial ownership within thirty (30) days from the exercise of any option, warrant or right, or conversion of any security; or pursuant to the power to revoke a trust, discretionary account or similar arrangement; or pursuant to the automatic termination of a trust, discretionary account or similar arrangement.

3.1.3. Bill of Exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.

3.1.4. Clearing agency is any entity that provides a facility for the performance of the following activities:

3.1.4.1. Make deliveries of securities and/or payments in connection with transactions in securities;

3.1.4.2. Reduce the number of settlements of securities transactions or allocate settlement responsibilities in accordance with the rules issued by the Commission or the Exchange; and/or

3.1.4.3. Provide the means for the central handling of securities so that transfers, loans, pledges and similar transactions can be made by bookkeeping entry; or otherwise facilitate the settlement of securities transactions without physical delivery of securities certificates.

As used in this Rule, "facility" includes a clearing agency's systems, processes or services and all the properties necessary to operate such systems, processes or services, whether within or outside its specific physical location, for the performance of any or all the activities enumerated in the immediately preceding SRC Rule, as may be authorized by the Commission.

3.1.5. Code means the Securities Regulation Code.

3.1.6. Commercial paper means an evidence of indebtedness of any person with a maturity of three hundred and sixty-five (365) days or less.

3.1.7. Commission means the Securities and Exchange Commission.

3.1.8. Control is the power to determine the financial and operating policies of an entity in order to benefit from its activities. It is presumed to exist when the parent entity owns, directly or through subsidiaries and/or associates, more than fifty percent (50%) of the voting power of an entity. It also exists when the parent entity owns fifty percent (50%) or less of the voting power of an entity, but has any of the following powers:

3.1.8.1. Over more than fifty percent (50%) of the voting rights by virtue of an agreement with other investors;

3.1.8.2. To govern the financial and operating policies of the entity under a statute or agreement;

3.1.8.3. To appoint or remove the majority of the members of the board of directors or equivalent governing body; or

3.1.8.4. To cast the majority of votes at meetings of the board of directors or equivalent governing body.

3.1.9. Derivative is a financial instrument whose value changes in response to changes in a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or similar variable or underlying factor It is settled at a future date. This term shall include, but not limited, to the following:

3.1.9.1. Options or contracts that give the buyer the right, but not the obligation, to buy or sell an underlying security at a predetermined price called the exercise or strike price, on or before a predetermined date, called the expiry date; and

3.1.9.2. Warrants or rights to subscribe or purchase new or existing shares in a company on or before a predetermined date.

3.1.10. Exchange is an organized marketplace or facility that brings together buyers and sellers, and executes trades of securities and/or commodities.

3.1.11. Issuer is any entity authorized by the Commission to offer to sell, sell or promote the sale to the public of its equity, bonds, instruments of indebtedness and other forms of securities.

3.1.12. Material fact or information is any fact or information that may result in a change in the market price or value of any of the Issuer's securities, or may potentially affect the investment decision of an investor.

3.1.13. Non-proprietary share or certificate is an evidence of interest, participation or privilege over a specific property of a corporation that allows the holder of the share or certificate to use such property under certain terms and conditions. The holder, however, shall not be entitled to dividends from the corporation or to its assets upon its liquidation.

3.1.14. Organized marketplace or organized market is an exchange, an over-the-counter market, alternative trading system, or otherwise recognized as such by the Commission, and governed by, among others, transparent and binding rules and market conventions on membership, trading, price transparency, trade reporting, market monitoring and orderly conduct or operation of the market which are enforceable on the members and participants.

3.1.15. Proprietary share or certificate is an evidence of interest, participation or privilege in a corporation which gives the holder of the share or certificate the right to use the facilities covered by such certificate and to receive dividends or earnings from the corporation. Upon the liquidation of the corporation, the holder shall have proportionate ownership rights over its assets.

3.1.16. Public company means any corporation with a class of equity securities listed on an Exchange, or with assets in excess of Fifty Million Pesos (PhP50,000,000.00) and has two hundred (200) or more holders each holding at least one hundred (100) shares of a class of its equity securities.

3.1.17. Public offering is any offering of securities to the public or to anyone, whether solicited or unsolicited. Any solicitation or presentation of securities for sale through any of the following modes shall be presumed to be a public offering:

3.1.17.1. Publication in any newspaper, magazine or printed reading material which is distributed within the Philippines;

3.1.17.2. Presentation in any public or commercial place;

3.1.17.3. Advertisement or announcement on radio, television, telephone, electronic communications, information communication technology or any other forms of communication; or

3.1.17.4. Distribution and/or making available flyers, brochures or any offering material in a public or commercial place or to prospective purchasers through the postal system, information communication technology and other means of information distribution.

3.1.18. Registrant means an issuer of securities with respect to which a registration statement, or required issuer report has been or is to be filed.

3.1.19. Reporting company is a corporation that has sold a class of its securities pursuant to a registration under Section 12 of the Code, or a public company, as defined under SRC Rule 3.1.16.

3.1.20. Securities shall include:

1. Shares of stock, bonds, government securities, commercial papers, debentures, notes, evidences of indebtedness, asset-backed securities;

2. Investment contracts, certificates of interest or participation in a profit sharing agreement, certificates of deposit for a future subscription;

3. Fractional undivided interests in oil, gas or other mineral rights;

4. Derivatives like option and warrants;

5. Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments;

6. Proprietary or nonproprietary membership certificates in corporations; and

7. Other instruments as may in the future be determined by the Commission.

Debt securities/instruments include any evidence of indebtedness such as bonds, notes, debentures, commercial papers, treasury bills, treasury bonds and other similar instruments as may be determined by the Commission.

Equity securities include shares of stock in a corporation.

3.1.21. Securities Depository holds securities accounts, provides central safekeeping and asset services, which may include the administration of corporate actions and redemptions, and plays an important role in helping to ensure the integrity of securities issues (that is, securities are not accidentally or fraudulently created or destroyed or their details changed).

3.1.22. Self-Regulatory Organization, or SRO, means an organized Exchange, registered clearing agency, organization or association registered as an SRO under Section 39 of the Code, and which have been authorized by the Commission to: (1) enforce compliance with relevant provisions of the Code and rules and regulations adopted thereunder; (2) promulgate and enforce its own rules which have been approved by the Commission, by their members and/or participants, and; (3) enforce fair, ethical and efficient practices in the securities and commodity futures industries including securities and commodities exchanges.

3.1.23. Subsidiary is an entity, including an unincorporated entity such as partnership that is controlled by another entity (known as the parent).

3.1.24. Trading Participant is any broker dealer who has the right, pursuant to the rules of the Exchange or any organized market, to trade in that Exchange or organized market.

3.1.25. Transfer agent is any person who performs on behalf of an Issuer or by itself as Issuer any of the following activities:

3.1.25.1. Countersigns, when applicable, certificates of securities upon their issuance;

3.1.25.2. Monitors the issuance of securities to prevent unauthorized issuances;

3.1.25.3. Registers the transfer of such securities;

3.1.25.4. Exchanges or converts such securities;

3.1.25.5. Records the ownership of securities by bookkeeping entry without physical issuance of securities certificates.

3.2. Unless otherwise specifically stated, the terms used in these Rules shall have the meaning provided in the Code.

3.3. A person, under these Rules, refers to natural or juridical persons depending on the context it is used. All references to the masculine gender in these Rules shall likewise cover the feminine gender.

"Days" shall be understood to be calendar days, unless the rules specifically state "business days" which shall be computed according to the number of working days of the Commission.

3.4. A rule or regulation which defines a term without express reference to the Code or these Rules, or any of its parts, shall be considered as defining such term for all purposes as used in the Code and in these Rules, unless the context specifically requires otherwise.

RULE 4 Securities and Exchange Commission

4.1. These Rules shall be implemented by the Commission as a collegial body composed of a Chairperson and four (4) Commissioners.

4.2. The Commission has four (4) principal departments, each to be headed by a director. Its core function of capital market regulation shall be performed by the Markets and Securities Regulation Department and Corporate Governance and Finance Department. Its company registration and enforcement functions shall be performed by the Company Registration and Monitoring Department and Enforcement and Investor Protection Department.

4.2.1. The Markets and Securities Regulation Department develops the registration criteria for all market participants and supervises them to ensure compliance with registration requirements and endorses infractions of the Code and rules and regulations to the Enforcement and Investor Protection Department. It registers equity securities and debt instruments, or recommends their exemption from registration, before they are sold, offered for sale, or distributed to the public and ensures that full, timely and accurate information is available about the said securities.

4.2.2. The Corporate Governance and Finance Department registers mutual funds, including exchange-traded funds, membership certificates, club shares, both proprietary and non-proprietary, and time shares before they are offered for sale or sold to the public and ensures that adequate information is available about the said securities. It also ensures that investors have access to all material disclosures regarding the said offering and the securities of public companies. The department also monitors compliance by the above issuers with the Code and rules and regulations adopted thereunder and compliance of financing, lending companies and foundations with existing laws, rules and regulations and endorse infractions thereof to the Enforcement and Investor Protection Department.

It monitors covered companies' compliance with the Revised Code of Corporate Governance and other corporate governance issuances of the Commission.

4.2.3. The Company Registration and Monitoring Department registers domestic corporations, partnerships and associations, including representative offices and foreign corporations intending to do business in the Philippines. It also supervises and monitors such entities relative to their compliance with law, rules and regulations administered by the Commission.

4.2.4. The Enforcement and Investor Protection Department ensures compliance by all market participants, issuers and individuals, and takes appropriate enforcement action against them for legal infraction of the Code and other relevant laws, rules and regulations administered by the Commission.

4.3. The Commission shall have support services departments, namely Human Resource Administrative Department, Economic Research and Training Department, Information and Communication Technology Department and Financial Management Department, each of which shall be headed by a director.

4.3.1. The Human Resource and Administrative Department is responsible for all activities relating to personnel and human resource management, including benefits, training and development.

4.3.2. The Economic Research and Training Department coordinates the conduct of strategic and operational planning and implementation of the Commission; undertakes relevant economic researches and publishes investment and financial statistics and analytics; conducts certification examinations and undertakes periodic training needs assessment for the participants of the Philippine financial and capital markets and recommends programs for career growth and human resource development of the internal public for implementation by the Human Resource and Administrative Department.

4.3.3. Information and Communications Technology Department is responsible for the implementation of SEC's information systems, deployment of all ICT resources including their administration and maintenance in order to promote an efficient and comprehensive management information system. It also assists the Commission in ensuring that all the information systems are aligned with the mandate of SEC and its major final outputs (MFO's) and are geared towards the attainment of the SEC mission and vision.

4.3.4. The Financial Management Department manages the internal finances of the Commission which includes budgeting, accounting and cash management.

4.4. The Commission shall have special offices, namely the Office of the Commission Secretary, Office of the General Counsel and the Office of the General Accountant.

4.4.1. The Office of the Commission Secretary, headed by the Commission Secretary, prepares minutes and maintains official records of Commission meetings and Executive Sessions, decisions and resolution for the approval of the En Banc. It also develops the rules of practice that guide the Commission, Departments, Offices, staff and the public in the Commission's processes and procedures, and performs such other functions as may be directed by the Chair and the Commissioners.

4.4.2. The Office of the General Counsel, headed by the General Counsel, shall serve as the lead legal adviser to the Commission. It also serves as legal liaison for the Commission with other government agencies, self-regulatory organizations and foreign government regulators and agencies. It oversees non-enforcement litigations and appeals to the Commission en banc. It likewise oversees the office of the Commission Secretary.

4.4.3. The Office of the General Accountant, headed by the General Accountant, advises the Commission and the private sector in the area of accounting standards and on issues of accounting treatment for public offerings and disclosures. It also coordinates with any board or council in the development of accounting standards for the Philippines and its capital market.

4.5. The Commission shall have Extension Offices in key cities, each to be headed by a Director. The Extension Offices shall perform company registration, 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, subject to the supervision of the Commission.

4.6. The Commission shall hold regular meetings at least once a week on a day and time fixed 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 senior Commissioner present shall act as the presiding officer of the meeting.

4.7. The Commission may, for purposes of efficiency, delegate any of its functions to an individual Commissioner, any department or office of the Commission or any staff member of the Commission except its review or appellate authority and its power to adopt, alter and supplement any rule or regulation.

4.8. The Commission, motu proprio or upon a petition filed by an interested party, may review any order, resolution, decision or action of any of its departments, offices, individual Commissioner, or staff member of the Commission.

The petition for review shall be filed with the Office of the General Counsel within fifteen (15) days from receipt of the order, resolution, decision or any document evidencing the action taken which is the subject of the review. The petition shall contain, among other things, its factual and legal basis and shall be signed by the petitioner or counsel.

RULE 5 Powers and Functions of the Commission

5.1. The Commission shall act with transparency and shall have the powers and functions provided by the Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions:

5.1.1. Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or permit issued by the Government;

5.1.2. Formulate policies and recommendations on issues concerning the securities market, advise Congress and other government agencies on all aspects of the securities market and propose legislation and amendments thereto;

5.1.3. Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications;

5.1.4. Regulate, investigate or supervise the activities of persons to ensure compliance;

5.1.5. Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other SROs;

5.1.6. Impose sanctions for the violation of laws and the rules, regulations and orders issued pursuant thereto;

5.1.7. Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide guidance on and supervise compliance with such rules, regulations and orders;

5.1.8. Enlist the aid and support of and/or deputize any and all enforcement agencies of the Government, civil or military as well as any private institution, corporation, firm, association or person in the implementation of its powers and functions under the Code;

5.1.9. Issue cease and desist orders to prevent fraud or injury to the investing public;

5.1.10. Punish for contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court;

5.1.11. Compel the officers of any registered corporation or association to call meetings of stockholders or members thereof under its supervision;

5.1.12. Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases, order the examination, search and seizure of all documents, papers, files and records, tax returns, and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it, subject to the provisions of existing laws;

5.1.13. Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law; and

5.1.14. Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws.

5.2. The Commission's jurisdiction over all cases enumerated under Section 5 of Presidential Decree No. 902-A is hereby transferred to the Courts of general jurisdiction or the appropriate Regional Trial Court: Provided, that the Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over these cases. The Commission shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of the Code. The Commission shall retain jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed.

RULE 6 Indemnification and Responsibilities of the Commissioners

6.1. The Commission shall indemnify each Commissioner and other officials of the Commission, including personnel performing supervision and examination functions for all costs and expenses reasonably incurred by such persons in connection with any civil or criminal actions, suits or proceedings to which they may be or made a party by reason of the performance of their functions or duties, unless they are finally adjudged in such actions or proceedings to be liable for gross negligence or misconduct.

In the event of settlement or compromise, indemnification shall be provided only in connection with such matters covered by the settlement as to which the Commission is advised by external counsel that the persons to be indemnified did not commit any gross negligence or misconduct.

The costs and expenses incurred in defending the aforementioned action, suit or proceeding may be paid by the Commission in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Commissioner, officer or employee to repay the amount advanced should it ultimately be determined by the Commission that he/she is not entitled to be indemnified as provided in this subsection.

6.2. The Commissioners, including the Chairperson, officers and employees of the Commission (hereinafter collectively referred to as officers or officer), in the execution of their duties owe their undivided loyalty to the Commission. They shall observe the highest standards of honesty, integrity and good faith in the performance of their duties.

Officers shall not pursue private activities in any manner which may conflict with their duties. They shall subordinate those activities which, although not in conflict with their duties, will require time and effort to the prejudice of their duties at the Commission. Every officer who has discretionary authority shall be free from any conflicting interest or influence of such nature and importance which would make it difficult for him to provide his best efforts and loyalty to the Commission.

The interest of officers shall include the interest of his or her spouse, children under the age of eighteen (18) and trusts for the benefit of himself, his or her spouse or children.

Officers shall provide the Commission with complete information with respect to any actual 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. New officers shall fill up this form and submit the same to the Commission Secretary thirty (30) days prior to the first day of their employment.

Even if not specifically required to be disclosed in SEC Form 6, officers shall report any other circumstances which, in their judgment, are regarded as being of possible concern to 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 cannot 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, or the narrowing of responsibilities of the officer.

SEC Form 6 shall be kept current and accurate. Any change in the information contained therein shall be reported and filed with the Commission Secretary on SEC Form 6-A no later than ten (10) days from the date of such change.

6.2.1. Set forth below is a description of some types of activities which may give rise to a conflict of interest in violation of this Rule:

6.2.1.1. All officerships, directorships, trusteeships or partnership interests in any organization or association, whether registered with the Commission or not, except in charitable or civic organizations;

6.2.1.2. Meaningful interest in any security or investment in any corporation, partnership or association registered under the Code, except in sports club, social, charitable or civic organization;

6.2.1.3. The receipt of compensation, wages, bonuses, benefits or privileges with monetary value from any corporation, partnership, or association registered with the Commission or from any person or enterprise which, though not registered with the Commission, does business with the Commission as a supplier, contractor or the like;

6.2.1.4. During their term of office or employment with the Commission and for a period of one year after resignation, retirement or separation from such office or employment:

6.2.1.4.1. Accept employment as an officer, employee, consultant, counsel, broker, agent, trustee or nominee by any person or in any enterprise regulated by the Commission under the Code;

6.2.1.4.2. Engage in private practice of their profession where such practice conflicts or tends to conflict with their official function (e.g. when such practice is in connection with any matter before the office of the Commission where such officer works or used to work);

6.2.1.4.3. Recommend any person to any position in a private enterprise which has a regular or pending official transaction with the office where such officer works or used to work.

6.2.1.5. Solicitation or acceptance of any gift, loan, or other benefit from any corporation, partnership or association registered, applying or contemplating registration with the Commission, including any person or firm, though not so registered, applying or contemplating registration and/or having current or prospective dealings with the Commission as a supplier or contractor or the like, if the acceptance would influence or would create the appearance of influencing him to act other than solely in the best interest of the Commission.

6.2.1.5.1. Any gift having more than a nominal value, even if given on occasions of rejoicing or celebration such as birthdays, anniversaries or Christmas, shall not be permitted.

6.2.1.5.2. Each officer should not borrow money from subordinates and from those entities which he directly regulates, except from financial institutions at prevailing market rates.

6.2.1.5.3. No entertainment should be accepted by any officer of a kind or amount which would influence or would create the appearance of influencing him to act other than solely in the best interest of the Commission.

6.3 The Commissioners, officers and employees of the Commission who willfully violate the Code or who are guilty of negligence, abuse or acts of malfeasance or fail to exercise extraordinary diligence in the performance of their duties shall be held liable for any loss or injury suffered by the Commission or other institutions as a result of such violation, negligence, abuse, malfeasance, or failure to exercise extraordinary diligence.

Similar responsibility shall apply to the Commissioners, officers and employees of the Commission for (1) the disclosure of any information, discussion or resolution of the Commission of a confidential nature, or about the confidential operations of the Commission, unless the disclosure is in connection with the performance of official functions with the Commission or with prior authorization of the Commissioners; or (2) the use of such information for personal gain or to the detriment of the government, the Commission or third parties: Provided, however, That any data or information required to be submitted to the President and/or Congress or its appropriate committee, or to be published under the provisions of the Code shall not be considered confidential.

RULE 7 Reorganization

7.1. To achieve the goals of the Code, consistent with Civil Service laws, the Commission is hereby authorized to provide for its reorganization, to streamline its structure and operations, upgrade its human resource component and enable it to more efficiently and effectively perform its functions and exercise its powers under the Code and these Rules.

7.2. All positions of the Commission shall be governed by a compensation and position classification systems and qualification standards approved by the Commission based on a comprehensive job analysis and audit of actual duties and responsibilities. The compensation plan shall be comparable with the prevailing compensation plan in the BSP and other government financial institutions and shall be subject to periodic review by the Commission no more than once every two (2) years without prejudice to yearly merit reviews or increases based on productivity and efficiency. The Commission shall, therefore, be exempt from laws, rules, and regulations on compensation, position classification and qualification standards. The Commission shall, however, endeavor to make its system conform as closely as possible with the principles under the Compensation and Position Classification Act of 1989 (Republic Act No. 6758, as amended).

RULE 8.1 Filing of Registration Statement

8.1.1. Filing of Registration Statement ("RS") and Effectivity of Offering

8.1.1.1. No securities shall be sold or offered for sale, or distributed by any person or entity within the Philippines unless such securities are duly registered with the Commission through Form 12-1, and the registration statement has been declared effective by the Commission except of a class exempt under Section 9 of the Code or unless sold in any transaction exempt under Section 10 thereof and these Rules. No information relating to an offering of securities shall be disseminated unless a registration statement has been filed with the Commission and the written communication proposed to be released contains the required information under SRC Rule 83.

8.1.1.2. All outstanding shares of the following corporations shall be registered with the Commission:

8.1.1.2.1. Corporations that will conduct Initial Public Offerings;

8.1.1.2.2. Corporations that will apply for listing on an Exchange by way of introduction.

8.1.1.3. No registration shall be required for the outstanding shares of reporting corporations with shares already listed on an Exchange that were not registered with the Commission pursuant to Section 5 (a) (3) of the Revised Securities Act, now Section 9.1 (e) of the Code.

8.1.1.4. If the securities subject of a registration statement are intended to be listed on an Exchange, a copy of the registration statement and all other pertinent documents, including any amendments, shall be filed with that Exchange. Two (2) copies of the application for listing shall also be filed with the Commission.

8.1.1.5. The sale of the securities subject of the registration statement shall commence within ten (10) business days from the date of the effectivity of the registration statement 1 and shall continue until the end of the offering period or until the sale is terminated by the Issuer. If the sale is not commenced within ten (10) business days, the RS shall be cancelled and all fees paid thereon forfeited.

8.1.1.6. A written notification of completion or termination of the offering shall be filed by the Issuer with the Commission within three (3) business days from such completion or termination, and the notice shall state the number of securities sold.

8.1.2. Delayed and Continuous Offering and Sale of Securities (Shelf Registration)

Securities, which are intended to be issued in tranches at more than one instance after the registration statement has been rendered effective by the Commission, may be registered for an offering to be made on a continuous or delayed basis in the future, for a period not exceeding three (3) years from the effective date of the registration statement under which they are being offered and sold.

Securities offered after the initial tranche shall comply with the following requirements:

8.1.2.1. At least five (5) business days prior to the offering or sale of the securities, it shall disclose to the Commission the required information using SEC Form 12-1-SR.

8.1.2.2. Filing Fees

8.1.2.2.1. Upon filing of an RS, the total filing fee shall be computed based on Section 12.5 (a) of the SRC, payable per tranche of issuance and proportional to the issued value.

8.1.2.2.2. The filing fees of the subsequent tranches shall be payable within seven (7) business days prior to commencement of the offer/sale of the said securities.

8.1.2.3. The registrant shall execute an Undertaking to pay the remaining registration fees no later than thirty (30) business days prior to the expiry of the three (3) year period reckoned from the date of effectivity of the RS.

8.1.3. Prospectus Delivery Requirements

8.1.3.1. The prospectus shall be submitted to the Commission as part of the registration statement.

8.1.3.2. Securities required to be registered pursuant to Sections 8 and 12 of the Code shall not be offered for sale or sold unless the prospectus, or any information material which has been filed with the registration statement in the form and containing the information described below, has been widely disseminated and sufficient copies have been made available to interested parties. Further, the prospectus contains the following statement in bold face print, at least 12 point type prominently displayed:

A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BUT HAS NOT YET BEEN DECLARED EFFECTIVE. NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE THEREBY, AND ANY SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY KIND, AT ANY TIME PRIOR TO THE NOTICE OF ITS ACCEPTANCE. AN INDICATION OF INTEREST IN RESPONSE HERETO INVOLVES NO OBLIGATION OR COMMITMENT OF ANY KIND. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR BE CONSIDERED A SOLICITATION OF AN OFFER TO BUY.

8.1.3.3. In addition to the requirements of this Rule, the prospectus shall contain the information required by SRC Rule 12.1 and Form 12-1 and shall be prepared in accordance with the requirements of SRC Rule 72.1. The contents of the prospectus shall be worded in a language that can be understood by an ordinary person.

8.1.3.4. The prospectus is presumed to have been widely disseminated or circulated if copies were distributed initially and additional copies were furnished promptly, upon request, to the following:

8.1.3.4.1. All the participants in the distribution (e.g., underwriters and brokers);

8.1.3.4.2. The principal office of the Commission;

8.1.3.4.3. An Exchange, if the securities will be listed; and

8.1.3.4.4. Twenty (20) or more persons who are not qualified buyers under Section 10.1 (1) of the Code.

8.1.3.5. Notice of Availability of the Prospectus

8.1.3.5.1. All participants in the distribution of an offering of securities to the public shall, when inquiries are made about it, inform the interested parties about the availability of the prospectus and shall, if requested, provide them copies.

8.1.3.5.2. A notice shall be placed on the front cover of the subscription agreement distributed in connection with the offering informing interested persons that they are entitled to a copy of the prospectus if they so desire and how and where it can be obtained.

8.1.3.5.3. The information referred to in SRC Rules 8.1.3.5.1 and 8.1.3.5.2 above on where the prospectus may be obtained shall include the address of the principal office and email address of the Commission, the Exchange where the securities may be listed, the Issuer company, and the telephone number, address and email address of the Issuer's contact person. A statement shall also be made to the effect that the prospectus is available from all underwriters and brokers participating in the distribution.

8.1.3.6. The use of selling documents other than the prospectus during the offering period is prohibited, provided, that the information described in SRC Rule 8.3 may be disseminated in whole or in part to summarize the offering.

8.1.3.7. The prospectus shall not be used unless all the information it contains are up to date and accurately reflect the terms of the offering and the financial condition of the Issuer. Accordingly, until all appropriate amendments have been made and filed with the Commission under SRC Rule 14, the use of the prospectus and the right to sell and offer for sale may be suspended under Section 15 of the Code if any of the following events occurs:

8.1.3.7.1. There is a material change in any of the information provided (including, but not limited to, the occurrence of a material event that is required to be reported in Form 17-C);

8.1.3.7.2. The accompanying financial statements are more than two hundred twenty five (225) days old.

8.1.3.8. Format of the Prospectus

8.1.3.8.1. The information required in the prospectus shall follow the order of the items or other requirements in Part I of Form 12-l. The information should be complete and should not mislead its reader or render its contents incomprehensible.

8.1.3.8.2. All information in the prospectus should be properly captioned or labeled to indicate the subject matters covered. The information shall be divided into short paragraphs or sections, except the financial statements and tabular data.

8.1.3.8.3. The information in the prospectus shall not be condensed or summarized. References may be made to information in other parts of the prospectus instead of repeating them.

8.1.3.8.4. All information required to be included in the prospectus should be clearly understandable without the need to refer to Form 12-1 or to outside sources.

RULE 8.2 Conditional Approval

The Commission may conditionally render the RS effective under such terms as it may deem necessary.

RULE 8.3 Written Communications Not Deemed Offers for Sale

8.3.1. A notice, circular, advertisement, letter or other forms of communication do not constitute an offer for sale that violates Section 8 of the Code if it is published or transmitted to any person after a registration statement has been filed and contains the following information:

8.3.1.1. The name of the issuer of the security;

8.3.1.2. The full title of the security and the amount being offered;

8.3.1.3. A brief indication of the general type of business of the issuer;

8.3.1.4. The price of the security or, if the price is not known, the method of its determination or the probable price range as specified by the issuer or the managing underwriter;

8.3.1.5. In the case of a debt security with a fixed (non-contingent) interest provision, the yield or, if the yield is not known, the probable yield range, as specified by the issuer or the managing underwriter;

8.3.1.6. The name and address of the sender of the communication and the fact that he is participating, or expects to participate, in the distribution of the security;

8.3.1.7. The names of the underwriters;

8.3.1.8. The approximate date upon which the proposed sale to the public is anticipated to commence;

8.3.1.9. Whether the security is being offered through rights issued to existing security holders, and, if so, the class of securities the holders of which will be entitled to subscribe, the subscription ratio, the actual or proposed record date, the date upon which the rights were issued or are expected to be issued, the actual or anticipated date upon which they will expire, and the approximate subscription price, or any of the foregoing;

8.3.1.10. With respect to any class of debt securities, any class of convertible debt securities or any class of preferred stock, the security rating or ratings assigned to the class of securities by any credit rating agency recognized or accredited by the Commission and the name of such rating agency/ies which assigned such rating/s;

8.3.1.11. For preliminary prospectuses, the following statement in bold face:

A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, BUT HAS NOT YET BECOME EFFECTIVE. THESE SECURITIES MAY NOT BE SOLD NOR OFFERS TO BUY THEM BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT IS RENDERED EFFECTIVE. THIS COMMUNICATION SHALL NOT CONSTITUTE AN OFFER TO SELL OR BE CONSIDERED A SOLICITATION TO BUY.

8.3.1.12. A statement whether the security is being offered in connection with a distribution by the Issuer or a security holder, or both, and whether the issue represents new financing or refinancing, or both;

8.3.1.13. The name/s and addresses of the person/s from whom a prospectus that meets the requirements of Section 12 of the Code may be obtained.

RULE 8.4 Register of Securities

A record of the registration of securities shall be kept in a Register of Securities in which shall be recorded orders entered by the Commission with respect to such securities. Such register and all documents or information with respect to the securities registered therein shall be open to public inspection at reasonable hours on business days.

RULE 8.5 Audit by the Commission

The Commission may audit the financial statements, assets and other information of a firm applying for registration of its securities whenever it deems the same necessary to insure full disclosure or to protect the interest of the investors and the public in general.

RULE 9.1 Exempt Securities

9.1.1. Any evidence of indebtedness issued by a financial institution that has been licensed by the BSP to engage in banking or quasi-banking shall be exempt from registration under Section 8.1 of the Code.

9.1.2. The registration requirements shall not likewise apply to the following:

9.1.2.1. Evidence of indebtedness issued to the BSP under its open market and/or rediscounting operations;

9.1.2.2. Bills of exchange arising from a bona fide sale of goods and services that are distributed and/or traded by banks or investment houses duly licensed by the Commission and BSP through an organized market that is operated under the rules approved by the Commission;

9.1.2.3. Any security issued or guaranteed by multilateral financial entities established through a treaty or any other binding agreement to which the Philippines is a party or subsequently becomes a member (hereinafter referred as Multilateral Financial Entities or MFE), e.g., international financial institutions, multilateral development banks, development finance institutions or any other similar entities; or by facilities or funds established, administered, and supported by MFEs; Provided, that the issuer shall file an offering circular/memorandum in a format prescribed by the Commission and containing among others; (1) information about the issuer and the security to be issued, (2) information about the MFE, and (3) information about the guarantee.

9.1.2.4. The registration requirements shall not likewise apply to evidence of indebtedness, e.g., commercial papers, that meet the following conditions:

9.1.2.4.1. Issued to not more than nineteen (19) non-institutional lenders;

9.1.2.4.2. Payable to a specific person;

9.1.2.4.3. Neither negotiable nor assignable and held on to maturity; and

9.1.2.4.4. In an amount not exceeding One Hundred Fifty Million Pesos (PhP150,000,000.00) or such higher amount as the Commission may prescribe.

9.13. Notwithstanding that a particular class of securities is exempt from registration, the conduct by any person in the purchase, sale, distribution of such securities, settlement and other post-trade activities shall comply with the provisions of the Code and the rules issued thereunder.

Moreover, the purchase and sale of such security shall not be exempt from the coverage of the provisions of the Code on civil and other related liabilities, and other applicable provisions of the Code on fraud.

9.1.4. Consistent with public interest and for the protection of investors, the Commission, may require an Issuer of a class of securities exempted from registration, to make available to investors and file with the Commission periodic disclosures regarding the Issuer, its business operations, its financial condition, its governance principles and practices, its use of investor funds, and other appropriate matters, and may also provide for suspension and termination of such requirement with respect to such Issuer.

RULE 9.2 Other Exempt Securities

9.2.1. The Commission may, by rule or regulation after public hearing, add to the foregoing any class of securities if it finds that the enforcement of the Code with respect to such securities is not necessary in the public interest and for the protection of investors.

RULE 10.1 Exempt Transactions

10.1.1. Disclosure to Investors

Any person claiming exemption under Section 10.1 of the Code shall provide to any party to whom it offers or sells securities in reliance on such exemption a written disclosure containing the following information:

10.1.1.1. The specific provision of Section 10.1 of the Code on which the exemption from registration is claimed; and

10.1.1.2. The following statement in bold face:

THE SECURITIES BEING OFFERED OR SOLD HEREIN HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE. ANY FUTURE OFFER OR SALE OF THE SECURITIES IS SUBJECT TO THE REGISTRATION REQUIREMENTS UNDER THE CODE UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION.

10.1.2. Restrictions for Transactions under Section 10.1 (k) of the Code

10.1.2.1. Sections 8 and 12 of the Code are violated if (a) the number of persons holding the exempt security under Section 10.1 (k) exceeds nineteen (19) within a twelve (12) month period or (b) the sale, offer for sale, or distribution of a security, which is not exempt or which does not fall under an exempt transaction, is actively solicited from or marketed to non-qualified buyers in the Philippines by any entity, including its agents, representatives, employees or any person acting on its behalf.

In proper cases, the issuer of the security and its directors and officers shall be held liable.

10.1.2.2. A prima facie presumption of circumvention of Sections 8 and 12 of the Code shall arise when the number of non-qualified investors shall exceed nineteen (19) within one (1) year. The issuer shall be liable for penalty in accordance with the Scale of Fines of the Commission, without prejudice to other actions which may be taken against the issuer.

If the original purchaser/s shall resell said securities resulting in more than nineteen (19) holders, Sections 8 and 12 of the SRC shall apply, notwithstanding the exemption of their issuances, unless such succeeding sale shall qualify as an exempt transaction.

10.1.2.3. Debt instruments issued by companies without quasi-banking licenses in excess of One Hundred Fifty Million Pesos (PhP150,000,000) or such higher amount as the Commission may prescribe shall require prior approval by the Commission.

10.1.2.4. A confirmation of exemption made under Section 10.1 (k), shall be subject to the following terms and conditions:

10.1.2.4.1. The Issuer or seller claiming relief shall not engage in any form of general solicitation or advertising in that connection;

10.1.2.4.2. Securities sold in any such transaction may only be sold to persons purchasing for their own account;

10.1.2.4.3. The sale may be made to not more than nineteen (19) buyers. A corporation, partnership or other entity shall be counted as one buyer; Provided, that if the entity is organized for the specific purpose of acquiring the securities offered and is not a qualified buyer under Section 10.1 (1) of the Code, or under these rules, then each beneficial owner of equity securities in the entity shall be counted as a separate buyer under this Rule;

10.1.2.4.4. The issuer or seller provides any person to whom it offers for sale or sells securities the following information in writing:

10.1.2.4.4.1. Name of the issuer or seller and its or his predecessor, if any;

10.1.2.4.4.2. Address of its principal executive office;

10.1.2.4.4.3. Place of incorporation;

10.1.2.4.4.4. Title and class of the security;

10.1.2.4.4.5. Par or issue value of the security;

10.1.2.4.4.6. Number of shares or total amount of securities outstanding as of the end of the issuer's most recent fiscal year;

10.1.2.4.4.7. Name and address of the transfer agent;

10.1.2.4.4.8. Nature of the Issuer's business;

10.1.2.4.4.9. Nature of products or services offered;

10.1.2.4.4.10. Nature and extent of the Issuer's facilities;

10.1.2.4.4.11. Name of the chief executive officer and members of the board of directors;

10.1.2.4.4.12. The Issuer's most recent financial statement for the two preceding fiscal years or such shorter period of existence;

10.1.2.4.4.13. Whether the person offering or selling the securities is affiliated, directly or indirectly, with the Issuer;

10.1.2.4.4.14. Whether the offering is being made directly or indirectly on behalf of the Issuer, or any director, officer or person who owns directly or indirectly more than ten percent (10%) of the outstanding shares of any equity security of the Issuer and, if so, the name of such person; and

10.1.2.4.4.15. Information required under SRC Rule 10.1.1; Provided, however, that if the Issuer is a reporting company under Section 17 of the Code, a copy of its most recent annual report may be used to provide the required information.

10.1.3. Offer or Sale of Securities to Qualified Buyers under Section 10.1 (l) of the Code.

Section 8 and 12 shall not likewise apply to securities issued and sold to the following qualified buyers:

10.1.3.1. Bank;

10.1.3.2. Registered investment house;

10.1.3.3. Insurance company;

10.1.3.4. Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or managed by a bank or other persons authorized by the BSP to engage in trust functions;

10.1.3.5. Investment company; or

10.1.3.6. Such other person as the Commission may by rule determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amount of assets under management.

10.1.4. Issuance of evidence of indebtedness to primary institutional lenders

Sections 8 and 12 shall not likewise apply to issuance of evidence of indebtedness to the following primary institutional lenders: banks, including their trust accounts wherein the bank-trustee is granted discretionary powers in the investment disposition of the trust funds, investment houses including their trust accounts wherein the investment house-trustee is granted discretionary powers in the investment disposition of the trust funds, trust companies, financing companies, investment companies, pre-need companies, non-stock savings and loan associations, building and loan associations, venture capital corporations, insurance companies, government financial institutions, pawnshops, pension and retirement funds approved by the BIR, educational assistance funds established by the national government, and other entities that may be classified as primary institutional lenders by the BSP, in consultation with the SEC; provided all such evidence of indebtedness shall only be negotiated or assigned to any of the aforementioned primary institutional lenders or the Development Bank of the Philippines with respect to private development banks in relation with their rediscounting privileges; provided further that in case of non-banks without underwriting licenses, such negotiation or assignment shall be through banks or non-banks licensed to be an underwriter or a securities dealer; provided finally, that in no case shall said instrument be negotiated or assigned to non-qualified investors.

10.1.5. Application for Confirmation or Declaration of Exemption

10.1.5.1. If the Issuer wants a confirmation of exemption under Section 10.1 of the Code, it shall file SEC Form 10-1 with the Commission.

10.1.5.2. In cases involving the distribution of securities through stock dividends, the Commission shall determine the sufficiency of the retained earnings of the Issuer prior to issuing a confirmation of exemption.

10.1.5.3. If the consideration for the offered securities is other than cash, except in the case of issuance of shares by way of stock dividends, a request for confirmation of exemption from registration shall be filed with the Company Registration and Monitoring Department of the Commission and shall be deemed to include an application for approval of valuation required under Section 62 of the Corporation Code and vice versa.

10.1.6. Exempt Commercial Paper Transactions

An Issuer of commercial papers in an exempt transaction shall:

10.1.6.1. File a Notice or Application for Confirmation of Exemption (SEC Form 10-1) prior to issuance. The application shall make a disclosure of the following financial ratios:

Current Assets

Current Ratio

=

————————

Current Liabilities

Total Liabilities

Debt to Equity Ratio

=

————————

Stockholders' Equity

10.1.6.2. Indicate in bold letters on the face of the instrument the words:

NON-NEGOTIABLE/NON-ASSIGNABLE

10.1.6.3. The Issuer of outstanding commercial papers shall also file the prescribed disclosure statement and pay the corresponding fee.

10.1.7. Isolated Transactions under Section 10.1 (c)

10.1.7.1. A request for confirmation of exemption under Section 10.1 (c) of the Code shall be available to issuers and sellers.

10.1.7.2. The Commission may take any action it may deem appropriate in an application for confirmation even if it is filed after the offer or sale of the securities without prejudice to the imposition of penalties if warranted.

10.1.8. Burden of Proof on the Availability of Exemption

Unless a confirmation of exemption is issued under this Rule, any person claiming exemption under Section 10 of the Code has the burden of proof, if challenged, of showing that it is entitled to the exemption. The Commission may challenge such exemption any time.

10.1.9. Exempt from Registration, But Not from Other Requirements and Liabilities

Notwithstanding that a particular class of securities issued under Section 10.1 is exempt from registration, the conduct by any person in the purchase, sale, distribution of such securities, settlement and other post-trade activities shall comply with the provisions of the Code and the rules issued thereunder.

Moreover, the sale or offer for sale of a security in an exempt transaction under Section 10 of the Code shall not be exempt from civil liability and other related liabilities and other applicable provisions of the Code on fraud, among others.

Consistent with public interest and for the protection of investors, the Commission, may require an Issuer of a class of securities falling under exempt transactions, to make available to investors and file with the Commission periodic disclosures regarding the Issuer, its business operations, its financial condition, its governance principles and practices, its use of investor funds, and other appropriate matters, and may also provide for suspension and termination of such requirement with respect to such Issuer.

10.1.10. Exemption Not Available for Scheme to Evade Compliance

A request for confirmation of exemption under Section 10 of the Code shall not be available to any Issuer or other persons to any transaction or chain of transactions that, although it may appear to be in compliance with the Code and these Rules, is a part of a plan or scheme to evade compliance with the registration requirements of the Code. In such cases, registration shall be mandatory.

10.1.11. Qualified Buyers Under Section 10.1 (l)(vi) of the Code

10.1.11.1. For purposes of Section 10 of the Code, a natural person shall be considered a qualified individual buyer if he has registered as such with entities that are authorized by the Commission to act as registrar of qualified buyers pursuant to the rules provided under SRC Rule 39.1.4.

A natural person must possess the following qualifications:

10.1.11.1.1. Has an annual gross income of at least Ten Million Pesos (Php10,000,000.00) at least two (2) years prior to registration, or a total portfolio investment in securities registered with the Commission of at least Ten Million Pesos (Php10,000,000.00), or a personal net worth of not less than Thirty Million Pesos (Php30,000,000.00); and

10.1.11.1.2. Has been engaged in securities trading personally or through a fund manager for a minimum period of one (1) year, or has held for at least two (2) years a position of responsibility in any professional business entity that requires knowledge or expertise in securities trading, such as, legal consultant, financial adviser, sales person, or associated person of a broker-dealer, bank finance or treasury officer, trust officer or other similar executive officers.

10.1.11.2. If the buyer is a juridical person, it shall, at the time of registration with an authorized registrar, (i) have gross assets of at least One Hundred Million Pesos (Php100,000,000.00) or (ii) a total portfolio investment in securities registered with the Commission or financial instruments issued by the government of at least Sixty Million Pesos (Php60,000,000.00).

10.1.11.3. All persons registering as qualified buyers shall, in addition, show proof that they possess the above-enumerated qualifications and submit under oath certified copies of the documents or their equivalent that show the following matters:

10.1.10.3.1. Total portfolio of securities;

10.1.10.3.2. Annual gross income;

10.1.10.3.3. Their net worth; and

10.1.10.3.4. Threshold risk (low, medium, high risk).

10.1.11.4. The registration as qualified buyers shall be valid for 3 years if the qualifications provided for in 10.1.10.1 and 10.1.10.2 above are continuously complied with. Any application for renewal shall be subject to new evaluation by the registrar and accompanied by updated information sheets. For this purpose, the registrar shall maintain a registry book of qualified buyers that shall be open for inspection by the Commission.

RULE 10.2 Limited Public Offerings and Other Exempt Transactions

10.2.1. The Commission may exempt other transactions, if it finds that the requirement of registration under the Code is not necessary in the public interest or for the protection of the investors such as by reason of the small amount involved or the limited character of the public offering.

10.2.2. For a public offering to be considered of limited character, the covered securities should be available only to the parties or persons named in the application for exemption for a specified period.

10.2.3. The following documents shall be submitted in support of an application for exemption under Section 10.2 of the Code:

10.2.3.1. Letter-request which shall contain the following information:

10.2.3.1.1. Registered name of the applicant;

10.2.3.1.2. Primary purpose of the applicant;

10.2.3.1.3. Number of option shares to be issued;

10.2.3.1.4. Corresponding position of the optionees or persons to whom the offer shall be made;

10.2.3.1.5. Latest audited financial statements of the applicant;

10.2.3.1.6. If applicable, the names and addresses of the applicant's subsidiaries and affiliate companies and their dates of registration with the Commission; issue price or exchange rate, including its source or basis, of the option shares at the time of filing; and last quoted price of the option shares and such other relevant features, terms and conditions of the plan.

10.2.3.2. Notarized certificate of the Corporate Secretary of the applicant Issuer attesting to the following: 2

10.2.3.2.1. Approval by the applicant's Board of Directors and required stockholders' approval of the stock offering plan ("the Plan");

10.2.3.2.2. Genuineness and due execution of the Plan, a copy of which shall be attached to the certificate; and

10.2.3.2.3. If applicable, a breakdown of the number of shares earlier exempted from registration (citing SEC Resolution and date of approval), the shares subscribed by the optionees, and the remaining unissued shares computed on a year-to-year basis, and an explanation on why the applicant has renewed its application in spite of the availability of unissued shares.

10.2.3.2.4. A Certification of the Human Resource Head or any position of equivalent nature that the optionee-employees were given a copy of the Plan to enable them to make an intelligent judgment on the advantages and disadvantages of the Plan.

10.2.3.2.5. If the issuer is a foreign corporation, it should state whether the terms and conditions of the Plan in the Philippines are the same as that in other jurisdictions and an undertaking that the optionees of the plan will have continuous access on the key performance indicators of the company;

10.2.3.2.6. All documents executed abroad shall be in English and authenticated by the Philippine Embassy or Consulate where the documents were executed.

10.2.3.2.7. A listing of persons and their corresponding position(s) in whose favor such grant or issuance of options is to be made, indicating the number of shares to be given to each, or if this could not yet be ascertained, the formula to be used in determining such number of shares, and issue price.

10.2.4. Issuers, as well as the participating subsidiary, affiliate, branch office or any other entity-optionee, granted exemption under this Rule shall submit to the Commission, on or before the 10th of January of each year following the date of the grant until full issuance, a report containing the necessary details of the grant, such as but not limited to, the names of actual optionees and the number of shares subscribed by them, or such other reports and for such period as the Commission may from time to time require.

10.2.5. Applicants for exemption filed under this Rule shall pay a filing fee in such amount as may be prescribed by the Commission. The Corporate Secretary of the Issuer shall submit a sworn undertaking to pay the additional filing fee should there be an increase in price of the securities at the time of grant;

10.2.6. No securities sold under exempt transactions pursuant to Section 10.1 or granted exemption under Section 10.2 hereof shall be offered for sale or sold to the public without prior registration.

RULE 10.3 Application for Confirmation of Exemption

10.3.1. Any person applying or seeking for confirmation of an exemption under Section 10 of the Code shall file with the Commission a notice identifying the exemption relied upon on such form and at such time as the Commission by rule may prescribe and with such notice shall pay to the Commission a fee equivalent to one-tenth (1/10) of one percent (1%) of the maximum aggregate price or issued value of the securities.

RULE 11 Commodity Futures Contracts

11.1. No person shall offer, sell or enter into commodity futures contracts except in accordance with rules, regulations and orders the Commission may prescribe in the public interest. The Commission shall promulgate rules and regulations involving commodity futures contracts to protect investors to ensure the development of a fair and transparent commodities market.

RULE 12.1 Filing Requirements under the Code

12.1.1. Underwriting Requirement for Registered Securities

Issuers of Registered Securities shall enter into an underwriting agreement with a universal bank, investment house or any other financial institution duly licensed under the Investment Houses Law; Provided, that if the underwriter is part of a group composed of such institutions, the group shall agree on a syndicate manager that shall act on behalf of, and be responsible to, the group and whose actions shall be binding on the members of the group.

No underwriting agreement shall be required for issuers of proprietary/non-proprietary securities and timeshares.

12.1.2. Requirements for Registration of Commercial Papers and Bonds

12.1.2.1. No commercial papers or bonds shall be offered for sale to the public unless the following registration requirements are complied with:

12.1.2.1.1. A registration statement shall be filed in accordance with SRC Rule 8.1 and this Rule;

12.1.2.1.2. The Commission may grant exemptive relief with respect to the requirement of an underwriting agreement provided the Issuer can show sufficient proof that it has the ability to sell all or substantially all of its debt securities to the public;

12.1.2.1.3. Except for an issuance that amounts to not more than twenty five percent (25%) of the Issuer's net worth both on the basis of its stand-alone Audited Financial Statements and Consolidated Audited Financial Statements, if applicable, or where there is an irrevocable committed credit line with a bank covering one hundred percent (100%) of the proposed issuance, an issuer of commercial papers shall be rated by a Credit Rating Agency ("CRA") accredited by the Commission.

12.1.2.2. The CRA which will provide the rating required under these rules shall comply with the requirements for accreditation, operations and reporting of CRA under SEC Memorandum Circular No. 7, Series of 2014 and SRC Rule 39.1.

12.1.2.3. The Issuer shall comply with such other terms and conditions that the Commission may impose from time to time in the exercise of its mandate to protect the investors.

12.1.2.4. The Issuer shall comply with the conditions imposed for the registration of its commercial papers during the effectivity of the registration statement covering the said securities. The failure to comply with the conditions shall be sufficient ground, after notice and hearing, for the suspension or revocation of the registration.

12.1.2.5. Term of Registration and Reissuance

The registration of commercial papers shall be valid for three (3) years or a longer period as may be prescribed by the Commission; Provided, that the Issuer shall include in its quarterly report the amount of commercial papers actually sold.

12.1.2.6. Default

12.1.2.6.1. If an Issuer of commercial papers defaults or fails to pay in full upon demand at its maturity date, the Issuer shall, within the next business day after such failure, notify in writing its underwriter or selling agent and the Commission of such failure and the latter shall forthwith issue a Cease and Desist Order enjoining the Issuer and underwriter or selling agent from further offering for sale the subject commercial papers.

12.1.3. Requirements for Registration of Derivatives

12.1.3.1. Warrants

12.1.3.1.1. Definitions. For purposes of this Rule, the following terms shall be construed as follows:

12.1.3.1.1.1. Warrant Certificate — means the certificate representing the right to a Warrant, which may or may not be detachable, that is issued by an Issuer to a Warrant holder.

12.1.3.1.1.2. Warrant Instrument — means the written document or deed containing the terms and conditions of the issue and exercise of a Warrant whose terms and conditions shall include (i) the maximum underlying shares that can be purchased upon exercise, (ii) the exercise period, and (iii) such other terms and conditions as the Commission may require.

12.1.3.1.1.3. Detachable Warrant — means a Warrant that may be sold, transferred or assigned to any person by the Warrant holder separate from, and independent of, the corresponding Beneficiary Securities.

12.1.3.1.1.4. Non-detachable Warrant — means a Warrant that may not be sold, transferred or assigned to any person by the Warrant holder separate from, and independent of, the Beneficiary Securities.

12.1.3.1.1.5. Beneficiary Securities — means the shares of stock and other securities of the Issuer which form the basis of entitlement in a Warrant.

12.1.3.1.1.6. Underlying Shares — means the unissued shares of a corporation that may be purchased by the Warrant holder upon the exercise of the right granted under the Warrant.

12.1.3.1.2. Registration

12.1.3.1.2.1. Upon registration of its warrants under Sections 8 and 12 of the Code and SRC Rules 8.1 and 12.1, a corporation may offer and issue such securities to the public.

12.1.3.1.2.2. The Issuer shall disclose in its registration statement the terms and conditions of the warrant plan, including its related computational data.

12.1.3.1.2.3. An Issuer proposing to offer Warrants to the public shall file SEC Form 12-1 and pay the filing fees in such amounts as the Commission may determine.

12.1.3.1.3. Form, Content and Other Requirements of Warrant Certificates

12.1.3.1.3.1. All Warrants authorized for issuance by the Commission shall be evidenced by Warrant Certificates which shall be signed by the president (or such other officer as may be duly authorized by the board of directors) and corporate secretary of the Issuer.

12.1.3.1.3.2. For Detachable Warrants, the Warrant Certificate shall state the following on its face: "This Warrant does not represent any share of stock, but only a right to purchase shares of stock of the Issuer under the terms and conditions contained in the certificate."

A Warrant Certificate shall also state (whether on its face or on its reverse side) the warrant certificate number; par or issue value, class and number of the corresponding underlying shares; exercise price, or formula for computing the same, or any adjustments; exercise period and expiry date of the Warrant; procedure for the exercise; summary of the provisions contained in the Warrant Instrument; and exchange ratio or the number of underlying shares that may be purchased by each Warrant holder.

12.1.3.1.3.3. For Non-detachable Warrants, the right granted under the Warrant shall be described in the stock transfer or instrument evidencing the Beneficial Securities. A Warrant Certificate or the stock certificate or instrument evidencing the Beneficial Securities where the non-detachable Warrant is described shall also state (whether on its face or on its reverse side) the warrant certificate number; par or issue value, class and number of the corresponding underlying shares; exercise price, or formula for computing the same, or any adjustments; exercise period and expiry date of the Warrant; procedure for the exercise; summary of the provisions contained in the Warrant Instrument; and exchange ratio or the number of underlying shares that may be purchased by each Warrant holder.

12.1.3.1.4. Exercise Period

Warrant holders may exercise the right granted under a Warrant within the period set by the Issuer as disclosed in its registration statement. Such set period shall hereinafter be referred to as the "Exercise Period". No extension of such period shall be allowed without the written consent of the Warrant Holders representing a majority of the total number of warrants held.

12.1.3.1.5. Exercise Price

12.1.3.1.5.1. The Exercise Price shall be a price fixed at the time of the registration, or computed using the stated formula, and disclosed by the Issuer in its registration statement.

12.1.3.1.5.2. The Exercise Price shall be paid in full upon the exercise of the right, and shall not be less than the par value of the underlying shares nor less than Five Pesos (PhP5.00) per share, if the underlying shares have no par value.

12.1.3.1.5.3. The Exercise Price shall be adjusted only if the Warrant Instrument provides for (i) the conditions under which adjustments in Exercise Price can be made; (ii) the formula under which the adjusted Exercise Price can be determined; and (iii) under any of the following circumstances that may occur after the issuance of the Warrant:

12.1.3.1.5.3.1. Change in the par value of the underlying shares;

12.1.3.1.5.3.2. Declaration of stock dividends;

12.1.3.1.5.3.3. Offering of additional shares at a price different from the original exercise price;

12.1.3.1.5.3.4. Merger, consolidation or quasi-reorganization;

12.1.3.1.5.3.5. Disposition of a substantial portion of the assets of the corporation; and

12.1.3.1.5.3.6. Such other similar instances as may be approved by the Commission.

12.1.3.1.6. Warrants Registry Book

Any corporation authorized to issue Warrants shall have a Warrants Registry Book or equivalent scripless record system maintained by a designated Warrants Registrar who shall preferably be the Stock and Transfer Agent of the Issuer. Upon the exercise of the right granted under a Warrant, a notation to this effect shall be duly recorded in the Warrants Registry Book and the purchase of the Underlying Shares shall be recorded in the Stock and Transfer Book of the Issuer. Any sale, transfer, or assignment of a Warrant must be recorded in the Warrants Registry Book, including the names of the transferor and transferee, the number of Warrants transferred and the number of Underlying Shares covered by the said transfer. Unless recorded in the Warrants Registry Book, the transfer of Warrants shall not be binding on the Issuer.

12.1.3.1.7. Transferability of Warrants

All registered Warrants shall be transferable without need of approval from the Commission; Provided, that Non-detachable Warrants shall be transferred only together with the Beneficial Securities.

12.1.3.1.8. Listing Requirements

Warrants authorized for issuance by the Commission may be listed in an Exchange together with the Beneficiary Securities in accordance with existing rules for the listing of securities, and under such other rules as the Exchange may adopt and approved by the Commission; Provided, that the Warrants shall be automatically delisted upon the lapse of the Exercise Period.

12.1.3.1.9. Structured and other types of Warrants

The registration and trading of structured and other warrants shall be governed by special rules that may be issued by the Commission.

12.1.3.2. Options

12.1.3.2.1. No corporation shall grant or offer any Option to the public unless it is registered in accordance with Sections 8 and 12 of the Code and Rules 8.1 and 12.1, except when the security is exempt from registration under Sections 9 and 10 of the Code or under these Rules.

12.1.3.2.2. A person proposing to offer any Option to the public shall file SEC Form 12-1. Notwithstanding that the Option has no issue value, it shall pay the filing fees in such amounts as the Commission may determine.

12.1.3.2.3. The Issuer shall disclose in its registration statement the terms and conditions of the Option plan, including its related computational data. The plan shall be submitted as an exhibit to the registration statement.

12.1.3.2.4. In evaluating the registration of stock Options, the Commission shall be guided by the following considerations:

12.1.3.2.4.1. Stocks granted to stockholders proportionate to their shareholdings may be allowed.

12.1.3.2.4.2. Stock Options may be granted to employees or officials who are not members of the board of directors, subject, however, to a review of the scheme by the board and approval by the stockholders in order to widen the corporate base and distribute corporate profits more equitably.

12.1.3.2.4.3. Stock Options may be granted to non-stockholders if the board has been authorized to grant that benefit by the corporation's articles of incorporation, by-laws or by a resolution of the stockholders representing at least two-thirds (2/3) of the outstanding voting and non-voting capital stock.

12.1.3.2.4.4. Stock Options granted to directors and officers must be approved in a meeting of the stockholders representing at least two-thirds (2/3) of the outstanding voting and non-voting capital stock.

12.1.3.2.4.5. The exercise of Options must be done within the period set by the Issuer as disclosed in its registration statement.

12.1.3.2.4.6. Corporations that grant Options shall maintain an Option Registry Book or equivalent scripless record system where all Options granted, including transfers, shall be recorded with the entries showing the name of the person to whom the Option has been granted, the basis or authority for such grant, the date of the grant, the number of shares, the price per share, the exercise date, the total cost and official receipt number.

12.1.3.3. Other Types of Derivatives

12.1.3.3.1. All companies that plan to offer to sell derivatives to the public shall file a registration statement under SEC Form 12-1 in accordance with SRC Rules 8.1 and 12.1.

12.1.3.3.2. The registration statement shall include financial statements prepared in accordance with the Philippine Financial Reporting Standards and applicable International Accounting Standards on Financial Instruments, enumeration of attendant risks and a description of the company's financial risk management policies, including its policies for hedging.

12.1.4. Additional registration requirements for Proprietary and Non-Proprietary Shares or Certificates

12.1.4.1. The Issuer shall clearly indicate in its articles of incorporation, by-laws and prospectus the following:

12.1.4.1.1. A description of the nature and type of the shares or certificates, rights and privileges of their holders, in particular, their right over the use of the facilities of the Issuer;

12.1.4.1.2. The undertaking that the certificates or shares shall be issued within sixty (60) business days from the date of their full payment, and that the Issuer shall qualify the prospective members before the actual sale or transfer of the share or certificate.

12.1.4.2. The Issuer shall also include in the prospectus an undertaking that, if the project or underlying asset for which the securities are sold is, for any reason, not completed within the periods stated in the prospectus, it shall refund the amount of the investment of the purchaser of the securities within ten (10) business days from receipt of a written demand, and which undertaking shall be covered by a surety bond under such terms and conditions as may be approved by the Commission.

12.1.4.3. The Issuer shall also state in the prospectus that it shall:

12.1.4.3.1. Not collect membership dues unless the project is fifty percent (50%) usable as indicated in the prospectus, unless the Issuer provides for a higher percentage of usability;

12.1.4.3.2. Submit to the Commission a report under oath of any increase in fees and the rationale for such increase within thirty (30) business days from the approval by its board of directors of such increase;

12.1.4.3.3. Notify the members of any increase in fees upon the board's approval of the increase; and

12.1.4.3.4. Cause the posting of proper notices and other communications on the charging of fees on bulletin boards situated at conspicuous place/s at the site of the Issuer for the benefit of the secondary market.

12.1.4.4. The following documents shall be submitted as annexes to the registration statement:

12.1.4.4.1. Copy of Subscription Agreement containing the required undertaking under SRC Rule 12.1.4.2 above;

12.1.4.4.2. Copy of a Credit Line Agreement with a reputable domestic bank covering the cost of the entire or unfinished portion of the project. The credit line shall be availed of in the event of insufficiency of funds for the completion of the project arises. The terms of the agreement shall be disclosed in the prospectus;

12.1.4.4.3. Copy of a Custodianship or Escrow Agreement with a reputable bank covering the proceeds from the sale of the shares or certificates, which provides, among others, that the said proceeds shall be withdrawn only upon the presentation of the company's work progress report; and

12.1.4.4.4. Copy of the Environmental Compliance Certificate from the Department of Environment and Natural Resources covering the project.

12.1.4.4.5. Copy of the Original/Transfer Certificate of Title of the property to be developed in the name of the Issuer.

RULE 12.2 Incorporation by Reference

12.2.1. Except for information filed as an exhibit, as provided for in SRC Rule 12.2.3, or is required to be contained in the prospectus subject of SRC Rule 12.2.4, information may be incorporated by reference to fully or partially answer any item of a registration statement filed pursuant to SRC Rule 8 or a report filed pursuant to SRC Rule 17.1 subject to the following provisions:

12.2.1.1. Financial statements incorporated by reference shall satisfy the requirements of the form or report in which they are incorporated. Financial statements or other financial data required to be given in comparative form for two (2) or more fiscal years or periods shall not be incorporated by reference unless the material incorporated by reference includes the entire period for which the comparative data are given;

12.2.1.2. Information in any part of the registration statement or other reports may be incorporated by reference to fully or partially answer any other item of the registration statement or other report; and

12.2.1.3. Copies of any information or financial statements incorporated into a registration statement or other report by reference, or copies of the pertinent pages of the document containing such information or statements, shall be filed as an exhibit to the statement or report.

12.2.2. All materials incorporated by reference shall be clearly identified by page, paragraph, caption or other means of identification. If only certain pages of a document are incorporated by reference and filed as an exhibit, the document from which the material was taken shall be 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 case if such incorporation would render the statement or report incomplete, unclear or confusing.

12.2.3. Incorporation of Exhibits by Reference

12.2.3.1. Any document or parts of it that have been filed with the Commission pursuant to the Code may be incorporated by reference as an exhibit to any statement or report filed with the Commission by the same or any other person. Any document or parts of it that are filed with an Exchange pursuant to the Code may be incorporated by reference as an exhibit to any statement or report filed with that Exchange by the same or any other person.

12.2.3.2. If any modification has been made in the text of any document incorporated by reference since its filing, the Issuer shall file with the reference a statement containing the text of any such modification and its date.

12.2.4. Information shall not be incorporated by reference in a prospectus.

RULE 12.5 (B) Publication and Posting of Notice of Filing

12.5(b).1. The Issuer shall prepare and file with its registration statement a notification of such filing which shall state that (a) a registration statement for the sale of the subject security has been filed with the Commission; (b) that the registration statement is open for inspection by interested parties during business hours at the Commission; and (c) that copies shall be furnished to anyone requesting them for a reasonable cost. The notice shall be signed by the Director of the department concerned or any officer designated by the Commission. The Issuer shall, upon or before filing, publish the notice, at its own expense, in two (2) national newspapers of general circulation once a week for two (2) consecutive weeks and post the said notice and updated prospectus in its website. The required format for this notice is shown in "Annex A."

12.5(b).1.1. In the choice of the newspaper where the notice shall be published, the Issuer shall take into account the following considerations:

12.5(b).1.1.1. The notice shall likely be read by the persons who may be interested in or whose interests would be affected by the registration statement;

12.5(b).1.1.2. The national newspaper of general circulation is published at regular intervals, preferably five (5) times a week;

12.5(b).1.1.3. The newspaper must not be devoted to the interests of or published for the entertainment of a particular class, profession, trade, calling, race or religious denomination.

12.5(b).1.2. The burden of proof of showing satisfactory compliance with the notice requirement shall rest with the Issuer and the Commission may order a republication and/or re-posting of the notice if, in its judgment, the objective of the notice requirement has not been met.

12.5(b).2. As part of its registration statement, the Issuer shall submit to the Commission an affidavit of publication with a copy of the notice that was published or a copy of the pro-forma notice to be published, with the attestation that the publication has been or will be immediately undertaken.

12.5(b).3. The order of the Commission rendering effective the registration statement shall, at the expense of the Issuer, be published in a national newspaper of general circulation and uploaded in its website within two (2) business days from its issuance.

RULE 13 Suspension or Revocation of Registration of Securities

13.1. If the Commission, after due notice and hearing, revokes or suspends the effectivity of a registration statement under Sections 13 and 15 of the Code respectively:

13.1.1. The Commission shall publish a notice of the order of revocation or suspension in a national newspaper of general circulation in the Philippines and/or post at the Commission's website, along with a statement that the offering in its current form has been cancelled.

13.1.2. Upon receipt of a notice under SRC Rule 13.1.1, the Issuer and all persons acting on its behalf in the distribution of the subject securities shall immediately terminate the offering and return any and all payments received from purchasers within ten (10) business days after the notice was first published.

13.2. Voluntary Revocation

13.2.1. An Application for Voluntary Revocation of Registration of Securities shall include the following documents:

13.2.1.1. Verified Petition for Revocation of Registration;

13.2.1.2. Board Resolution approving the revocation, certified under oath by the corporate secretary and attested to by the president or anyone performing a similar function;

13.2.1.3. List of stockholders indicating their respective shareholdings as of the latest date;

13.2.1.4. All relevant books and papers of the Issuer, as may be determined by the Commission;

13.2.1.5. Proposed Notice of Filing of Petition for Voluntary Revocation of Registration of Securities, reciting the facts supporting the said petition which shall be subject to the approval of the Commission; and

13.2.1.6. Copy of the official receipt representing payment of the prescribed filing fees.

13.2.2. The Commission may impose such other requirements or conditions it may deem necessary.

13.2.3. Procedures

13.2.3.1. Upon the presentation of the documents required for voluntary revocation of registration of securities, the Notice of Filing of Petition for Voluntary Revocation shall be immediately published by the Issuer at its own expense, once in a national newspaper of general circulation.

13.2.3.2. If, after fifteen (15) business days from the said publication, the Commission finds that the petition together with all other papers and documents attached to it, is on its face complete and that no party stands to suffer any damage from the revocation, it shall prepare an order revoking the registration.

13.2.3.3. The Order of Revocation shall be published once in a national newspaper of general circulation at the expense of the company, and/or uploaded at the Commission's website.

13.3. The Order of Revocation shall exempt the Issuer from its reporting obligations under Section 17.2 of the Code unless it still qualifies as a public company.

RULE 14 Amendments on the Registration Statement and Prospectus

14.1. For purposes of this Rule, material information shall include, but not be limited to, the following:

14.1.1. Any event or transaction which increases or creates a risk on the investments or on the securities covered by the registration;

14.1.2. Increase or decrease in the volume of the securities being offered at an issue price higher or lower than the range set and disclosed in the registration statement and which results to a derogation of the rights of existing security holders, as may be determined by the Commission;

14.1.3. Major change in the primary business of the Issuer;

14.1.4. Reorganization of the company;

14.1.5. Loss, deterioration or substitution of the property underlying the securities;

14.1.6. Ten percent (10%) or more change in the financial condition or results of operation of the Issuer unless a report to that effect has been filed with the Commission and furnished the prospective purchaser;

14.1.7. Classification, de-classification or re-classification of securities which results to the derogation of the rights of existing security holders, as may be determined by the Commission.

14.2. If a registration statement or prospectus on file with the Commission becomes incomplete or inaccurate in any material respect or if the Issuer wants to change any material information therein after a current report or SEC Form 17-C has been filed, the Issuer shall:

14.2.1. File an amendment to the registration statement with the Commission explaining in detail all proposed changes which shall be reviewed by the Commission in accordance with Section 14 of the Code;

14.2.2. If the registration statement has been declared effective by the Commission, publish a notice of the proposed amendment/s, including the reasons for the amendments, in two (2) national newspapers of general circulation in the Philippines stating that the offering in its current form has been amended;

14.2.3. If the changes shall result in a derogation of the rights of existing security holders or purchasers of securities or, membership certificates who have paid a portion of the selling price, the Issuer may include in the above-mentioned publication an offer to rescind all transactions that have been completed for sale to date, without making any deduction pursuant to SRC Rule 14.2.4 and wait for thirty (30) days for the purchasers to respond to the rescission offer before initiating the amended offering;

14.2.4. If the conditions under SRC Rule 14.23 are present, the purchasers may, within thirty (30) days from the date of such notification, renounce their purchase of the said securities. Upon such renunciation, the Issuer, or any person acting on behalf of the Issuer in connection with the distribution of the said securities, shall, within ten (10) days from receipt of notification of such election, return the payments made by security holders or purchasers of securities, or membership certificates. Purchasers who decide not to renounce their purchase of securities shall be subject to the terms of the amended offering; and

14.2.5. In case of an increase in the volume or offering price of the securities to a level higher than the range previously disclosed by the Issuer, the amended registration statement or prospectus shall be accompanied by a filing fee based on the difference between the highest aggregate amount in relation to the previous range and the total amount based on the new volume or price. For amendments other than the offering price, the filing fee for the amended registration statement or prospectus shall be in such amount as the Commission may determine.

14.3. If the Commission learns that the prospectus is on its face incomplete or inaccurate in any material respect, or there is a material omission in it, it may require Issuer to comply with SRC Rule 14.2, or suspend or revoke its registration under Section 13 or 15 of the Code.

14.4. If non-material information stated in the prospectus changes, the Issuer shall file a report on SEC Form 17-C on the said changes prior to making any amendments in the registration statement. The proposed amendments shall be considered part of the original disclosure unless the Commission, within twenty (20) business days from receipt of such report, requires the Issuer to explain such changes.

14.5. Every amendment of 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. The final registration statement and prospectus shall, however, be signed by all the required signatories under Section 12.4 of the Code.

14.6. The Issuer shall file 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 amended registration statement and prospectus shall be signed by the required signatories and filed with the Commission.

14.7. A copy of every amendment relating to a certified financial statements shall include the consent of the certifying accountant on the use of his certificate in the amended financial statements in the registration statement or prospectus and to being named as having certified such financial statements.

14.8. The date on which the amendments are received by the Commission shall be considered their date of filing if all the requirements of the Code and these Rules have been complied with.

14.9. The Commission may, taking into consideration the interests of the investors, order the publication in a national newspaper of general circulation of its order rendering effective the amended registration statement.

RULE 15 Grounds and Procedure for Suspension of Registration

15.1. If, at any time, the information contained in the registration statement filed is or has become misleading, incorrect, inadequate or incomplete in any material respect, or the sale or offering for sale of the security registered thereunder may work or tend to work a fraud, the Commission may require from the issuer such further information as may in its judgment be necessary to enable the Commission to ascertain whether the registration of such security should be revoked on any ground specified in the Code. The Commission may also suspend the right to sell and offer for sale such security pending further investigation, by entering an order specifying the grounds for such action, and by notifying the issuer, underwriter, dealer or broker known as participating in such offering.

15.2. The refusal to furnish information required by the Commission may be a ground for the issuance of an order of suspension pursuant to Subsection 15.1. Upon the issuance of any such order and notification to the issuer, underwriter, dealer or broker known as participating in such offering, no further offer or sale of any such security shall be made until the same is lifted or set aside by the Commission. Otherwise, such sale shall be void.

15.3. Upon issuance of an order of suspension, the Commission shall conduct a hearing. If the Commission determines that the sale of any security should be revoked, it shall issue an order prohibiting sale of such security.

Until the issuance of a final order, the suspension of the right to sell, though binding upon the persons notified thereof, shall be deemed confidential, and shall not be published, unless it shall appear that the order of suspension has been violated after notice. If, however, the Commission finds that the sale of the security will neither be fraudulent nor result in fraud, it shall forthwith issue an order revoking the order of suspension, and such security shall be restored to its status as a registered security as of the date of such order of suspension.

RULE 17.1 Reportorial Requirements

17.1.1. Public and Reporting Companies

This SRC Rule shall apply to all public and reporting companies as defined in SRC Rule 3. However, the obligation of a company which has sold a class of its securities pursuant to a registration under Section 12 of the Code shall be suspended for any fiscal year if, as of the first day of any such fiscal year, it has less than one hundred (100) holders of such class of securities and the Commission is notified of that fact. The suspension shall be availed of only after the year the registration became effective.

17.1.1.1. The public and reporting companies shall file with the Commission:

17.1.1.1.1. An annual report on SEC Form 17-A for the fiscal year in which the registration statement was rendered effective by the Commission, and for each fiscal year thereafter, within one hundred five (105) calendar days after the end of the fiscal year.

17.1.1.1.2. A quarterly report on SEC Form 17-Q within forty five (45) calendar days after the end of each of the first three quarters of each fiscal year. The first quarterly report of the Issuer shall be filed either within forty five (45) calendar days after the effective date of the registration statement or on or before the date on which such report would have been required to be filed if the Issuer had been required previously to file reports on SEC Form 17-Q, whichever is later.

17.1.1.1.3(a). A current report on SEC Form 17-C, as may be necessary, to make a full, fair and accurate disclosure to the public of every material fact or event that occurs which would reasonably be expected to affect the investors' decisions in relation to those securities. In the event a news report appears in the media involving an alleged material event, a current report shall be made within the period prescribed herein in order to clarify the said news item which may create public speculation if not officially denied or clarified by the concerned company.

17.1.1.1.3(b). The disclosure required by SRC Rule 17.1.1.1.3 (a) shall be made by the company in accordance with the following guidelines:

17.1.1.1.3(b).1. Promptly to the public through the news media;

17.1.1.1.3(b).2. If the Issuer is listed on an Exchange, to that Exchange and to the Commission within ten (10) minutes after the occurrence of the event and prior to its release to the public through the news media; Provided that, disclosure by the Issuer to the Exchange may be deemed as filing with the Commission pursuant to a Memorandum of Agreement between the Exchange and the Commission; Provided further that, the Memorandum of Agreement shall provide for the ability of the Commission to download and upload the same information made available to the Exchange;

17.1.1.1.3(b).3. If the issuer is not listed on an Exchange, to the Commission through SEC Form 17-C within five (5) calendar days after the occurrence of the event reported, unless substantially similar information as that required by Form 17-C has been previously reported to the Commission by the Issuer.

17.1.1.2. Any disclosure signed and filed with the Commission and the Exchange where the securities of the Issuer are listed, or released to the news media by any director, executive officer or a principal (as defined under Section 23 of the Code) of an Issuer shall be considered as part of any report mentioned in SRC Rule 17.1.1.1.3(a) and deemed as an official filing of such company if it does not deny the subject information within two (2) days from the filing or release of the disclosure. Any misleading statement, misrepresentation or omission of a material fact therein shall be considered the joint responsibility of the Issuer and the reporting director, officer or principal.

17.1.1.3. An owner of more than five percent (5%) of the voting rights of a public and reporting company that meets the requirements of Section 17.2 of the Code who holds material information which may materially affect such company may be required by the Commission to disclose such information within the period prescribed under SRC Rule 17.1.1.1.3. Failure to provide the required information shall subject the said stockholder to the sanctions applicable to violations of this Rule.

17.1.1.4. Issuers of securities registered with the Commission shall file an annual report on SEC Form 17-A for its predecessors that registered securities with the Commission during the last full fiscal year of the predecessor prior to the Issuer's succession, unless such report has already been filed by the predecessor. The annual report shall contain the information required if it were filed by the predecessor.

17.1.1.5. In the event a non-reporting Issuer (in connection with succession by merger, consolidation, exchange of securities or acquisition of assets) issues equity securities to holders of equity securities issued by a reporting Issuer, the non-reporting Issuer shall assume the same obligation as the reporting Issuer to file reports pursuant to Section 17 of the Code, and the non-reporting Issuer shall file such reports on the same forms as the reporting Issuer.

17.1.1.6. Notification of Inability to File on Time All or Any Required Portion of SEC Form 17-A or 17-Q.

17.1.1.6.1. If all or any required portion of an annual report (SEC Form 17-A) or quarterly report (SEC Form 17-Q) required to be filed pursuant to Section 17 of the Code and SRC Rule 17.1 is not filed within the period prescribed for such report, the Issuer shall, not later than the due date for such report, file with the Commission and, if applicable, with the Exchange where any class of its securities is listed, SEC Form 17-L which shall contain a disclosure in reasonable detail of its inability to timely file the report and the reasons for such failure. All information available on the date of the required filing shall be filed.

17.1.1.6.2. If any report or portion of any report described in SRC Rule 17.1.1.1 is not timely filed because the Issuer is unable to do so without unreasonable effort or expense, such report shall be deemed to be filed on the prescribed due date for such report if:

17.1.1.6.2.1. The Issuer files SEC Form 17-L in compliance with paragraph 17.1.1.6.1 hereof and, if applicable, furnishes the document required by SRC Rule 17.1.1.6.3;

17.1.1.6.2.2. The Issuer states in SEC Form 17-L that: (i) the reason(s) that caused the inability to timely file could not be eliminated by the Issuer without unreasonable effort or expense; (ii) either the subject annual report on SEC Form 17-A, or portion thereof, will be filed not later than the fifteenth (15th) calendar day following the prescribed due date, or the subject quarterly report on SEC Form 17-Q, or portion thereof, will be filed not later than the fifth (5th) calendar day following the prescribed due date; and (iii) the report or portion thereof is actually filed within the period specified by SRC Rule 17.1.1.1.

17.1.1.6.3. If SRC Rule 17.1.1.6.2 is applicable and the reason the subject report or portion thereof cannot be timely filed without unreasonable effort or expense relates to the inability of any person, other than the Issuer, to furnish any required opinion, report or certification, a statement signed by such person stating the specific reasons why that person is unable to furnish the required opinion, report or certification on or before the date must be filed with SEC Form 17-L.

17.1.1.6.4. Notwithstanding SRC Rule 17.1.1.6.2, a registration statement filed on SEC Form 12-1 pursuant to SRC Rule 8.1, the use of which is predicated on timely filed reports, shall not be declared effective until the subject report is actually filed pursuant to SRC Rule 17.1.1.1.

17.1.1.6.5. If the SEC Form 17-L filed pursuant to SRC Rule 17.1.1.6.2 relates only to a portion of a subject report, the Issuer shall:

17.1.1.6.5.1. File the balance of such report and indicate on its cover page which disclosure items are omitted; and

17.1.1.6.5.2. Include at the upper right corner of the amendment to the report which includes the previously omitted information the following statement:

"The following items were the subject of SEC Form 17-L and are included herein: (List Item Numbers)"

17.1.2. Issuers of Commercial Papers in Exempt Transactions

Underwriters or Issuers of commercial papers ("CP") shall file an information statement (SEC Form CP-IS) within seven (7) days prior to issuance thereof. An annual CP report on outstanding issuance shall likewise be filed on or before the 10th of January every year.

RULE 17.2 Subjects of the Reportorial Requirements

The reportorial requirements of Subsection 17.1 shall apply to the following:

17.2.1. An issuer which has sold a class of its securities pursuant to a registration under Section 12 hereof: Provided, however, That the obligation of such issuer to file reports shall be suspended for any fiscal year after the year such registration became effective if such issuer, as of the first day of any such fiscal year, has less than one hundred (100) holders of such class of securities or such other number as the Commission shall prescribe and it notifies the Commission of such

17.2.2. An issuer with a class of securities listed for trading on an Exchange

17.2.3. An issuer with assets of at least Fifty million pesos (P50,000,000.00) or such other amount as the Commission shall prescribe, and having Two hundred (200) or more holders each holding at least One hundred (100) shares of a class of its equity securities: Provided, however That the obligation of such issuer to file reports shall be terminated ninety (90) days after notification to the Commission by the issuer that the number of its holders holding at least one hundred (100) shares is reduced to less than One hundred (100).

RULE 17.3

Every issuer of a security listed for trading on an Exchange shall file with the Exchange a copy of any report filed with the Commission under Subsection 17.1 hereof.

RULE 17.4

All reports (including financial statements) required to be filed with the Commission pursuant to Subsection 17.1 hereof shall be in such form, contain such information and be filed at such times as the Commission shall prescribe, and shall be in lieu of any periodical or current reports or financial statements otherwise required to be filed under the Corporation Code.

RULE 17.5

Every issuer which has a class of equity securities satisfying any of the requirements in Subsection 17.2 shall furnish to each holder of such equity security an annual report in such form and containing such information as the Commission shall prescribe.

RULE 17.6

Within such period as the Commission may prescribe preceding the annual meeting of the holders of any equity security of a class entitled to vote at such meeting, the issuer shall transmit to such holders an annual report in conformity with Subsection 17.5.

RULE 18.1 Reports to be Filed by Certain Beneficial Owners

18.1.1. This Rule shall apply to any person who acquires in any manner the beneficial ownership of five percent (5%) of any class of equity securities of a company that satisfies the requirements of Section 17.2 of the Code.

18.1.2. If the equity securities under the name of the legal owner are beneficially owned by another person/s, the legal owner and beneficial owner shall individually or jointly, within five (5) business days after such acquisition, submit to the Issuer, the Exchange where the security is traded, and to the Commission a sworn statement containing the information required by SEC Form 18-A.

18.1.3(a). A person required to file a report on SEC Form 18-A may, in lieu of such report, file with the Commission within forty five (45) days after the end of the year in which such person became obligated, copies of a short form report on SEC Form 18-AS including all exhibits, and send one copy of such report to the Issuer at its principal office and to each Exchange where the security is listed for trading; provided, that the percentage of the class of equity security beneficially owned as of the end of the calendar year is more than five percent (5%), and that:

18.1.3(a).1. Such person has acquired such securities in the ordinary course of business and not for the purpose of changing or influencing the control of the Issuer, nor in connection with or as a participant in any transaction having such purpose or effect;

18.1.3(a).2. Such person is:

[a] a broker or dealer registered under the Code;

[b] a bank authorized to operate as such by the BSP;

[c] an insurance company subject to the supervision of the Insurance Commission;

[d] an investment house registered under the Investment Houses Law;

[e] an investment company registered under the Investment Company Act;

[f] a pension plan subject to the regulation and supervision by the BIR and/or the Insurance Commission; or

[g] a group where all its members are persons specified above, and

18.1.3(a).3. Such person has promptly notified any other person on whose behalf it holds, on a discretionary basis, securities exceeding five percent (5%) of the class of any acquisition or transaction on behalf of such other person which might be reportable by that person under Section 18.1 (a) of the Code.

18.1.3(b). Any person who has reported an acquisition of securities on SEC Form 18-AS who later ceases to be a person specified in SRC Rule 18.13(a).l or 18.1.3(a).2 (a) through (g) shall file within three (3) business days thereafter a sworn statement on SEC Form 18-A in the event such person is a beneficial owner at that time of more than five percent (5%) of the class of equity securities.

18.1.4. In determining the amount of outstanding securities of a class of equity securities, a person may rely upon information set forth in the Issuer's most recent quarterly or annual report, and any subsequent current report unless he knows or has reason to believe that the information contained therein is inaccurate.

18.1.5. For purposes of Section 18 of the Code, "beneficial owner" shall have the same definition as that stated in SRC Rule 3, provided that:

18.1.5.1. A person who, in the ordinary course of business, is a pledgee of securities under a written agreement shall not be deemed to be the beneficial owner of such pledged securities until the pledgee has taken all the steps required to declare a default and has determined that the power to vote or to dispose or to direct the disposition of such pledged securities will be exercised;

18.1.5.2. A person engaged in the business of an investment house who acquires his securities through his participation in good faith in a firm commitment underwriting shall not be deemed to be the beneficial owner of such securities until the expiration of six (6) months from the date of such acquisition; and

18.1.5.3. When two (2) or more persons agree to act together for the purpose of acquiring, holding, voting or disposing of the equity securities of an Issuer, the group formed in the process shall be deemed to have acquired beneficial ownership for purposes of Section 18 of the Code, as of the date of such agreement, of all equity securities of that Issuer that are beneficially owned by such persons.

RULE 18.2

If any change occurs in the facts set forth in the statements, an amendment shall be transmitted to the issuer, the Exchange and the Commission.

RULE 18.3

The Commission, may permit any person to file in lieu of the statement required by Subsection 17.1 of the Code, a notice stating the name of such person, the shares of any equity securities subject to Subsection 17.1 of the Code which are owned by him, the date of their acquisition and such other information as the Commission may specify, if it appears to the Commission that such securities were acquired by such person in the ordinary course of his business and were not acquired for the purpose of and do not have the effect of changing or influencing the control of the issuer nor in connection with any transaction having such purpose or effect.

RULE 19 Tender Offers

19.1 Definitions

19.1.1. "Beneficial owner" shall have the same meaning as defined in SRC Rule 3.

19.1.2. "Offeror" means any person who makes a tender offer or on whose behalf a tender offer is made.

19.1.3. "Commencement" means the date a tender offer is first published, sent or given to security holders.

19.1.4. "Issuer" means any person or entity subject to reporting obligations under Section 17.2 of the Code.

19.1.5. "Issuer Tender Offer" means a publicly announced intention by an Issuer to reacquire any of its own class of equity securities, or by an associate of such Issuer to acquire such securities.

19.1.6. "Security holders" mean holders of record and beneficial owners of securities that are the subject of a tender offer.

19.1.7. "Target company" means any Issuer whose equity securities are sought by an Offeror pursuant to a tender offer.

19.1.8. "Tender offer" means a publicly announced intention by a person acting alone or in concert with other persons (hereinafter referred to as "person") to acquire outstanding equity securities of a public company as defined in SRC Rule 3, or outstanding equity securities of an associate or related company of such public company which controls the said public company.

19.1.9. "Tender offer materials" mean: (i) the Offeror's formal offer, including all the material terms and conditions of the tender offer and all their amendments; (ii) the related transmittal letter (whereby equity securities of the target company that are sought in the tender offer may be transmitted to the Offeror or its depository) and all their amendments; and (iii) press releases, advertisements, letters and other documents published by the Offeror or sent or given by the Offeror to security holders which, directly or indirectly, solicit, invite or request tenders of the equity securities being sought in the tender offer.

19.1.10. "Termination" means the date after which equity securities may not be tendered pursuant to the tender offer.

19.2. Mandatory tender offers

19.2.1. Any person or group of persons acting in concert, who intends to acquire fifteen percent (15%) of equity securities in a public company in one or more transactions within a period of twelve (12) months, shall file a declaration to that effect with the Commission.

19.2.2. Any person or group of persons acting in concert, who intends to acquire thirty five percent (35%) of the outstanding voting shares or such outstanding voting shares that are sufficient to gain control of the board in a public company in one or more transactions within a period of twelve (12) months, shall disclose such intention and contemporaneously make a tender offer for the percentage sought to all holders of such securities within the said period.

If the tender offer is oversubscribed, the aggregate amount of securities to be acquired at the close of such tender offer shall be proportionately distributed across selling shareholders with whom the acquirer may have been in private negotiations and other shareholders. For purposes of SRC Rule 19.2.2, the last sale that meets the threshold shall not be consummated until the closing and completion of the tender offer. 3

19.2.3. Any person or group of persons acting in concert, who intends to acquire thirty five percent (35%) of the outstanding voting shares or such outstanding voting shares that are sufficient to gain control of the board in a public company through the Exchange trading system shall not be required to make a tender offer even if such person or group of persons acting in concert acquire the remainder through a block sale if, after acquisition through the Exchange trading system, they fail to acquire their target of thirty five percent (35%) or such outstanding voting shares that is sufficient to gain control of the board. 4

19.2.4. Any person or group of persons acting in concert, who intends to acquire thirty five percent (35%) of the outstanding voting shares or such outstanding voting shares that are sufficient to gain control of the 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.

19.2.5. If any acquisition that would result in ownership of over fifty percent (50%) of the total outstanding equity securities of a public company, the acquirer shall be required to make a tender offer under this Rule for all the outstanding equity securities to all remaining stockholders of the said company at a price supported by a fairness opinion provided by an independent financial advisor or equivalent third party. The acquirer in such a tender offer shall be required to accept all securities tendered.

19.2.6. Guidelines on the Conduct of Valuation and Issuance of a Fairness Opinion.

19.2.6.1. Only independent firms that are compliant with the qualifications prescribed in these Rules and Regulations Circular may conduct valuation and issue fairness opinion to comply with the above-quoted provisions of SRC Rule 19.

"Independence" shall mean absence of any business interest or family relationship with any party to the transaction or of any of its directors, officers, or major stockholders, that could, or could reasonably be perceived to, materially interfere with the exercise of the professional judgment of the firm, its representative or any member of the engagement team, in carrying out their responsibilities in assessing the fairness of the issuer's securities;

19.2.6.2. The following requirements must be observed in the conduct of the valuation and issuance of fairness opinion by an accredited firm:

19.2.6.2.1. The individual who acts on behalf of the accredited firm shall be a licensed professional who has at least ten (10) years experience in the field of accounting, finance or economics and holds a relevant advance degree;

19.2.6.2.2. The firm shall use in its assessment relevant and current data or those that are not more than three months from date of valuation;

19.2.6.2.3. The firm shall adopt more than one valuation methodology and compare the values derived from using different methodologies to minimize the risk that the opinion is unreliable. In addition to referencing the quoted price of the subject equity securities, valuation methodologies shall include balance sheet valuation or book value, dividend discount model, price/earnings ratio, and free cash flow approach;

19.2.6.2.4. If the firm's valuation of a company materially differs from the market price of the company's securities prior to the announcement of a proposed transaction, the firm shall comment on the difference and the factors underlying it;

19.2.6.2.5. The firm shall not include prospective financial information (including forecasts and projections) unless it has made sufficient inquiries to satisfy itself that the information on which it relied was prepared on a reasonable basis. It shall also disclose how and why it finds such inquiries sufficient and utilize several of the methodologies in 19.2.6.2.3 above. Discounted cash flow methodology which invariably uses forward looking information may only be used if the firm has reasonable grounds for doing so. If the firm considered the use of prospective information, the reasons shall be indicated in the report;

19.2.6.2.6. The firm shall notify the party commissioning the report within two (2) days from date of its knowledge of a significant change which may affect the contents of the report or from the date of its conclusion that a material statement in the report is misleading or deceptive. A copy of such a report shall be furnished to the Commission within the same period;

19.2.6.2.7. The following information shall be provided in the firm's Fairness Opinion Report:

19.2.6.2.7.1. All material assumptions and reasons for the opinion;

19.2.6.2.7.2. Justification of the choice of methodologies and description of the methods used by the firm;

19.2.6.2.7.3. Whether or not the opinion was approved by a committee created within the firm;

19.2.6.2.7.4. Whether or not the opinion expresses a judgment about the fairness of the transaction's compensation to any of the company's directors, officers or employees to the company's shareholders;

19.2.6.2.7.5. Whether or not the firm acted as a financial advisor to any party to the transaction, and whether or not it will receive compensation and/or other significant payments that is contingent on the successful completion of the transaction, for rendering the fairness opinion and/or serving as advisor;

19.2.6.2.7.6. Material relationships during the prior two (2) years or those contemplated between the firm and any party to the transaction in which any compensation was received or intended to be received. A relationship shall be considered material if it would affect the independence of the firm, as defined under SRC Rule 19.2.6.1 , assuming that it is currently present;

19.2.6.2.7.7. Whether or not the firm independently verified any information that formed a substantial basis for the opinion, and whether or not such information was supplied to the firm by the company requesting the opinion. The information or the categories of information that were verified and not verified must be discussed and described;

19.2.6.2.7.8. The firm's discussion on any material difference between the valuation set and the market price of the company's securities prior to the announcement of the proposed transaction;

19.2.6.2.7.9. A written declaration of compliance by the firm's representative with the Code of Ethics applicable to his or her profession;

19.2.6.2.7.10. A brief description of the firm and the education and professional qualifications of its representative who conducted the valuation.

19.2.6.2.8. The Fairness Opinion Report shall be signed by the firm's representative of a rank not lower than a partner or a Vice-President or their equivalent respectively. He shall indicate his complete name, Professional License Number, Tax Identification Number, firm name and address, PSE Accreditation Number of the firm (if any) and other technical information.

19.3. Exemptions from the Mandatory Tender Offer Requirement

19.3.1. Unless the acquisition of equity securities is intended to circumvent or defeat the objectives of the tender offer rules, the mandatory tender offer requirement shall not apply to the following:

19.3.1.1. Any purchase of securities from the unissued capital stock; Provided, the acquisition will not result to a fifty percent (50%) or more ownership of securities by the purchaser or such percentage that is sufficient to gain control of the board;

19.3.1.2. Any purchase of securities from an increase in authorized capital stock;

19.3.1.3. Purchase in connection with foreclosure proceedings involving a duly constituted pledge or security arrangement where the acquisition is made by the debtor or creditor;

19.3.1.4. Purchases in connection with a privatization undertaken by the government of the Philippines;

19.3.1.5. Purchases in connection with corporate rehabilitation under court supervision;

19.3.1.6. Purchases in the open market at the prevailing market price; and

19.3.1.7. Merger or consolidation.

19.3.2. Purchasers of securities in the foregoing transactions shall, however, comply with the disclosure and other obligations under SRC Rules 18.1 and 23.

19.4. Tender Offer by an Issuer or Buy Back

19.4.1. A reacquisition or repurchase by an Issuer of its own securities shall only be made if such Issuer has unrestricted retained earnings in its books to cover the amount of shares to be purchased, and is undertaken for any of the following purposes:

19.4.1.1. To implement a stock option or stock purchase plan;

19.4.1.2. To meet short-term obligations which can be settled by the re-issuance of the repurchased shares;

19.4.1.3. To pay dissenting or withdrawing stockholders entitled to payment for their securities under the Corporation Code; and

19.4.1.4. Such other legitimate corporate purpose/s.

19.4.2. An Issuer that intends to reacquire its own securities through active and widespread solicitation from the stockholders in general and in substantial amounts as the Commission may determine shall comply with the disclosure and procedural requirements provided for in SRC Rules 19.4.3 and 19.4.4, and the preceding provisions of this Rule.

19.4.3. If an Issuer publishes, sends or disseminates its tender offer to security holders by means of summary publication in the manner prescribed in this Rule, the summary publication shall disclose only the following information:

19.4.3.1. The identity of the Issuer making the tender offer;

19.4.3.2. The amount and class of securities being sought and the price being offered;

19.4.3.3. The information required by SRC Rule 19.7;

19.4.3.4. A statement of the purpose of the tender offer; and

19.4.3.5. The appropriate instruction for security holders on how to obtain promptly, at the expense of the Issuer making the tender offer, the information required in SRC Rule 19.7.

19.4.4. Until the expiration of at least ten (10) business days from the date of termination of the tender offer, the Issuer shall not make any repurchase, otherwise than pursuant to the tender offer, of:

19.4.4.1. Any security which is the subject of the tender offer, or any security of the same class and series, or any right to repurchase such securities; and

19.4.4.2. In the case of a tender offer which is an exchange offer, any security being offered pursuant to the exchange offer, or any security of the same class and series, or any right to repurchase any such security.

19.4.5. This rule shall not apply to —

19.4.5.1. Calls or redemption of any security in accordance with the terms and conditions of its governing instruments;

19.4.5.2. Offers to repurchase securities evidenced by a certificate, order form or similar document which represents a fractional interest in a share of stock or similar security.

19.5. Any person making a tender offer shall make an announcement of its intention in a national newspaper of general circulation within five (5) business days from either the company's board approval authorizing negotiations relative to the purchase of shares that may result to a mandatory tender offer or thirty (30) business days prior to the commencement of the offer; Provided, that such announcement shall not be made until the Offeror has the resources to implement the offer in full. A copy of the said notice shall be submitted to the Commission on the date of its publication.

19.6. Filing Requirements

19.6.1. No Offeror shall make a tender offer unless the Offeror:

19.6.1.1. Has filed with the Commission SEC Form 19-1, including all its exhibits, and

19.6.1.2. Has hand delivered a copy of the SEC Form 19-1, including all its exhibits, to the target company at its principal executive office and to each Exchange where such class of the target company's securities is listed for trading.

19.6.2. The Offeror shall file with the Commission copies of any additional tender offer materials as exhibit to SEC Form 19-1 and, if a material change occurs in the information set forth in such SEC Form, copies of an amendment to such form. Copies of the additional tender offer materials and amendments shall be hand delivered to the target company and to any Exchange as required above.

19.6.3. The Offeror shall report the results of the tender offer to the Commission by filing, not later than ten (10) business days after the termination of the tender offer, copies of the final amendments to SEC Form 19-1.

19.7. Disclosure Requirements in Tender Offers

19.7.1. The Offeror shall publish, send or give to security holders in the manner prescribed by SRC Rule 19.9, a report containing the following information:

19.7.1.1. The identity of the Offeror including his or its present principal occupation or business;

19.7.1.2. The identity of the target company;

19.7.1.3. The amount of class of securities being sought and the type and amount of consideration being offered;

19.7.1.4. The scheduled expiration date of the tender offer, whether the tender offer may be extended and, if so, the procedures for extension of the tender offer;

19.7.1.5. The exact dates when security holders who deposit their securities shall have the right to withdraw their securities pursuant to this Rule and the manner by which shares will be accepted for payment and which withdrawal may be effected;

19.7.1.6. If the tender offer is for less than all of the securities of the class and the Offeror is not obligated to purchase all securities tendered, the exact date of the period during which securities will be accepted on a pro rata basis under this Rule and the present intention or plan of the Offeror with respect to the tender offer in the event of an oversubscription by security holders;

19.7.1.7. The confirmation by the Offeror's financial adviser or another appropriate third party that the resources available to the Offeror are sufficient to satisfy full acceptance of the offer; and

19.7.1.8. The information required in SEC Form 19-1.

19.7.2. If any material change occurs in the information previously disclosed to security holders, the Offeror shall disclose promptly such change in the manner prescribed by this Rule.

19.8. Dissemination Requirements

19.8.1. An Offeror or Issuer shall publish the terms and conditions of the tender offering in two (2) national newspapers of general circulation in the Philippines on the date of commencement of the tender offer and for two (2) consecutive days after compliance with SRC Rule 19.7.1.

19.8.2. If a material change occurs in the information published, sent or given to security holders, the Offeror shall disseminate promptly a disclosure of such change in a manner reasonably calculated to inform security holders of such change.

19.9. Period and Manner of Making Tender Offers

19.9.1. A tender offer shall, unless withdrawn, remain open until the expiration of:

19.9.1.1. At least twenty (20) business days from its commencement; Provided, that an offer should as much as possible be completed within sixty (60) business days from the date the intention to make such offer is publicly announced; or

19.9.1.2. At least ten (10) business days from the date the notice of a change in the percentage of the class of securities being sought or in the consideration offered is first published, sent or given to security holders.

19.9.2. In a mandatory tender offer, the Offeror shall be compelled to offer the highest price paid by him for such securities during the preceding six (6) months. If the offer involves payment by transfer or allotment of securities, such securities must be valued on an equitable basis.

19.9.3. In case of a tender offer other than by an Issuer, the subject of the tender offer ("the target company") shall not engage in any of the following transactions during the course of a tender offer, or before its commencement if its board has reason to believe that an offer might be imminent, except if such transaction is pursuant to a contract entered into earlier, or with the approval of the shareholders in a general meeting or, where special circumstances exist, the Commission's approval has been obtained:

19.9.3.1. Issue any authorized but unissued shares;

19.9.3.2. Issue or grant options in respect to any unissued shares;

19.9.3.3. Create or issue, or permit the creation or issuance of, any securities carrying rights of conversion into, or subscription to, shares;

19.9.3.4. Sell, dispose of or acquire, or agree to acquire, any asset whose value amounts to five percent (5%) or more of the total value of the assets prior to acquisition; or

19.9.3.5. Enter into contracts that are not in the ordinary course of business.

19.9.4. The Offeror in a tender offer shall permit the securities tendered to be withdrawn (i) at any time during the period such tender offer remains open; and (ii) if not yet accepted for payment, after the expiration of sixty (60) business days from the commencement of the tender offer.

19.9.5. If the tender offer shall be for less than the total outstanding securities of a class, but a greater number of securities is tendered, the Offeror shall be obliged to accept and pay the securities on a pro rata basis, disregarding fractions, according to the number of securities tendered by each security holder during the period the offer was open.

19.9.6. In the event the Offeror in a tender offer increases the consideration offered after the tender offer has commenced, the Offeror shall pay such increased consideration to all security holders whose tendered securities have been accepted for payment by such Offeror, whether or not the securities were tendered prior to the variation of the tender offer's terms.

19.9.7. The Offeror in a tender offer shall either pay the consideration offered, or return the tendered securities, not later than ten (10) business days after the termination or the withdrawal of the tender offer.

19.9.8. No tender offer shall be made unless:

19.9.8.1. It is open to all security holders of the class of securities subject to the tender offer; and

19.9.8.2. The consideration paid to any security holder pursuant to the tender offer shall be the highest consideration paid to any other security holder during such tender offer.

19.9.9. The Offeror shall not extend the period of a tender offer without prior clearance from the Commission and without issuing a notice of such extension by publication in a national newspaper of general circulation. The notice shall include a disclosure of the number of securities deposited to date and shall be made public not later than the scheduled original expiration date of the offer.

19.10. Transactions Based on Material, Non-Public Information

If a person shall become aware of a potential tender offer before the tender offer has been publicly announced, such person shall not buy or sell, directly or indirectly, the securities of the target company until the tender offer shall have been publicly announced. Such buying or selling shall constitute insider trading under Section 27.4 of the Code.

19.11. Withdrawal or Lapse of the Tender Offer

Unless with the prior approval of the Commission, if an offer has been announced but has not become unconditional in all respects and has been withdrawn or has lapsed, neither the Offeror nor any person who acted in concert with it in the course of the offer may, within six (6) months from the date on which such offer has been withdrawn or has lapsed, announce an offer for the target company nor acquire any securities of the target company which would require such person to make a mandatory tender offer under this Rule and Section 19.1 of the Code.

19.12. Prohibited practices

The following acts are prohibited in any tender offer:

19.12.1. To employ any device, scheme or artifice to defraud any person;

19.12.2. To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or

19.12.3. To engage in any act, practice or course of business which operates or would operate as a fraud or deceit upon any person.

19.13. Violation

If equity securities of a public company are purchased at threshold amounts provided for in this Rule without complying with the tender offer requirements under this Rule, the Commission may, upon complaint, nullify such purchase and order the conduct of a tender offer, without prejudice to the imposition of other sanctions under the Code.

RULE 20 Disclosures to Stockholders Prior to Meetings

20.1. Applicability

This Rule shall apply to all corporations covered by the reporting requirements of Section 17 of the Code and to any person who shall solicit votes for any stockholders' meeting or securing the written assent of stockholders in lieu of such meeting pursuant to Section 16 of the Corporation Code.

20.2. Definitions

20.2.1. As used in this Rule and SEC Form 20-IS, the following terms shall have the following meanings:

20.2.1.1. Employee Benefit Plan means any purchase, savings, option, profit sharing, bonus, incentive, pension or similar plan primarily for the benefit of employees, directors, trustees or officers.

20.2.1.2. Entity that exercises fiduciary powers means any entity that holds securities in a nominee's name or on behalf of a beneficial owner.

20.2.1.3. Information statement means the statement required by this Rule.

20.2.1.4. Proxy refers to the proxy, consent or authorization referred to in Section 20 of the Code.

20.2.1.5. Record date means the date on which the holders of securities entitled to vote at the meeting in person or by written consent or authorization shall be determined.

20.2.2. Solicitation

20.2.2.1. The terms solicit and solicitation shall include:

20.2.2.1.1. Any request for a proxy or authorization;

20.2.2.1.2. Any request to execute or not to execute, or to revoke, a proxy or authorization; or

20.2.2.1.3. The furnishing of a form of proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy.

20.2.2.2. The terms shall not apply to:

20.2.2.2.1. The performance by any person of ministerial acts on behalf of a person soliciting a proxy; or

20.2.2.2.2. Any solicitation made otherwise than on behalf of the Issuer where the total number of persons solicited is not more than nineteen (19).

20.3. Obligations of an Issuer Proposing Approval through a Stockholders' Meeting or by Written Assent

20.3.1. In the conduct of annual or other stockholders' meetings, the Issuer shall transmit either a written or verifiable soft copy of the information statement and proxy form (in case of a proxy solicitation) containing the information specified under SEC Form 20-IS, and a management report under SRC Rule 20.4, if applicable, to every security holder of the class entitled to vote.

20.3.2. The proxy form shall be prepared in accordance with SRC Rule 20.5.

20.3.3. Filing Requirements

20.3.3.1. Preliminary copies of the information statement and proxy form shall be filed with the Commission at least ten (10) business days prior to the date definitive copies of such material shall be first sent or given to security holders.

20.3.3.2. Upon filing the preliminary information material, the Issuer shall pay a filing fee in such amount that the Commission may determine.

20.3.3.3. Copies of the definitive information statement, proxy form and all other materials, if any, shall be filed with the Commission prior to the date such material/s shall be first sent or given to security holders. One (1) copy of the material/s shall at the same time be filed with, or mailed for filing to, any Exchange in which any class of securities of the Issuer is listed for trading.

20.3.3.4. The information statement, proxy form and management report referred to in SRC Rule 20.4, if applicable, shall be distributed to security holders at least fifteen (15) business days prior to the date of the stockholders' meeting; Provided, that in case any changes are made within the said fifteen (15) business days, the company shall comply with the following requirements:

20.3.3.4.1. Publish in a national newspaper of general circulation the order of the Commission granting the request of the company to make such changes within the said period;

20.3.3.4.2. Submit its updated Definitive Information Statement, proxy form and Management Report within five (5) business days from the approval by the Commission of the said changes; and

20.3.3.4.3. Distribute relevant portions of the Definitive Information Statement, proxy form and Management Report which have been updated pursuant to the changes made at least five (5) business days before the date of the stockholders' meeting.

20.3.3.5. Copies of the information statement and management report shall likewise be uploaded in the Issuer's website for downloading by interested parties.

20.3.4. If the solicitation or distribution shall be made personally in whole or in part, copies of all written instructions or other materials which (i) discuss, review or comment on the merits of any matter to be acted upon and (ii) which shall be furnished by the persons making the solicitation in connection with the solicitation shall be filed with, or mailed for filing to, the Commission by the person on whose behalf the solicitation shall be made not later than the date any such material is first sent or given to such individuals.

20.3.5. If any information statement, proxy form or other materials (if applicable) filed pursuant to this Rule is amended or revised, copies of such amended or revised material shall be filed in accordance with this Rule and marked to indicate clearly and precisely the changes made.

20.4. Report to be Furnished to Stockholders

20.4.1. If the information statement shall relate to an annual (or special meeting in lieu of the annual) meeting of stockholders at which directors shall be elected, it shall be accompanied or preceded by a management report to such stockholders containing the following:

20.4.1.1. Consolidated audited financial statements and interim unaudited financial statements (if applicable), as required by SRC Rule 68, as amended;

20.4.1.2. Information concerning disagreements with accountants on accounting and financial disclosures;

20.4.1.3. Management's discussion and analysis or plan of operation;

20.4.1.4. Brief description of the general nature and scope of the business of the Issuer and its subsidiaries;

20.4.1.5. Identity of each of the Issuer's directors and executive officers, including their principal occupation or employment, name and principal business of any organization in which such persons are employed;

20.4.1.6. Market price of and dividends on the Issuer's common shares;

20.4.1.7. Discussion on compliance with leading practices on corporate governance; and

20.4.1.8. Undertaking in bold face prominent type to provide without charge to each person solicited, upon written request of any such person, a copy of the Issuer's annual report on SEC Form 17-A and the name and address of the person to whom such written request is to be directed. At the discretion of management, a charge may be made for exhibits, provided the charge is limited to reasonable expenses incurred by the Issuer in furnishing the exhibits.

20.4.2. Any information required to be disclosed in the information statement, which is also contained in the Issuer's annual report, need not be provided in the said statement. Reference to the page of the annual report shall, however, be made.

20.4.3. In case of a special meeting where the Issuer has already distributed to its stockholders its annual report on SEC Form 17-A for the fiscal year preceding the date of its annual stockholders' meeting, it shall no longer be required to comply with SRC Rule 20.4.1 except with respect to the disclosure of updated financial and non-financial information.

20.4.4. Copies of the management report for distribution to security holders shall be filed with the Commission prior to the date on which such report shall be first sent or given to security holders.

20.4.5. The distribution of the management report to security holders shall be considered as compliance with Section 75 of the Corporation Code in regard to the presentation of a financial report of operations, including financial statements, to the stockholders at their regular meeting.

20.5. Requirements as to Form of Proxy and Delivery of Information to Security Holders

20.5.1. The form of proxy shall:

20.5.1.1. Indicate in bold face on whose behalf the solicitation is being made;

20.5.1.2. Provide a specifically designated blank space for dating the proxy form;

20.5.1.3. Identify clearly and impartially each separate matter intended to be acted upon;

20.5.1.4. Be in writing, signed by the stockholder or his duly authorized representative; and

20.5.1.5. Be filed with the corporate secretary before the scheduled meeting.

20.5.2. Appropriate means shall be provided in the proxy form to give the person solicited the opportunity to specify his choice between approval or disapproval of, or abstention with respect to, each separate matter referred to therein intended to be acted upon, other than election to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not specified by the security holder provided the form of proxy states in bold face how it is intended to vote the shares represented by the proxy in each such case.

20.5.3. A proxy form that provides for the election of directors shall state the names of persons nominated for election as directors. The form shall clearly provide any of the following means for security holders to withhold authority to vote for each nominee:

20.5.3.1. A box opposite the name of each nominee which may be marked to indicate that the authority to vote for such nominee is withheld;

20.5.3.2. An instruction in bold face which indicates that the security holder may withhold the authority to vote for any nominee by lining through or otherwise striking out the name of the nominee; or

20.5.3.3. Designate blank spaces in which the shareholder may enter the names of nominees to whom the shareholder chooses to withhold the authority to vote.

20.5.4. Any proxy form executed by the security holder in such manner as not to withhold the authority to vote for the election of any nominee shall be deemed to grant such authority, provided the form so states in prominent bold face.

20.5.5. A proxy may confer discretionary authority to vote with respect to any of the following:

20.5.5.1. Matters that are to be presented at the meeting but which, at a reasonable time before the solicitation, are not known to the persons making the solicitation; Provided, that a specific statement to that effect is made in the information statement or proxy form;

20.5.5.2. Approval of the minutes of the prior meeting;

20.5.5.3. Election of any person to any office for which a bona fide nominee is named in the information statement and such nominee is unable to serve or for good cause will not be able to serve; or

20.5.5.4. Matters incidental to the conduct of the meeting.

20.5.6. No proxy shall confer authority:

20.5.6.1. To vote for any person to any office for which a bona fide nominee is not named in the information statement or any material attached to it;

20.5.6.2. To vote with respect to more than one meeting (and any of its adjournment), unless a specific statement is made in the information statement and proxy form that the proxy is valid for more than one meeting; Provided, that no proxy shall be valid and effective for a period longer than five (5) years from the date of the proxy; or

20.5.6.3. To consent to or authorize any action other than the action proposed to be taken in the information statement or matters referred to above.

20.5.7. The proxy form shall provide, subject to reasonable specific conditions, that the shares represented by the proxy will be voted and that, where the person solicited specifies by means of a ballot provided pursuant to this Rule a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the stated specifications made.

20.5.8. No person making a solicitation covered by this Rule shall solicit:

20.5.8.1. Any undated or post-dated proxy; or

20.5.8.2. Any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the security holder.

20.6. Obligations of an Issuer to Provide a List of, or Mail Meeting Material/s to Security Holders

20.6.1. If a record or beneficial holder of securities of the class entitled to vote at the meeting makes a written request to be provided with a list of stockholders or to mail the meeting materials, the Issuer shall grant the request either by providing the list or mailing the materials to the requesting stockholder.

20.6.2. If the Issuer opts to mail the materials for the requesting stockholder, the Issuer shall:

20.6.2.1. Promptly advise the requesting stockholder of the number of record holders and beneficial holders to whom the materials will be sent;

20.6.2.2. Inform the requesting stockholder of the estimated cost of mailing an information statement, proxy form or other materials to such holders; and

20.6.2.3. Promptly mail the materials to the stockholders.

20.7. Providing Copies of Material to Beneficial Owners

20.7.1. If the Issuer or solicitor knows that the securities of any class entitled to vote at a meeting for which SEC Form 20-IS is furnished are held of record by a broker, dealer, investment house, voting trustee, bank, association, or other entity that exercises fiduciary powers in a nominee's name or otherwise, the Issuer or solicitor shall, by first class mail, electronic mail, facsimile, or other equally prompt means, inquire from such record holders at least twenty (20) business days prior to the record date of the meeting:

20.7.1.1. Whether other persons are the beneficial owners of such securities and, if so, the number of copies of the information statement necessary to supply such material to such beneficial owners; and

20.7.1.2. In the case of an annual (or special meeting in lieu of the annual) meeting at which directors are to be elected, the number of copies of the management report to security holders necessary to supply such report to beneficial owners to whom such reports are to be distributed by such record holder.

20.7.2. The Issuer or solicitor shall supply, in a timely manner, each record holder for whom the inquiries required by SRC Rule 20.7.1 are made with copies of the information statement and/or the management report to security holders in such quantities, assembled in such form and at such place(s), as the record holder may reasonably request in order to send such material to each beneficial owner of securities to be furnished with such material by the record holder.

20.7.3. At the request of any record holder that is supplied with the information statement and/or annual reports to security holders pursuant to SRC Rule 20.7.1, the Issuer shall reimburse the record holder for its reasonable expenses for the mailing of such material to the beneficial owners.

20.8. Special Provisions Applicable to Solicitation of Votes Other Than by the Issuer

20.8.1. This Rule applies to solicitations by any person or group of persons other than the Issuer in regard to any item/s to be taken up in an annual or special stockholders' meeting.

20.8.2. Notwithstanding the provisions of SRC Rule 20.3, a solicitation subject to this Rule may be made without furnishing the security holders an information statement on SEC Form 20-IS, provided that:

20.8.2.1. The following information are stated in the communication that shall be attached to and distributed with the proxy form prepared in accordance with SRC Rule 20.5:

20.8.2.1.1. The name of the solicitor and person who shall shoulder the expenses, and the mode of solicitation;

20.8.2.1.2. In case of election of directors, the name/s of the nominee/s, including his business experience for the past five (5) years, involvement in legal proceedings, family relationship with any other nominee, incumbent director or officer, and his interest, direct or indirect, in security holdings or related businesses;

20.8.2.13. A discussion of the reason/s for the solicitation of votes against the proposed action/s by the Issuer;

20.8.2.1.4. A brief description of any substantial interest, direct or indirect, in security holdings or related businesses of each solicitor or participant to the solicitation in any matter to be acted upon at the meeting, and with respect to each solicitor the following information or its fair and accurate summary:

20.8.2.1.4.1. Name and business address of the solicitor;

20.8.2.1.4.2. Present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on;

20.8.2.1.4.3. Amount of each class of securities of the Issuer which the solicitor owns beneficially, directly or indirectly;

20.8.2.1.4.4. Amount of each class of securities of the Issuer which the solicitor owns of record but not beneficially;

20.8.2.1.4.5. All securities of the Issuer purchased or sold by the solicitor within the past two (2) years, the dates on which they were purchased or sold and the amount purchased or sold on each date;

20.8.2.1.4.6. If the solicitor is, or was within the past year, a party to any contract, arrangement or understanding with any person with respect to any security of the Issuer, including, but not limited to, joint ventures, loan or option arrangements, puts or calls, guarantees against loss or of profit, division of losses or profits, or the giving or withholding of proxies. If so, name the parties to such contracts, arrangements or understandings and give their details; and

20.8.2.1.4.7. Amount of each class of securities of any parent or subsidiary of the Issuer which the solicitor owns beneficially, directly or indirectly.

20.8.2.1.5. If specially engaged employees, representatives or other persons have been or are to be employed to solicit security holders, the [i] material features of any contract or arrangement for such solicitation and the identity of the parties, [ii] their cost or anticipated cost, and [iii] approximate number of such employees or employees of any other person (naming such other person) who will solicit security holders; and

20.8.2.1.6. The total amount estimated to be spent and the total expenditures in furtherance of, or in connection with, the solicitation of security holders.

20.8.2.2. All matters to be taken up in the meeting shall be described and reflected in the proxy form and its attachments.

20.8.3. Copies of the proxy form with its attachments shall be filed with the Commission at least fifteen (15) business days prior to the date such materials shall be distributed, sent or given to any security holder.

20.8.4. The prescribed filing fees for each proxy solicitation other than by the Issuer shall be paid to the Commission.

20.9. False or Misleading Statements

20.9.1. No information subject to this Rule shall be made containing any statement which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.

20.9.2. The fact that a statement or other material has been filed with or examined by the Commission shall not be considered a finding by the Commission that such material is accurate or complete, or not false or misleading, or that the Commission has passed upon the merits of or approved any statement contained therein or any matter to be acted upon by security holders. No representation contrary to the foregoing shall be made.

20.10. Obligation of Issuers in Communicating with Beneficial Owners

20.10.1. If the Issuer knows that securities of any class entitled to vote at a meeting with respect to which the Issuer intends to solicit proxies, consents or authorizations are held of record by a broker, dealer, investment house, voting trustee, bank, association, or other entity that exercises fiduciary powers in nominee name or otherwise, the Issuer shall by first class mail, electronic mail, facsimile, or other equally prompt means, inquire of such record holders at least twenty (20) business days prior to the record date of the meeting:

20.10.1.1. Whether other persons are the beneficial owners of such securities and if so, the number of copies of the proxy and other soliciting material necessary to supply such material to such beneficial owners; and

20.10.1.2. In the case of an annual (or special meeting in lieu of the annual) meeting at which directors are to be elected, the number of copies of the management report to security holders necessary to supply such report to beneficial owners to whom such reports are to be distributed by such record holder.

20.10.2. The Issuer shall supply, in a timely manner, each record holder of whom the inquiries required by SRC Rule 20.10.1 are made with copies of the information statement, proxy form (if applicable), other proxy soliciting material, and/or the management report to security holders, in such quantities, assembled in such form and at such place(s), as the record holder may reasonably request in order to send such material to each beneficial owner of securities who is to be furnished with such material by the record holder.

20.10.3. Upon the request of any record holder that is supplied with the said documents pursuant to SRC Rule 20.10.2, the Issuer shall reimburse the record holder for its reasonable expenses in completing the mailing of such material to beneficial owners.

20.11. Other Procedural Requirements

20.11.1. Annual Meeting

20.11.1.1. Regular meeting of stockholders for the election of Directors and Officers of the corporation shall be held annually on the date fixed in the by-laws, or if not so fixed, on any date in April as determined by the Board of Directors. If the date of the annual meeting falls on a legal holiday, the annual meeting shall be held in the next succeeding business day which is not a legal holiday.

20.11.1.2. The annual stockholders' meeting shall be held in the city or municipality where the principal office of the corporation is located, and if practicable in the principal office of the corporation. Metro Manila shall, for purposes of said meeting, be considered a city or municipality.

20.11.1.3. Written notice, stating the date, time and place of the annual meeting shall be sent to all stockholders of record at least two (2) weeks prior to the scheduled annual stockholders' meeting, unless a different period is required by the by-laws. The distribution to stockholders of information statement (SEC Form 20-IS) within the prescribed period under this Rule shall be sufficient compliance with the notice requirement.

20.11.1.4. If for any justifiable and valid reason, the annual stockholders' meeting has to be postponed, the corporation shall notify the Commission in writing of such postponement within ten (10) days from the date of such postponement.

20.11.1.5. No postponement of annual stockholders' meeting shall be allowed except for justifiable reasons to be stated in writing signed under oath by the President or Secretary of the corporation.

20.11.1.6. The Commission en banc may, motu proprio, or upon the written request of any stockholder, direct the calling of an annual stockholders' meeting under its supervision, if the corporation fails or refuses to call said meeting for any justifiable reason.

20.11.1.7. The Commission may send its representatives/observers to stockholders' meetings, under such terms and conditions it deems appropriate.

20.11.1.8. Unless otherwise provided by the by-laws, the stock and transfer book shall be closed at least twenty (20) days before the scheduled date of the annual stockholders' meeting to enable the corporation to prepare a list of stockholders entitled to vote.

20.11.1.9. A copy of the list of stockholders entitled to vote shall be made available at the company's principal office at least fifteen (15) days prior to the date of the annual stockholders' meeting and the corporation shall furnish a copy thereof to any stockholder who may request the same at the expense of said stockholder.

20.11.2. Proxy

20.11.2.1. The corporate by-laws shall be controlling in determining the proper procedure to be followed in the execution and acceptance of proxies, provided that the minimum required formalities prescribed under Section 58 of the Corporation Code and SRC Rule 20 shall be complied with.

20.11.2.2. The notice of stockholders' meeting shall also set the date, time and place of the validation of proxies, which in no case shall be less than five (5) days prior to the annual stockholders' meeting to be held. The presence of any stockholder who may wish to be present in person or through counsel shall be allowed.

20.11.2.3. Failure to affix documentary stamps shall not affect the validity of the proxy. The only adverse effect of such failure is that the same cannot be recorded as a public document and cannot be admitted or used as evidence in Court until the required documentary stamp is affixed and cancelled.

20.11.2.4. Unless required by the corporate by-laws, a proxy need not be notarized.

20.11.2.5. If the name of the proxy is left in blank, the person to whom it is given or the issuer corporation receiving the proxy is at liberty to fill in any name he/it chooses.

20.11.2.6. If a duly accomplished and executed proxy is undated, the postmark or, if not mailed, its actual date of presentation shall be considered.

20.11.2.7. A proxy executed by a corporation shall be in the form of a board resolution duly certified by the Corporate Secretary or in a proxy form executed by a duly authorized corporate officer accompanied by a Corporate Secretary's certificate quoting the board resolution authorizing the said corporate officer to execute the said proxy.

20.11.2.8. If the by-laws provide for a cut-off date for the submission of proxies the same should be strictly followed. In the absence of a provision in the by-laws fixing a deadline, proxies shall be submitted not later than ten (10) days prior to the date of the stockholders meeting.

20.11.2.9. Where the corporation receives more than one (1) proxy from the same stockholder and they are all undated, the postmark dates shall be considered. If the proxies are mailed on the same date, the one bearing the latest time of day of postmark is counted. If the proxies are not mailed, then the time of their actual presentation is considered. That which is presented last will be recognized.

20.11.2.10. Where a proxy is given to two (2) or more persons in the alternative in one instrument, the proxy designated as an alternate can only act as proxy in the event of non-attendance of the other designated person.

20.11.2.11. Where the same stockholder gives two (2) or more proxies, the latest one given is to be deemed to revoke all former proxies.

20.11.2.12. A proxy shall be valid only for the meeting for which it is intended.

20.11.2.13. Executors, administrators, receivers and other legal representatives duly appointed by the court may attend and vote on behalf of the stockholders without a need of any written proxy.

20.11.2.14. If the stockholder intends to designate several proxies, the number of shares of stock to be represented by each proxy shall be specifically indicated in the proxy form. If some of the proxy forms do not indicate the number of shares, the total shareholdings of the stockholder shall be tallied and the balance thereof, if any, shall be allotted to the holder of the proxy form without the number of shares. If all are in blank, the stocks shall be distributed equally among the proxies. The number of persons to be designated as proxies may be limited by the By-laws.

20.11.2.15. In case of shares of stock owned jointly by two (2) or more persons, the consent of all co-owners shall be necessary to appoint or revoke a proxy.

20.11.2.16. For persons owning shares in an "and/or" capacity, any one of them may appoint and revoke a proxy.

20.11.2.17. Proxies executed abroad shall be duly authenticated by the Philippine Embassy or Consular Office.

20.11.2.18. No member of the Stock Exchange and no broker/dealer shall give any proxy, consent or authorization, in respect of any security carried for the account of a customer to a person other than the customer, without the express written authorization of such customer. The proxy executed by the broker shall be accompanied by a certification under oath stating that before the proxy was given to the broker, he had duly obtained the written consent of the persons in whose account the shares are held.

20.11.2.19. A proxy shall not be invalidated on the ground that the stockholder who executed the same has no signature card on file with the Corporate Secretary or Transfer Agent, unless it can be shown that he/she had refused to submit the signature card despite written demand to that effect duly received by the said stockholder at least ten (10) days before the annual stockholders' meeting and election.

20.11.2.20. There shall be a presumption of regularity in the execution of proxies and shall be accepted if they have the appearance of prima facie authenticity in the absence of a timely and valid challenge.

20.11.2.21. In the validation of proxies, a special committee of inspectors shall be designated or appointed by the Board of Directors which shall be empowered to pass on the validity of proxies. [GSIS -vs.- Rosete (Meralco), April 16, 2009]

20.11.2.22. Any violation of this Rule on Proxy shall be subject to the administrative sanctions provided for under Section 144 of the Corporation Code and Section 54 of the Code, and shall render the proceedings null and void.

RULE 21 Fees for Tender Offers and Certain Proxy Solicitations

At the time of filing with the Commission of any statement required under Section 19 for any tender offer or Section 72.2 of the Code for issuer repurchases, or Section 20 for proxy or consent solicitation, the Commission may require that the person making such filing pay a fee of not more than one-tenth (1/10) of one percentum (1%) of:

21.1. The proposed aggregate purchase price in the case of a transaction under Sections 20 or 72 of the Code.

21.2. The proposed payment in cash, and the value of any securities or property to be transferred in the acquisition, merger or consolidation, or the cash and value of any securities proposed to be received upon the sale or disposition of such assets in the case of a solicitation under Section 20 of the Code. The Commission shall prescribe by rule diminishing fees in inverse proportion to the value of the aggregate price of the offering.

RULE 22 Internal Record Keeping and Accounting Controls

Every issuer which has a class of securities that satisfies the requirements of Subsection 17.2 shall:

22.1. Make and keep books, records, and accounts which, in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the issuer.

22.2. Devise and maintain a system of internal accounting controls sufficient to provide reasonable assurances that:

22.2.1. Transactions and access to assets are pursuant to management authorization

22.2.2. Financial statements are prepared in conformity with generally accepted accounting principles that are adopted by the Accounting Standards Council and the rules promulgated by the Commission with regard to the preparation of financial statements

22.2.3. Recorded assets are compared with existing assets at reasonable intervals and differences are reconciled

RULE 23 Reports to be Filed by Directors, Officers and Principal Stockholders

23.1. Every person who is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of any security of a company which satisfies the requirements of Subsection 17.2 of the Code, or who is a director or an officer of the issuer of such security, shall:

23.1.1. Within ten (10) calendar days after the effective date of the registration statement for that security, or within ten (10) calendar days after he becomes such beneficial owner, director or officer, subsequent to the effective date of the registration statement, whichever is earlier, file a statement with the Commission, and with the Exchange, if the security is listed on an Exchange, on Form 23-A indicating the amount of securities of such issuer of which he is the beneficial owner;

23.1.2. Within ten (10) calendar days after the close of each calendar month thereafter, if there has been any change in such ownership during the month, file a statement with the Commission and with the Exchange, if the security is listed on an Exchange, on Form 23-B indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during that calendar month;

23.1.3. Notify the Commission if his direct or indirect beneficial ownership of securities falls below ten percent (10%), or if he ceases to be an officer or director of the Issuer. After filing such notification, he shall no longer be required to file Form 23-B.

However, a newly appointed officer, who has no beneficial ownership over the shares of the company, shall notify the Commission of such fact within ten (10) calendar days from such appointment.

23.1.4. If the security is listed on an Exchange, the report shall be filed on that Exchange in accordance with the rules of the Exchange, but not more than five (5) calendar days after such person became beneficial owner. The filing with the Exchange may be deemed as filing with the Commission pursuant to a Memorandum of Agreement between the Exchange and the Commission; Provided that, the Memorandum of Agreement shall provide for the ability of the Commission to download and upload the same information made available to the Exchange.

23.2. In determining whether a person is the beneficial owner, directly or indirectly, of more than ten percent (10%) of any class of any registered security, such class shall be deemed to consist of the amount of such class which has been issued.

For the purpose of determining the percentage of ownership of voting trust certificates or certificates of deposit for securities, the class of voting trust certificate or certificates of deposit shall consist of the entire amount of issuable voting trust certificates or certificates of deposit.

23.3. A person filing a statement pursuant to this Rule otherwise than as the direct beneficial owner of any security shall specify the nature of his beneficial ownership in such security.

23.4. A partner who is required under this Rule to report in respect to any security owned by the partnership may include in his statement the entire amount of such security owned by the partnership and state that he has an interest in such security by reason of his membership in the partnership without disclosing the extent of such interest; or such partner may file a statement only as to the amount of such security which represents his proportionate interest in the partnership, indicating that the statement covers only such interest.

RULE 24.1 (A AND B) Manipulative Practices

24.1.1. It shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly:

24.1.1.1. To create a false or misleading appearance of active trading in any listed security traded in an Exchange or any other trading market (hereafter referred to purposes of this Chapter as "Exchange"):

24.1.1.1.1. By effecting any transaction in such security which involves no change in the beneficial ownership thereof;

24.1.1.1.2. By entering an order or orders for the purchase or sale of such security with the knowledge that a simultaneous order or orders of substantially the same size, time and price, for the sale or purchase of any such security, has or will be entered by or for the same or different parties; or

24.1.1.1.3. By performing similar act where there is no change in beneficial ownership.

24.1.2. It shall be unlawful for any person to make a bid or offer, or deal in securities which has the effect or is likely to have the effect of creating a false or misleading appearance of active trading in any security or with respect to the market for, or the price of, any security.

24.1.3. 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 creates, or is aware that the other person creates, or taking into account the circumstances of the order, reasonably suspects that the order creates or will create, a false or misleading appearance of active trading in any security or with respect to the market for, or the price of, any security.

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

24.1.4.1. Whether the order or execution of the order, would materially alter the market for, and/or the price of, the securities;

24.1.4.2. The date and time the order is entered or any instructions concerning the date and time of entry of the order;

24.1.4.3. Whether the person on whose behalf the order is placed, or another person who the Broker Dealer knows to be a related party of that person, may have an interest in creating a false or misleading appearance of active trading in any security or with respect to the market for, or the price of, any security;

24.1.4.4. Whether the order is accompanied by settlement, delivery or security arrangements which are unusual;

24.1.4.5. Whether the order appears to be part of a series of orders, which when put together with the other orders which appear to make up the series, the order or the series is unusual having regard to the matters referred to in SRC Rule 24.1.3; and

24.1.4.6. Whether there appears to be a legitimate commercial reason or basis in placing the order, unrelated to an intention to create a false or misleading appearance of active trading in or with respect to the market for, or price of, any security.

Failure to consider these factors shall raise a presumption that the transaction/s is/are manipulative.

24.1.5. Set forth below are examples of prohibited conduct:

24.1.5.1. Engaging in a series of transactions in securities that are reported publicly to give the impression of activity or price movement in a security (e.g., painting the tape);

24.1.5.2. Buying and selling securities at the close of the market in an effort to alter the closing price of the security (marking the close);

24.1.5.3. Engaging in buying activity at increasingly higher prices and then selling securities in the market at the higher prices (hype and dump) or vice versa (i.e., selling activity at lower prices and then buying at such lower prices);

24.1.5.4. Engaging in transactions in which there is no change in beneficial ownership of a security (wash sales).

24.1.5.5. Taking advantage of a shortage of securities in the market by controlling the demand side and exploiting market congestion during such shortages in a way as to create artificial prices (squeezing the float);

24.1.5.6. Disseminating false or misleading market information through media, including the internet, or any other means to move the price of a security in a direction that is favorable to a position held or a transaction; and

24.1.5.7. Other types of prohibited conduct and/or manipulative practices which include, among others, the creation of temporary funds for the purpose of engaging in other manipulative practices.

24.1.6. Obligations imposed on registered persons under this rule apply in respect of all orders, irrespective of the trading system used and whether executed or not.

RULE 24.1(C) Manipulation of Security Prices — Circulating Information to Affect the Price of a Security

It shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly, to circulate or disseminate information that the price of any security listed in an Exchange will or is likely to rise or fall because of manipulative market operations of any one or more persons conducted for the purpose of raising or depressing the price of the security for the purpose of inducing the purpose of sale of such security.

RULE 24.1(D) Manipulation of Security Prices — Advertisements and Communications with the Public; False and Misleading Statements

24.1(d).1. All communications by Broker Dealers or associated persons or salesmen of Broker Dealers (hereinafter "registered persons"), with the public shall be based on principles of fair dealing and good faith and should provide a sound basis for evaluating the facts in regard to any particular security or securities or type of security, industry discussed, or service offered. No material fact or qualification shall be omitted if the omission, in the light of the context of the material presented, would cause the advertising or sales literature to be misleading.

24.1(d).2. Exaggerated, unwarranted or misleading statements or claims are prohibited in all public communications of registered persons. In preparing such literature, it must be borne in mind by registered persons that inherent in investment are the risks of fluctuating prices and the uncertainty of dividends, rates of return and yield, and no registered person shall, directly or indirectly, publish, circulate or distribute any public communication that he knows, or had reason to know, contains any untrue statement of a material fact or is otherwise false or misleading.

24.1(d).3. Communications with the public shall not contain promises of specific results, exaggerated or unwarranted claims, or unwarranted superlatives, unfounded opinions for which there is no basis, or forecasts of future events which are unwarranted, or which are not clearly labeled as forecasts.

24.1(d).4. In judging whether a communication or a particular element of a communication may be misleading, several factors should be considered, including but not limited to:

24.1(d).4.1. The overall context in which the statement/s is/are made. A statement made in one context may be misleading even though such a statement could be perfectly appropriate in another context. An essential test in this regard is the balance of treatment of risks and potential benefits;

24.1(d).4.2. The audience to which the communication is directed. Different levels of explanation or detail may be necessary depending on the audience to which a communication is directed and the ability of the registered person given the nature of the media used, to restrict the audience appropriately. If the statements made in a communication would be applicable only to a limited audience, or if additional information might be necessary for other audiences, it should be kept in mind that it is not always possible to restrict the readership of a particular communication; and/or

24.1(d).4.3. The clarity of the communication. A statement or disclosure made in an unclear manner can result in a failure to understand the statement, or in a serious misunderstanding. A complex or overly technical explanation may worse cause even greater misunderstanding than too scant information. Likewise material disclosure relegated to legends or footnotes

RULE 24.1(E) Manipulation of Security Prices — Price Fixing

It shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly, to effect, either alone or others, any series of transactions for the purchase and/or sale of any security traded in an Exchange for the purpose of pegging, fixing or stabilizing the price of such security unless otherwise allowed by the SRC or these Rules.

RULE 24.2-2 Short Sales

24.2-2.1. Definition of Short Sale

The term "short sale" shall mean any sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of the seller with the commitment of the seller or securities borrower to return or deliver said securities or their equivalent to the lender on a determined or determinable future date. A person shall be deemed to own a security if: (1) he or his agent has title to it; (2) he has purchased, or has entered into an unconditional contract, binding on both parties thereto, to purchase it and has not yet received it; (3) he owns a security convertible into or exchangeable for it and has tendered such security for conversion or exchange; (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 warrants provided, however, that a person shall be deemed to own securities only to the extent he has a net long position in such securities.

24.2-2.2. Determination of Good Delivery

No Broker or Dealer shall accept a long sale order from a customer unless he has made a determination that the customer owns the security and will deliver in good deliverable form within the settlement period provided by exchange or clearing agency, or as may be prescribed by the Commission. The determination must include a notation on the order ticket at the time the order is taken which reflects the conversation with the customer regarding the present location of the securities, whether they are in good deliverable form, and the customer's ability to make delivery.

24.2-2.3. Order for Short Sale

Upon receiving an order to sell short a qualified security, the order should be indicated on the selling order and throughout all the records pertinent to the sale. Prior to acceptance of any short sale order, the broker dealer shall make a determination that the customer has already borrowed the security and such will be delivered in good deliverable form within the prescribed settlement period.

24.2-2.4. Definition of Qualified Security

For purposes of this rule, the term qualified security shall mean a listed security that is eligible for short selling in accordance with the following standards: (1) market capitalization; (2) tradability; (3) liquidity; and (4) with other applicable guidelines as may be prescribed by the Commission.

24.2-2.5. Execution of Short Sale/Uptick Rule

No broker or dealer shall use any facility of a securities exchange to effect a short sale of any security unless (1) at a price higher than the last sale or (2) at the price of the sale if that price is above the next preceding different sale price on such day.

Unless otherwise provided by the Commission, this price requirement shall not apply to a sale due to a bona fide market-making or arbitrage activity executed by a broker dealer authorized to engage in such activities.

24.2-2.6. Failure to Deliver

No person shall, directly or indirectly, by the use of any facility of a securities exchange, effect a short sale in a security registered or listed on any securities exchange, where the seller does not intend or is unable to make delivery of the securities within the prescribed settlement period. Failure on the part of the seller to make delivery on such date will be construed by the Commission as prima facie evidence of the lack of intention on his part to make such delivery.

24.2-2.7. Mandatory Close-Out

A contract involving a short sale which has not resulted in a delivery by the Broker Dealer within the settlement period must be closed by the Broker Dealer either by purchasing for cash or 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, or in accordance with rules of the clearing agency that shall clear and settle the transactions.

24.2-2.8. Directors, Officers or Principal Stockholders

No director, officer or principal stockholder of a corporation shall make a short sale in securities of the corporation in which he is a director, officer or principal stockholder.

24.2-2.9. Record Keeping

A Broker Dealer who engages in short selling activities is required to maintain and keep up-to-date ledgers, whether in manual or preferably in electronic form, to record the complete details of all short selling transactions whether for its account or for the account of its customers. Such ledgers shall be kept in accordance with the Records Retention Rule and be made available to the Commission.

24.2-2.10. Prohibition on Short Selling

The Commission may, motu proprio or upon recommendation of the Exchange, prohibit short selling in the Exchange indefinitely or for such period as it may deem proper for the protection of the investors. The Commission may also prohibit short selling in any Exchange as an emergency measure or whenever such short selling is necessary or appropriate in the public interest.

RULE 25 Option Trading

No member of an Exchange shall, directly or indirectly endorse or guarantee the performance of any put, call, straddle, option or privilege in relation to any security registered on a securities exchange. The terms "put", "call", "straddle", "option", or "privilege" shall not include any registered warrant, right or convertible security.

RULE 26 Fraudulent Transactions

26.1. It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securities to: (i) employ any device, scheme, or artifice to defraud; (ii) obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading; or (iii) engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person.

26.2. Use of Information Obtained in Fiduciary Capacity

A Broker Dealer, Associated Person or salesman of a Broker Dealer, a paying agent, transfer agent, trustee, or any other person acting in a similar fiduciary capacity, who has received information as to the ownership of securities, shall not make use of such information for the purpose of soliciting or making purchases, sales or exchanges of securities or, except as provided in SRC Rule 30.2.9, provide such information to any person who does not need such information to fulfill his responsibilities under the Code.

26.3. Prohibited Representations, Dealings and Solicitations

It shall be unlawful for any:

26.3.1. Person to represent that he has been registered as a securities 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;

26.3.2. Broker Dealer to represent that the registration of the Broker Dealer under the Code, or the failure of the Commission to deny, suspend, or revoke such registration, indicates in any way that the Commission has passed upon or approved the financial standing, business, or conduct of such Broker Dealer, or the merits of any security or any transaction/s conducted thereby;

26.3.3. Person to represent that a security is a particular type of security when such representation is inconsistent with a stated definition under the Code or rules or regulations adopted thereunder.

26.3.4. Person to represent that a security to be sold, transferred, pledged, mortgaged, encumbered, used for delivery, or any other purpose to another entity or itself has been legally authorized by the registered owner when such representation is not true and documented in writing at the time and date it was used.

26.3.5. Person, whether as principal or agent, to buy, sell or deal in securities or solicit investments in securities and other investment contracts, unless he is a registered broker, dealer or licensed salesman of a broker dealer and the securities are registered under the Code or exempt from registration pursuant to Sections 9 and 10 thereof.

Dealing in securities includes making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into any agreement for or with a view to acquiring, disposing of, subscribing for securities.

Solicitation is the act of seeking or asking for business or information and including the act of providing information about a security or investment product being offered for sale with the view of making another person a client or closing or bringing in a sale or purchase of security or investment product. The solicitor need not be a signatory to any contract relative to such offer or sale of the security.

An investment contract means a contract, transaction or scheme (collectively "contract") whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others. An investment contract is presumed to exist whenever a person seeks to use the money or property of others on the promise of profits.

A common enterprise is deemed created when two (2) or more investors "pool" their resources, creating a common enterprise, even if the promoter receives nothing more than a broker's commission.

RULE 27 Insider Trading

27.1. It shall be unlawful for an insider to sell or buy a security of the issuer, while in possession of material information with respect to the issuer or the security that is not generally available to the public, unless: (a) The insider proves that the information was not gained from such relationship; or (b) If the other party selling to or buying from the insider (or his agent) is identified, the insider proves: (i) that he disclosed the information to the other party, or (ii) that he had reason to believe that the other party otherwise is also in possession of the information. A purchase or sale of a security of the issuer made by an insider defined in Section 3.8 of the Code, or such insider's spouse or relatives by affinity or consanguinity within the second degree, legitimate or common-law, shall be presumed to have been effected while in possession of material nonpublic information if transacted after such information came into existence but prior to dissemination of such information to the public and the lapse of a reasonable time for market to absorb such information; Provided, however, That this presumption shall be rebutted upon a showing by the purchaser or seller that he was aware of the material nonpublic information at the time of the purchase or sale.

27.2. Information is "material nonpublic" under this Rule if: (a) 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 and the lapse of a reasonable time for the market to absorb the information; or (b) would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sell or hold a security.

27.3. It shall be unlawful for any insider to communicate material nonpublic information about the issuer or the security to any person who, by virtue of the communication, becomes an insider as defined in Section 3.8 of the Code, where the insider communicating the information knows or has reason to believe that such person will likely buy or sell a security of the issuer whole in possession of such information.

27.4. Where a tender offer has commenced or is about to commence, it shall be unlawful for:

27.4.1. Any person (other than the tender offeror) who is in possession of material nonpublic information relating to such tender offer, to buy or sell the securities of the issuer that are sought or to be sought by such tender offer if such person knows or has reason to believe that the information is nonpublic and has been acquired directly or indirectly from the tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, or any insider of such issuer; and

27.4.2. Any tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, and any insider of such issuer to communicate material nonpublic information relating to the tender offer to any other person where such communication is likely to result in a violation of the preceding SRC Rule.

The term "securities of the issuer sought or to be sought by such tender offer" shall include any securities convertible or exchangeable into such securities or any options or rights in any of the foregoing securities.

RULE 28.1 Registration of Brokers and Dealers

28.1.1. Broker Dealer

A Broker Dealer is any entity that buys or sells securities for its own and customers' account and who shall be registered with the Commission pursuant to Section 28 of the Code.

28.1.2. Requirements for Registration

28.1.2.1. An entity applying for registration as a Broker Dealer under Section 28 shall indicate in the application form for registration, or in an amendment thereto, whether it will:

28.1.2.1.1. Act as a Broker or Dealer;

28.1.2.1.2. Trade, directly or indirectly, in an Exchange, in the Over-The-Counter Market or in an Alternative Trading System;

28.1.2.1.3. If an Exchange Trading Participant, act as a clearing or a non-clearing participant or as a market maker;

28.1.2.1.4. Deal with Equity Securities, Fixed Income/Debt Securities, Proprietary Shares, Non-Proprietary Shares, Government Securities, Derivatives or other instruments which must be specified in the application form.

28.1.2.2. "Market making transactions" shall mean transactions in a particular security/ies:

28.1.2.2.1. By a Broker Dealer which complies with the Commission and Exchange rules regarding its duty as a market maker;

28.1.2.2.2. To ensure two way quotes, provide liquidity, and maintain a fair and orderly trading market therein.

28.1.2.3. An applicant for registration as a Broker Dealer shall solely engage in the business of a Broker Dealer, unless otherwise authorized by the Commission to engage in another business.

The Broker Dealer shall segregate the operational and financial books and records of the other businesses, if any.

28.1.2.4. Every application for registration as a Broker Dealer shall be filed on SEC Form 28-BD and be accompanied by the following papers or documents:

28.1.2.4.1. A continuing authorization for the Commission's duly authorized representative to verify the applicant's bank accounts. The authorization shall be for all banks wherein accounts are maintained by the Broker Dealer and shall be continuous with registration by the Commission;

28.1.2.4.2. Proof of compliance with paid up capital requirements pursuant to SRC Rule 28.1.2.5.2;

28.1.2.4.3. Certified True Copy of valid work permit of foreigners who are employees or officers of the applicant corporation duly issued by the Department of Labor and Employment (DOLE) or any appropriate agency;

28.1.2.4.4. Copies of identity cards/passports of the following:

28.1.2.4.4.1. Individual applicants (salesman/associated person);

28.1.2.4.4.2. Officers;

28.1.2.4.4.3. Directors; and

28.1.2.4.4.4. Persons who control more than ten percent (10%) of a class of voting securities of corporate applicants.

28.1.2.4.5. Written supervision and control procedures, including procedures for establishing and segregating transactions pursuant to Section 34.1 of the Code. Such procedures shall take into consideration the requirements of the Anti-Money Laundering Act of 2001 (RA 9160, as amended), and the Revised Code of Corporate Governance;

28.1.2.4.6. A schedule of minimum commission charges as required by SRC Rule 30.2.5;

28.1.2.4.7. Calculation of net capital requirements in accordance with SRC Rule 28.1.2.5.2 and SRC Rule 49.1.1.5 or any other financial ratio/measure which the Commission may in the future mandate;

28.1.2.4.8. Bio-data of Directors and Officers using SEC Form 28-BDF as well as Certified True Copy of educational, professional/technical or other academic qualifications of Officers, Associated Persons and Salesmen;

28.1.2.4.9. Latest audited financial statement;

28.1.2.4.10. Where applicant has been in existence for more than one year, certified copies of income tax returns for the two years preceding date of application;

28.1.2.4.11. Detailed description of Organizational and Functional charts, the names and designations of the officers, including branch offices;

28.1.2.4.12. If the applicant is a corporation, a certified copy of the following documents under oath, by the corporate secretary:

28.1.2.4.12.1. With respect to a foreign corporation, certificate that the board of directors has authorized, in a resolution, the President and Secretary to sign an irrevocable consent to service of process upon the Commission as service to the corporation;

28.1.2.4.12.2. Articles of Incorporation indicating that the purpose of the applicant is to engage in the business of a Broker Dealer;

28.1.2.4.12.3. Board resolution attesting to particulars contained in the application and in the attached documents.

28.1.2.4.13. Business plan regarding proposed and/or current operations, including projected volume of business. Such plan should reflect applicant's ability and plans to engage in a profitable level of business; and

28.1.2.4.14. A yearly schedule/timetable on the implementation of the training program for the staff, which specifies, among others, the description of the training program, date of implementation and name of participants.

28.1.2.4.15. Proof of valid membership in an SRO;

28.1.2.4.16. Risk Management Manual and Internal Control Procedures;

28.1.2.4.17. Business Continuity and Disaster Recovery Plan;

28.1.2.4.18. Comprehensive Information Technology Plan, to include among others: a) a list and brief description of the software and hardware to be primarily used in its functions and their location; b) a back-up system or subsystem and their location; c) security system and procedures to be employed; d) procedures to check sufficiency of system's capacity and expansion program, if necessary; and e) IT system maintenance schedule; and

28.1.2.4.19. Copies of proposed contract of any activities or services that are being outsourced.

28.1.2.5. Terms and Conditions for Registration and for Continuing Registration

28.1.2.5.1. Applicable to Exchange Trading Participants

28.1.2.5.1.1. Membership in good standing in an Exchange;provided, however that any applicant who is not a member of an Exchange may only be granted registration conditioned upon future membership in an Exchange;

28.1.2.5.1.2. Membership or participation in a Trust Fund accredited by the Commission under SRC Rule 36.5.1;

28.1.2.5.1.3. Where the Broker Dealer is a participant in a registered clearing agency, fulfillment of its obligation to contribute to the guarantee fund;

28.1.2.5.2. Applicable to both Exchange Trading Participants and Non-Exchange Broker Dealers

28.1.2.5.2(a). Compliance with SEC Risk Based Capital Adequacy (RBCA) Requirement/Ratio for Brokers Dealers, otherwise known as the RBCA Rules or any amendments thereto.

28.1.2.5.2(b).1. Unimpaired paid up capital of One Hundred Million pesos (PhP100,000,000.00) for the following types of Broker Dealers:

28.1.2.5.2(b).1.1. First time registrants who will be participating in a registered clearing agency upon the effectivity of the Code;

28.1.2.5.2(b).1.2. Those acquiring the business of existing Broker Dealer companies pursuant to SRC Rule 28.1.3 and will be participating in a registered clearing agency; Provided, however, that the Commission may authorize a lower capitalization for applicants not participating in a registered clearing agency.

28.1.2.5.2(b).2. Other existing Broker Dealer applicants not meeting the One Hundred Million (PhP100,000,000.00) capitalization and not seeking authorization to engage in market making transactions shall maintain a Thirty Million Pesos (PhP30,000,000.00) unimpaired paid up capital, or such other amount as the Commission may prescribe, and file the required surety bond in lieu of the One Hundred Million Pesos (PhP100,000,000.00) as prescribed under SRC Rule 28.1.6.

28.1.2.5.2(b).3. Unimpaired paid up capital of Two Million Five Hundred Thousand Pesos (PhP2,500,000.00), or such other amount as the Commission may prescribe, for applicants dealing purely in proprietary shares who are not holding securities for their clients.

28.1.2.5.2(c). Registration of each branch office;

28.1.2.5.2(d). At least one trained and registered salesman at each registered branch office. All salesmen of the applicant shall apply for registration as a salesman under SRC Rule 28.1.5;

28.1.2.5.2(e). At least one registered Associated Person. Any person with supervisory responsibility for the applicant shall apply for registration as an Associated Person under SRC Rule 28.1.5;

28.1.2.5.2(f). A sufficient number of back office staff at the main office of the applicant;

28.1.2.5.2(g). A computerized and effective recording and accounting system;

28.1.2.5.2(h). Separate bank accounts for client funds;

28.1.2.5.2(i). Separate bank accounts for proprietary funds;

28.1.2.5.2(j). Reporting, using SEC Form 28-BDA of changes in the information provided in the application form to the Commission in writing within seven (7) days of such changes;

28.1.2.5.2(k). Compliance with the provisions of the Revised Code of Corporate Governance and Anti Money Laundering Act, as amended;

28.1.2.5.2(l). Filing of reports required under the rules and regulations, including but not limited to the filing of the Revised Manuals on Good Governance and Anti-Money Laundering;

28.1.2.5.2(m). A certificate of Membership in good standing from a duly-accredited or recognized broker/dealer association; and

28.1.2.5.2(n). A Broker Dealer must have a website which shall contain basic information about the firm including the services offered, the names, current photos and contact details of its directors, principal officers, associated persons and salesmen. This requirement must be complied with by the firm within six (6) months from effectivity of these rules. The website shall be kept current and updated at all times.

28.1.2.5.2(o). A Broker Dealer shall submit to the Commission and the SRO which has authority to supervise its trading participants a list of its directors, officers, salesmen and employees together with their respective photos taken within six (6) months before submission to the Commission, designations and specimen signatures. For initial compliance, the Broker Dealer shall submit such requirements within six (6) months from the effectivity of these rules. These requirements shall be updated every three (3) years thereafter.

28.1.2.5.2(p). The Commission may require Broker Dealers to subject their information technology, trading, business continuity, disaster recovery and risk management systems to a regular review and audit by independent firm at least once every three (3) years and such other frequency that the Commission may deem necessary. The Commission may also require that the results of said review and audit shall be submitted to the Commission;

28.1.2.5.2(q). Such other requirements which the Commission may prescribe.

28.1.2.6. Perpetual License of Broker Dealer

The registration of Broker Dealer license shall remain valid unless otherwise revoked for cause or suspended or voluntarily surrendered by the Broker Dealer, subject to the Broker Dealers' compliance with the qualification and monitoring requirements of the Commission. Each registered Broker Dealer shall pay the annual fee every November of each year of registration. The filing and payment of the required annual fee after the prescribed period shall be subject to a penalty that shall be determined by the Commission. Failure to pay the annual fee shall, after notice and hearing, result in the suspension or revocation of the license, as the circumstances may warrant.

28.1.3. Registration of Successor to Broker Dealer

28.1.3.1. No sale or transfer of assets and liabilities of an existing Broker Dealer (hereinafter referred to as "predecessor Broker Dealer") to an entity (hereinafter referred to as "successor Broker Dealer") or any form of reorganization or change in management of a Broker Dealer, de facto or otherwise shall be effected without prior approval by the Commission. The successor Broker Dealer, with conformity of the predecessor Broker Dealer, shall file a request for such approval. In the evaluation of the request of the predecessor Broker Dealer, the Commission shall determine the eligibility of the successor entity for registration as broker dealer.

After securing the aforementioned approval of the Commission, the successor Broker Dealer shall file its application for registration within (30) business days from the date of receipt of notice of approval and simultaneously publish at its expense a notice of such application in any national newspaper of general circulation.

In the event that the successor Broker Dealer succeeds to and continues the business of the predecessor Broker Dealer without filing an application for registration, both the predecessor and successor Broker Dealer shall be subject to corresponding administrative penalty as may be determined by the Commission.

28.1.3.2. The following are examples of the types of reorganizations that require the successor of a Broker Dealer to file a new application:

28.13.2.1. A person or entity purchases or assumes substantially all of the assets and liabilities of a Broker Dealer, and, after so doing, the said entity decides to operate the business of the Broker Dealer;

28.1.3.2.2. If two or more registered Broker Dealers consolidate their firms and conduct their business through a new entity which assumes substantially all of the assets and liabilities of the predecessor broker dealer the new entity shall file a complete application on SEC Form 28-BD, while the predecessor firms shall each be required to file a Request for Withdrawal of Business and/or Cancellation of Registration as Broker Dealer under SRC Rule 28.1.4.

28.1.3.2.3. A person or group of persons representing the same interest or acting in concert invests in the Broker Dealer, where such investment results in a change in the management and/or ownership control of the Broker Dealer.

28.1.3.3. Notwithstanding SRC Rule 28.1.3.1, the successor may file an amendment to the registration of the predecessor Broker Dealer on SEC Form 28-BDA instead of an original application for registration, within thirty (30) days after the succession in the following instances:

28.1.3.3.1. A corporate reorganization or restructuring that does not result in a change in control of the Broker Dealer.

28.1.3.3.2. A succession resulting from a change in the form of business, such as from a partnership to a corporation.

28.1.4. Withdrawal of Business and/or Cancellation of Registration as Broker Dealer

28.1.4.1. The Request for Withdrawal of Business and/or Cancellation of Registration as a Broker Dealer shall be filed on SEC Form 28-BDW in accordance with the instructions contained therein.

28.1.4.2. A request to withdraw business and/or cancel registration filed by a Broker Dealer shall become effective on such date as determined by the Commission for its effectivity. If there is no date indicated, the withdrawal or cancellation shall take effect on the date of the issuance of the Order.

28.1.4.3. Subsequent to filing of such Notice or Request to withdraw business and/or cancel registration, the Broker Dealer shall perform the following:

28.1.4.3.1. Publication in at least two (2) national newspapers of general circulation of the notice of the filing of request to withdraw business and/or cancel registration with the Commission and/or the SRO; and

28.1.4.3.2. Execution within five (5) days of a sworn statement, undertaking to comply with the following conditions:

28.1.4.3.2.1. The company will cease to solicit new business and that should the company remain inoperative for five (5) years, its Certificate of Incorporation will be revoked;

28.1.4.3.2.2. The company will no longer execute orders from clients within five (5) days from actual cessation of operation;

28.1.4.3.2.3. The terms and conditions of the Surety Bond shall remain effective until its expiration;

28.1.4.3.2.4. There will be no disposal or transfer of clients' securities to a successor Broker without the prior written agreement or confirmation of the client. The Broker Dealer shall provide the client a template for its agreement or confirmation of the disposal or transfer. The Broker Dealer shall submit to the Commission and/or the Self-Regulatory Organization ("SRO") proof of mailing or transmittal, whether through personal service or a reputable commercial courier, or through online submission as the Commission may prescribe, of the agreement or confirmation. The Broker Dealer shall notify the Commission if the client accepted or rejected the agreement or confirmation.

28.1.4.3.2.5. The company will continually inform the client of its corporate activities until the transfer to successor broker;

28.1.4.3.2.6. The company will preserve for a period of not less than five (5) years from the date the Commission and/or the SRO has approved its operation to cease, all records required to be maintained pursuant to the Books and Records Rule. The company shall inform the SRO and the Commission of the names and residence addresses and contact numbers of at least two (2) person/s responsible for the safekeeping of all the records, reporting any change in the person/s responsible, if there is any. If money laundering, criminal or administrative cases have been filed in court or an investigation is being conducted wherein the customer is involved or impleaded as a party to the case or investigation, the file must be retained beyond the five (5) year period until it is confirmed that the case has been finally been resolved or terminated by the court;

28.1.4.3.2.7. It shall be the responsibility of the Compliance Officer or Associated Person to oversee compliance with the requirements of the Commission and/or the SRO relative to the closure of its business;

28.1.4.3.3. Following the submission of SEC Form 28-BDW Notice of Withdrawal from Registration, the Broker Dealer shall be given a maximum of forty five (45) business days to effect the transfer of its clients' securities to the successor Broker duly approved by the SRO (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) or any broker chosen by the client. During such period the following requirements shall be complied with:

28.1.4.3.3.1. Submit to the SRO (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) for its approval a draft letter informing the clients of the closure of business including the procedures that it will undertake to service the clients and the creditors;

28.1.4.3.3.2. Issue latest statement of accounts to individual clients to give them the opportunity to validate their securities' positions with the company including their payables;

28.1.4.3.3.3. Submit to the SRO (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) a summary of clients' account balances;

28.1.4.3.3.4. Execute clients' instructions on how to effect transfer/liquidate their securities and cash positions;

28.1.4.3.3.5. Provide the SRO (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer) with a status report of clients' complaints with the corresponding actions taken; and

28.1.4.3.3.6. Submit to the SRO (in the case of Exchange Trading Participants), copy furnished the Commission, or the Commission (in the case of Non-Exchange Broker Dealer) an undertaking to be accomplished by the persons responsible for the safekeeping of all the records of the company pursuant to AMLA and SRC's IRR; and

28.1.4.3.3.7. Submit an affidavit of publication with a copy of the notice that was published regarding the application for the Withdrawal of Business and/or Cancellation of Registration as a Broker Dealer in accordance with SRC Rule 28.1.4.3.9.

28.1.4.3.4. The SRO tasked to perform the independent audit, surveillance and/or compliance functions of the Broker Dealers (in case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealer), if it deems necessary, will conduct a post audit of the company to ensure compliance with the aforementioned requirements after the end of the forty five (45) day period.

28.1.4.3.5. After effecting the transfer of clients' securities to the successor broker duly approved by the SRO (in the case of Exchange Trading Participants) or the Commission (in the case of Non-Exchange Broker Dealers) or any broker of their choice, the company is required to submit to the Commission the following documents:

28.1.4.3.5.1. A list, executed under oath, of all transfers of customer accounts from the time notice of cessation of business or withdrawal of registration has been communicated to the Commission or the SRO;

28.1.4.3.5.2. Certificate of Good Standing from the Commission;

28.1.4.3.5.3. Clearance from the SRO that the company has no outstanding liabilities to the SRO;

28.1.4.3.5.4. Clearance from the SRO tasked to perform the independent audit, surveillance and/or compliance functions that the company can settle or has settled all of its trading related liabilities and obligations prior to the date of effectivity of the termination of operations;

28.1.4.3.5.5. Clearance from the registered clearing agency that all obligations have been settled, delivered and/or securities intact and in good control location;

28.1.4.3.5.6. Current original licenses of the Broker Dealer, salespersons and its Associated Person; and

28.1.4.3.5.7. Filing of SEC Form 28-T for each of the company's Associated Person/s and salesperson/s.

28.1.4.3.5.8. Notwithstanding, the filing of the notice of cessation of operation with the Commission, the liabilities and obligations of the company to third parties shall continue until full compliance with and submission of the abovementioned conditions/requirements. Furthermore, the primary license of the company will be cancelled/revoked should it remain non-operational for five (5) years pursuant to Section 22 of the Corporation Code.

28.1.5. Registration of Salesmen and Associated Persons of Brokers Dealers

28.1.5.1. A person may not be employed as a salesman or associated person of a Broker Dealer or Issuer of proprietary or non-proprietary securities unless registered as a salesman or Associated Person under this Rule. The Broker Dealer/Issuer may be allowed to employ trainees for a one-time, non-extendible period of six (6) months; Provided however that:

28.1.5.1.1. The trainees are supervised by a registered salesman;

28.1.5.1.2. The trainees are not soliciting clients or dealing directly with clients;

28.1.5.1.3. The trainees are not receiving any form of commission or salary from the Broker Dealer other than a reasonable allowance; and

28.1.5.1.4. The Broker Dealer immediately informs the Commission in writing of the hiring of such trainees.

The Commission shall consider the attendant conditions to warrant the determination of compliance with the above requirements.

28.1.5.2. For purposes of this Rule:

28.1.5.2.1. Salesman shall refer to a natural person hired to buy and sell securities on a salary or commission basis properly endorsed to the Commission by the employing Broker Dealer. It shall also include any employee of an issuer company whose compensation is determined directly or indirectly on sales of the issuer's securities.

28.1.5.2.2. Associated person shall mean any person employed full time by the Broker Dealer whose responsibilities include internal control supervision of other employees, agents, salesmen, officers, directors, clerks and stockholders of such Broker Dealer for compliance with the Code and rules and regulations adopted thereunder. He cannot perform other duties without Commission approval and subject to the condition that the broker dealer will maintain the appropriate Chinese Wall between the functions of an associated person and that of his other duties.

28.1.5.3. Notice of discontinuation of employment of a salesman or Associated Person and the reasons therefore, shall be provided to the Commission by the employing Broker Dealer by filing SEC Form 28-T and surrendering to the Commission the original registration certificate of such salesman or associated person, no later than five (5) business days after the discontinuation of employment.

28.1.5.4. Requirements for Registration

Every application for registration as a salesman or associated person shall be filed on SEC Form 28-S, or SEC Form 28-AP, respectively, verified under oath by the Broker Dealer who is the employer of the salesman or associated person, be accompanied by the prescribed fee and the following papers and documents:

28.1.5.4.1. If an applicant is a foreigner, certified true copy of valid work permit duly issued by the Department of Labor and Employment (DOLE) or any appropriate agency;

28.1.5.4.2. Copies of identity cards/passports of applicant;

28.1.5.4.3. Evidence, preferably a certified true copy, that such person has complied with applicable examination requirements and/or meets other educational, professional or technical qualifications; and

28.1.5.4.4. Written evidence that a Broker Dealer has agreed to employ such person contingent upon such person's registration as a salesman or Associated Person.

28.1.5.5. Terms and Conditions for Applicants for Registration

28.1.5.5.1. Only natural persons can apply and be employed by a Broker Dealer.

28.1.5.5.2. Applicants for salesmen shall be at least eighteen (18) years of age and applicants for Associated Person shall be at least twenty one (21) years of age.

28.1.5.5.3. Applicants for registration as a salesman must have no disciplinary history that would subject them to disqualification from registration under Section 29 of the Code.

28.1.5.5.4. Applicants for registration as an Associated Person, must not have been censured or reprimanded by a professional (e.g., IBP, PRC, etc.), or regulatory body (e.g., SEC, BSP, IC, etc.) for negligence, incompetence or mismanagement, or dismissed or requested to resign from any position or office for negligence, incompetence or mismanagement, or be subject to any other disqualification under Section 29 of the Code. CScaDH

28.1.5.5.5. Any applicant applying for registration as a salesman or Associated Person for the first time, must have taken and passed the applicable examination within the last three (3) years immediately preceding the date of his application.

28.1.5.5.5.1. No applicant for registration as salesman or Associated Person shall be registered unless he has completed the certification requirements of the Commission.

28.1.5.5.5.2. An applicant who is not registered as a salesman or associated person for three (3) consecutive years or more, which shall be counted from the date of expiration or termination of his registration or from the date of his passing of relevant examinations, cannot apply for registration unless he has complied with the certification requirements of the Commission.

28.1.5.5.5.3. An applicant who is covered under subsection 28.1.5.5.5.2 above may not be required to take the earlier referred examination if he can prove to the Commission that he has continuously worked in an equivalent capacity in the local capital market or its related industries for the last three (3) years.

28.1.5.6. The registration of a salesman or Associated Person shall cease when he is no longer employed by the Broker Dealer identified in his registration application.

28.1.5.7. Duties of an Associated Person. Taken in conjunction with SRC Rule 30.2.6, an Associated Person shall:

28.1.5.7.1. Have a general knowledge of the operations of the Broker Dealer without necessarily engaging or actively participating in the day-to-day operations of the firm;

28.1.5.7.2. Supervise and provide trainings as prescribed under SRC Rule 30.2.7 to stockholders, directors, officers, salesmen, other employees, agents, and authorized clerks of the Broker Dealer for compliance with the Code and these Rules;

28.1.5.7.3. Oversee compliance with legislative and other regulatory requirements (such as notifying the Commission of material changes in information previously filed, maintaining registers, books of accounts and other records, compliance with rules, orders and laws relating to trading, issuing confirmation receipts, compliance with margin rules, net capital and other financial requirements);

28.1.5.7.4. Ensure that all salesmen of the Broker Dealer are registered and that the Commission is notified when any salesman is no longer employed by the Broker Dealer;

28.1.5.7.4. * Develop procedures and monitor on a daily basis compliance with financial resource requirements; and

28.1.5.7.5. Ensure that there is an audit trail which enables compliance with applicable laws, Exchange, Clearing Agency and other SRO rules.

28.1.5.8. Conditions for Continuing Registration

As a condition for continuing registration, registered salesmen and Associated Persons shall:

28.1.5.8.1. Report any change in the information provided in the application forms and other information that may be required under these rules or orders. Such report must be in SEC Form 28-AMD and filed within seven (7) days from such change.

28.1.5.8.2. Observe at all times the provisions of the Code, these Rules, and applicable Exchange, clearing agency and other SRO rules; and

28.1.5.8.3. Demonstrate an on-going understanding of applicable regulatory requirements and Exchange, clearing agency, and other SRO rules.

28.1.5.9. Every registered salesman or Associated Person who shall change his registration category during the year (i.e., salesman to Associated Person and vice versa) shall be assessed the appropriate fee for the issuance of a new license.

28.1.5.10. Perpetual License

For so long as the salesmen and Associated Persons are employed by the Broker Dealer identified in his registration application, their license shall remain valid unless otherwise revoked for cause or suspended or voluntarily surrendered, subject to compliance with the terms and conditions of registration. Each registered salesman or Associated Person shall pay the annual fee every November of each year of registration, and must be cleared of all derogatory reports and cases by the Commission and/or any duly recognized professional or regulatory body or, in appropriate cases, the SRO. The filing and payment of the annual fee after the prescribed period will be charged a fee for late filing. Failure to pay the required annual fees is a ground to suspend registration.

28.1.5.11. Rules in Case of Absence or Lack of Associated Persons

Should an Associated Person file an application for vacation leave or takes leave of absence due to emergency, health, and other personal reasons, the Broker Dealer shall notify the Commission in writing on or before the first day the vacation leave or leave of absence takes effect. The same notice requirement applies in case of resignation of an Associated Person wherein the Broker Dealer is unable to find a replacement who can and shall assume office on or before the date of effectivity of said resignation.

In case the Associated Person resigns, the Broker Dealer shall immediately appoint a replacement within a period not exceeding one (1) month from the date of filing of resignation, or from the effectivity of the resignation in case the Associated Person resigns without prior notice. In the event that the Broker Dealer will not be able to appoint a replacement within the one (1)-month period or if the replacement appointed/to be appointed cannot yet assume office within the said period, the Broker Dealer shall secure an exemptive relief from the Commission.

In case the Associated Person takes a leave of absence for a period exceeding three (3) months which will result in the Broker Dealer not having an Associated Person during the said period, the Broker Dealer shall secure an exemptive relief from the Commission within two (2) days from the time of the approval of such leave of absence, or from the time of knowledge thereof by the Broker Dealer, if prior approval is not applicable.

In all instances of absence or lack of Associated Person, it shall be the responsibility and accountability of the board of directors to immediately appoint a competent person to perform the functions of an Associated Person subject to the following conditions:

28.1.5.11.1. The company's President shall take full accountability and responsibility in the event of violations or non-compliance committed at the time the Broker Dealer has no Associated Person or the Associated Person was absent even as the appointed competent person performs the activities required and expected of an Associated Person.

28.1.5.11.2. The company shall be willing to be subject to a monthly audit to be conducted by the SRO and pay audit fee as may be imposed by the SRO. (SEC Resolution #562 Series of 2012)

28.1.6. Broker Dealer Surety Bond and Self Insurance Bond

The surety bonds required to be filed pursuant to SRC Rule 28.1.2.5 by Broker Dealers who have been allowed by the Commission to defer compliance with the One Hundred Million (PhP100,000,000.00) unimpaired paid up capital requirements pursuant to that Rule shall be not less than Ten Million Pesos (PhP10,000,000.00) for Brokers and not less than Two Million Pesos (PhP2,000,000.00) for Dealers, or such other amount as the Commission shall prescribe. Such bonds shall be conditioned upon the faithful compliance with the provisions of the Code and rules and regulations adopted thereunder by said Broker Dealer and by all salesmen and Associated Persons while acting for it. Such bond shall be executed by a surety company authorized to do business in the Philippines and duly accredited as a surety company pursuant to the Commission's Guidelines on Accreditation as a Surety Company.

In lieu of such bond, the Broker Dealer may file bonds of the Government of the Philippines. If a bond is filed, any person damaged by the failure of such Broker Dealer or of any salesman or Associated Person while acting for it, to comply with the provisions of the Code and these Rules shall be entitled to sue the sureties under such bond and to recover the damages so suffered thereunder. If other securities are filed in lieu thereof, such person may subject such securities to the payment of such damage. The Commission shall file the claim or call on the surety on behalf of claimants.

28.1.7. Compliance with New Requirements

Any registered Broker Dealer operating prior to the effectivity of these Rules shall, within ninety (90) calendar days from these Rules' effectivity, comply with all the requirements provided under these Rules that are not otherwise included in its original registration.

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 supervise these persons and/or to protect the interest of the investing public.

RULE 28.2 Compliance with Qualification Requirements of Self-Regulatory Organizations

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 Broker Dealer is a Participant. aHSTID

RULE 28.3 Action of the Commission on the Registration

28.3.1. Exemption from Registration and Compliance with Qualification Requirements

The Commission, by rule or order, may conditionally or unconditionally exempt any broker, dealer, salesman, associated person of any broker or dealer, or any class of the foregoing, from the requirement of registration under SRC Rule 28.1 for purposes consistent with public interest and for the protection of investors.

28.3.2. Approval or Denial of Registration by the Commission

The Commission shall, within thirty (30) days after the filing of any application under this Rule: (i) grant registrations if it determines that the requirements and qualifications for registrations set forth in this Rule have been satisfied; or (ii) deny said registration.

RULE 28.4 Suspension of Registration

The Commission shall promulgate rules and regulations prescribing the qualifications for registration of each category of applicant, which shall, among other things, require as a condition for registration that:

28.4.1. If a natural person, the applicant satisfactorily pass a written examination as to his proficiency and knowledge in the area of activity for which registration is sought;

28.4.2. In the case of a broker or dealer, the applicant satisfy a minimum net capital as prescribed by the Commission, and provide a bond or other security as the Commission may prescribe to secure compliance with the provisions of this Code; and

28.4.3. If located outside of the Philippines, the applicant files a written consent to service of process upon the Commission pursuant to Section 65 hereof.

RULE 28.5 Automatic Termination of Registration

The registration of a salesman or associated person shall be automatically terminated upon the cessation of his affiliation with said registered broker or dealer or with an issuer in the case of a salesman employed, appointed or authorized by such issuer. Promptly following any such cessation of affiliation, the registered broker or dealer, issuer as the case may be, shall file with the Commission a notice of separation of such salesman or associated person.

RULE 28.6

Registration of a salesman or of an associated person of a registered broker or dealer may be made upon written application filed with the Commission by such salesman or associated person. The application shall be separately signed and certified by the registered broker or dealer to which such salesman or associated person is to become affiliated, or by the issuer in the case of a salesman employed, appointed or authorized solely by such issuer. The application shall be in such form and contain such information and documents concerning the salesman or associated person as the Commission by rule shall prescribe. For purposes of this Section, a salesman shall not include any employee of an issuer whose compensation is not determined directly or indirectly on sales of securities of the issuer.

RULE 28.7

Applications filed pursuant to SRC Rules 28.5 and 28.6 shall be accompanied by a registration fee in such reasonable amount prescribed by the Commission.

RULE 28.8

Within thirty (30) days after the filing of any application under this Section, the Commission shall by order: (a) Grant registration if it determines that the requirements of this Section and the qualifications for registration set forth in its rules and regulations have been satisfied; or (b) Deny said registration.

RULE 28.9

The names and addresses of all persons approved for registration as brokers, dealers, associated persons or salesmen and all orders of the Commission with respect thereto shall be recorded in a Register of Securities Market Professionals kept in the office of the Commission which shall be open to public inspection.

RULE 28.10

Every person registered pursuant to this Section shall file with the Commission, in such form as the Commission shall prescribe, information necessary to keep the application for registration current and accurate, including in the case of a broker or dealer changes in salesmen, associated persons and owners thereof.

RULE 28.11

Every person registered pursuant to SRC Rule 28.1 shall pay to the Commission an annual fee at such time and in such reasonable amount as the Commission shall prescribe. Upon notice by the Commission that such annual fee has not been paid as required, the Commission shall initiate a proceeding to suspend such person's registration. The registration of such person shall be suspended until payment has been made.

RULE 28.12

The registration of a salesman or associated person shall be automatically terminated upon the cessation of his affiliation with said registered broker or dealer, or with an issuer in the case of a salesman employed, appointed or authorized by such issuer. Promptly following any such cessation of affiliation, the registered broker or dealer, or issuer, as the case may be, shall file with the Commission a notice of separation of such salesman or associated person.

RULE 29 Protection of Customer Accounts Where Registration of a Broker Dealer is Suspended or Revoked

29.1. Procedure for Refusal, Suspension, Cancellation or Revocation of Registration

The Commission may, upon its initiative, order or upon the complaint of any person, upon existence of any of the grounds provided for under Section 29 and/or Section 54 of the Code, refuse, suspend, cancel or revoke the registration of a broker-dealer, salesman or Associated Person in accordance with the 2006 Rules of Procedure of the Securities and Exchange Commission.

29.2. Protection of Customer Accounts Where Registration of a Broker Dealer is Suspended or Revoked

If registration of a Broker Dealer is suspended or revoked the following procedure shall be observed:

29.2.1. If such Broker Dealer is an Exchange Trading Participant, the Exchange shall immediately arrange for another Exchange Trading Participant to take over any outstanding contracts relating to securities and simultaneously notify the Commission and the affected customers in writing of such transfer that said contracts have been transferred.

29.2.2. If such Broker Dealer is not an Exchange Trading Participant, the Commission shall notify the affected customers, if any, of such suspension or revocation and shall require the Exchange Trading Participant to which the Broker Dealer courses its trade to take over the operations of such Broker Dealer.

RULE 30.1 Monitoring of Affiliated Transactions by Broker Dealers

30.1.1. Every Broker Dealer shall require every stockholder, director, Associated Person, salesman and authorized clerk of the Broker Dealer (collectively referred to as "director") to complete and submit to the Broker Dealer an executed copy of SEC Form 30.1 under oath (Affiliated Transactions Monitoring Sheet) to ensure compliance with the conditions set forth in Section 30.1 of the Code.

30.1.2. Based on information set forth in the Affiliated Transactions Monitoring Sheet, every Broker Dealer shall provide the Commission with a list of securities that the Broker Dealer must report pursuant to Section 30.1 of the Code under SEC Form 30.1/30.1-AMD (Report by Broker Dealers on Restricted Transactions).

The reports required under SRC Rules 30.1.1 and 30.1.2 of this Rule shall be submitted to the Commission not later than seven (7) calendar days after the occurrence of the relationship defined under Section 30.1 of the Code.

30.1.3. Every director shall ensure that his Affiliated Transactions Monitoring Sheet is accurate and complete at all times and shall update and submit to the Broker Dealer any amendment thereto within seven (7) calendar days of such amendment so as to reflect any change/s thereto.

30.1.4. Brokers Dealers that transact listed shares of corporations which would have been prohibited by Section 30.1 of the Code shall disclose the same within seven (7) calendar days after such transaction. The disclosure shall include the following information:

30.1.4.1. Name of the traded issue;

30.1.4.2. Date and time of the transaction;

30.1.4.3. Number of shares;

30.1.4.4. Traded price;

30.1.4.5. Side of the transaction (i.e., whether it is a buy or a sell);

30.1.4.6. Name of the customer that transacted the prohibited shares; and

30.1.4.7. Relationship of the Broker Dealer with the Issuer company (i.e., the reason why the reported issue falls under the restriction of Section 30.1 of the Code). CDHaET

30.1.5. The failure of any director to comply with this rule shall be deemed a violation of the Code.

RULE 30.2 Transactions and Responsibilities of Brokers and Dealers

30.2.1. Ethical Standards Rule

30.2.1.1. Every Broker Dealer, Associated Person and salesman of a Broker Dealer (hereinafter referred to as a "registered person"), in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.

30.2.1.2. In considering whether a registered person is conducting his business in an ethical and fair manner, the Commission, in addition to requirements imposed under other SRC rules, will be guided by the following principles and requirements which incorporate International Organization of Securities Commission ("IOSCO") standards:

30.2.1.2.1. Honesty and fairness

In conducting his business activities, a registered person shall act honestly, fairly and in the best interest of his client and for the integrity of the market.

If a registered person advises or acts on behalf of a client, he shall ensure at all times that any representations or other communications made and information provided to the client is accurate and not misleading.

30.2.1.2.2. Diligence

In conducting his business activities, a registered person shall act with due skill, care and diligence, in the best interest of his clients and for the integrity of the market.

30.2.1.2.2.1. A registered person shall take all reasonable steps to promptly execute client orders and in conformity with the instruction of the client.

30.2.1.2.2.2. A registered person when acting for or with a client shall always execute client orders on the best available terms in compliance with SRC Rule 30.2.13.

30.2.1.2.2.3. A registered person shall ensure that transactions executed on behalf of clients are promptly and fairly allocated to the accounts of the clients on whose behalf the transactions were executed.

30.2.1.2.2.4. When providing advice to a client, a registered person shall act diligently and ensure that his advice and recommendations in relation to clients are based on thorough analysis and takes into account available alternatives.

30.2.1.2.3. Capabilities

A registered person shall have and employ effectively the resources and procedures which are needed for the proper performance of his business activities.

30.2.1.2.3.1. A registered person shall ensure at all times that any person he employs or appoints to conduct business for or with clients or other registered persons is qualified, including having relevant training or experience to act in the capacity so employed or appointed in compliance with SRC Rules 28.1, and 28.2.

30.2.1.2.3.2. A registered person shall ensure that at all times, pursuant to SRC Rule 30.2.6, he has:

30.2.1.2.3.2.1. Adequate resources to diligently supervise and does diligently supervise his employees and all persons appointed by him to conduct business for or with clients or any other registered persons; and

30.2.1.2.3.2.2. Satisfactory internal control procedures and financial and operational capabilities which can be reasonably expected to protect his operations, his clients and other registered persons from financial loss arising from the theft, fraud and other dishonest acts, or professional misconduct or omissions of all company officers, employees and authorized representatives.

30.2.1.2.4. Information about clients

30.2.1.2.4.1. A registered person should seek from his clients, information about their financial situation, investment experience and investment objectives regarding the services to be provided pursuant to SRC Rule 52.1.6 and other applicable laws. If a client refuses to disclose reasonable information about his financial situation, the registered person shall make the necessary estimate based on his initial evaluation of the information given by the client.

30.2.1.2.4.2. Information obtained from clients shall be treated with utmost confidentiality and shall not be disclosed to unauthorized persons; Provided that, such treatment of confidentiality shall not apply to the Commission, SROs, Exchanges, clearing agencies, depositories and their authorized representatives that exercise regulatory and supervisory responsibilities, or to any order issued by the Commission pursuant to SRC Rule 30.2.9. This confidentiality treatment and all the exceptions shall be stated in the Client Agreement.

All requests for information by the Commission about trading activities shall be complied with strictly by the registered persons in a form and style prescribed by the Commission, notwithstanding any confidentiality agreement between and among the registered persons and their clients.

The submission of the registered persons referred to above shall not be made in codes, cyphers or internal descriptions, or any other means that may hinder the Commission's ability to expeditiously conduct surveillance, examination or investigation pursuant to this Rule.

30.2.1.2.4.3. A registered person shall take all reasonable steps to establish the true and full identity of each of his clients, their financial situation, investment experience, and investment objectives.

30.2.1.2.4.4. Having regard to information disclosed by a client and other circumstances relating to the client which the registered person is or should be aware of through the exercise of due diligence, the registered person shall ensure that such recommendation or solicitation for that client is reasonable and suitable in all circumstances pursuant to Suitability Rule under SRC Rule 30.2.4.

30.2.1.2.4.5. A registered person providing services to any client, in relation to derivatives, including options and warrants, structured products, or any leveraged transaction, shall assure himself that the client understands the nature and risks of these instruments and has sufficient net worth and financial sophistication to be able to assume the risks and bear the potential losses of trading in such instruments. TaCEHA

30.2.1.2.4.6. A registered person should be reasonably satisfied about the identity, address and contact details of the person ultimately responsible for originating the instruction in relation to a transaction, the person who stands to gain the commercial or economic benefit of the transaction and/or bears the commercial or economic risk; Provided, however, that in relation to an investment company, or discretionary account, the person referred to above is the investment company or account, not those who hold a beneficial interest therein.

30.2.1.2.4.7. A registered person shall keep in the Philippines a record of the details referred to above and provide the Commission with access to those records upon request pursuant to Section 52 of the Code and SRC Rule 52.1.1.

30.2.1.2.4.8. A registered person shall not do anything to effect a transaction unless he has first complied with the requirements of this rule, as required by the Suitability Rule under SRC Rule 30.2.4.

30.2.1.2.5. Information for clients

A registered person shall make adequate disclosure of material information in his dealings with his clients.

30.2.1.2.5.1. A registered person shall ensure that a written agreement which complies with SRC Rule 30.2.3 (Client Agreement) is entered into with a client before any services are provided to that client.

30.2.1.2.5.2. A registered person shall provide clients with adequate information about his firm, including his business address, any relevant conditions or restrictions under which the registered person conducts his business, and the identity or status of employees and others acting on his behalf with whom the client may have contact. Broker Dealers which changed their corporate names shall indicate their former corporate names in all their communications, letter heads and corporate documents for two (2) years from date of issuance of the Commission's approval of the change in corporate name. Any change in the address of the broker dealer shall also be announced not later than thirty (30) days through publication in a national newspaper of general circulation and posted in its website not later than thirty (30) days from such date of issuance. The Commission reserves the right to require the Broker Dealers to send notices to each client about the change of corporate name and address.

30.2.1.2.5.3. After a registered person has effected a transaction for a client, he shall endeavor to confirm promptly with the client, in writing, the essential features of the transaction pursuant to SRC Rule 30.2.

30.2.1.2.5.4. A registered person shall comply with SRC Rule 52.1.8, regarding customer account statements.

30.2.1.2.5.5. A registered person shall disclose the financial condition of his business to a client upon request by providing a copy of the most recent report required to be filed with the Commission under SRC Rule 52.1.5 (Audited Financial Statements) and Risk Based Capital Adequacy Report, (Net Capital) and disclose any material changes which adversely affect the registered person's financial condition after the date of such filing.

30.2.1.2.6. Conflicts of Interest

A registered person should avoid conflicts of interest and when they cannot be avoided, should ensure that his clients are fairly treated and properly informed of such conflicts of interest.

30.2.1.2.6.1. Client priority — A registered person shall handle orders of clients fairly and in the order in which they are received in compliance with Customer First policy under SRC Rule 34.1.

30.2.1.2.6.1.1. Orders of clients, or transactions to be undertaken on behalf of clients, shall have in all cases priority over orders for the account of the registered person, and otherwise comply with SRC Rule 34.1.1 where the Broker is an Exchange Trading Participant;

30.2.1.2.6.1.2. A registered person shall, where he has aggregated an order for a client with an order for another client, or with an order for his own account, give priority to satisfying orders of clients, in any subsequent allocation, if all orders cannot be filled.

Aggregated orders or bundled orders should have designated specific trading account codes to be used for such purpose only.

30.2.1.2.6.1.3. A registered person shall not deal in any securities for himself or for any account in which he has an interest based upon advance knowledge he possesses of pending transactions for or with clients or any other non-public information, the disclosure of which would be expected to affect the price of such securities and violate Section 27 of the Code (Prohibition on Insider Trading);

30.2.1.2.6.1.4. A registered person who withdraws in whole or in part from providing any investment or related service shall ensure that affected clients are promptly notified of such action and that any business which remains outstanding is promptly completed or transferred to another registered person in accordance with SRC Rule 29 and any instruction of the affected clients.

30.2.1.2.6.2. Conflicts of Interest — Where a registered person has a material interest in a transaction with or for a client, or a relationship which gives rise to an actual or potential conflict of interest in relation to such transaction, he shall neither advise, nor deal in relation to the transaction unless he has disclosed that material interest or conflict to the client and has taken all reasonable steps to ensure fair treatment of the client.

30.2.1.2.6.3. Client assets — A registered person shall, in the handling of client transactions and assets, act to ensure that client assets are accounted for properly and promptly and comply with SRC Rule 52.1.10. Where the registered person, or a third party on behalf of the registered person, is in possession or control of client positions or assets, the registered person shall ensure that client positions or assets are adequately safeguarded.

30.2.1.2.7. Compliance

A registered person shall comply with all regulatory requirements applicable to the conduct of his business activities so as to promote the best interest of clients and the integrity of the market.

30.2.1.2.7.1. A registered person shall comply with the Code, these Rules and rules of any Exchange, clearing agency, or other SRO, of which he is a member or participant.

30.2.1.2.7.2. A registered person shall have a policy, which has been communicated to employees in writing, on whether employees are permitted to deal for their own accounts in securities. If employees are permitted to deal, the conditions on which they may do so, including those imposed under SRC Rule 34.1, shall be set out in writing and communicated to each employee.

30.2.1.2.7.3. A registered person shall ensure that complaints from clients relating to his business are adequately addressed in compliance with SRC Rule 30.2.6.2.7 and sufficient records of such complaints are made in compliance with SRC Rule 52.1.9.

30.2.1.2.7.4. A registered person shall at all times be responsible for the acts or omissions of his employees and agents in respect to the conduct of his business, pursuant to Section 51 of the Code.

30.2.1.2.7.5. All registered persons, as a condition of their registration, shall undertake in writing to uphold the Code, and the rules and regulations adopted in relation to it.

30.2.1.3. This rule applies to all registered persons, although the Commission recognizes that certain requirements of the Code and rules adopted in relation to it may not be within the control of an Associated Person. In considering the conduct of an Associated Person, the Commission will consider such person's level of responsibility within the Broker Dealer company, and the level of control or knowledge he may have, considering any failure by his company or persons under his supervision to follow the Code.

30.2.1.4. Where the Commission makes an inquiry under Section 53 of the Code, the Commission will refer to the requirements set forth in this Rule in considering whether any person is guilty of a violation of the Code and should remain registered.

30.2.2. Confirmation of Customer Orders

30.2.2.1. A Broker Dealer shall report to its customers all transactions entered into for the customer's account, and to this end, shall send the customer a written confirmation as promptly as possible. The written confirmation shall preferably be by electronic mail, facsimile or any other means as may be approved by the Commission. The Broker Dealer shall adopt written procedures to ensure that the written confirmations are received promptly by the customer. An employee or salesman of a Broker Dealer shall not be authorized to accept a confirmation for or on behalf of a customer. acHTIC

30.2.2.2. Notwithstanding the electronic format authorized in the immediately preceding SRC Rule, Broker Dealer shall provide his customer a confirmation of purchases and sales in paper format if requested by such customer.

A Broker Dealer shall ensure that the electronic copies of the confirmation receipt or its equivalent are kept current and made available to the Commission, the Exchange, or SRO concerned, and upon the request of the Commission, the Exchange, or SRO concerned, prepare or print hard copies of such document and submit such without delay.

The confirmation shall be sent to the customer at the electronic mail, business, home or such address indicated by the customer in the Customer Account Information Form ("CAIF"). Parties subscribing to facsimile transmission or electronic mail confirmation of customer orders are governed by the special procedure provided in the immediately succeeding paragraph.

30.2.2.3. Broker Dealers shall send to their clients their confirmations during office hours on the day of the transactions but not later than the next business day after the transaction. Clients are required to attest to the accuracy of the information communicated in the confirmation to the Broker Dealer, not later than the next business day after they received the confirmation. The Broker Dealer shall then keep a printout of such reply together with the file notifications and transaction data being confirmed.

30.2.2.4. The confirmation required by SRC Rule 30.2.2.1 above shall contain at least the following information:

30.2.2.4.1. A statement as to whether the Broker Dealer is broking for a customer or another Broker Dealer or is dealing for himself pursuant to Section 34.1 (a) to (d) of the Code and SRC Rule 34.1;

30.2.2.4.2. That the Broker Dealer is controlled by, or controls, or is under common control with the issuer of such security if such be the fact;

30.2.2.4.3. Whether the transaction was solicited or unsolicited by the Broker Dealer or whether the transaction was executed pursuant to the exercise of discretionary power; and

30.2.2.4.4. For facsimile transmission and electronic confirmations, the reminder that clients must confirm their orders, not later than the next business day after they received the confirmation.

30.2.2.5. The Commission, when it deems necessary, may require a Broker Dealer to submit a report of his commission or remuneration on a particular transaction.

30.2.2.6. All payments to customers must be through electronic fund transfer or checks issued in the name of the payee customer and/or the beneficial owner indicated in the CAIF. In no case shall checks be payable "To Cash" or similar designations.

30.2.3. Client Agreement

30.2.3.1. A Broker Dealer and its registered persons who deal directly with clients shall ensure that a written agreement (hereinafter referred to as "Client Agreement") is entered into with a client before any service is provided to that client.

30.2.3.2. The Client Agreement shall be in a language understood by the client. The registered persons who deal directly with clients shall explain to the client the contents of the agreement.

30.2.3.3. A Client Agreement shall contain, among others, the following information:

30.2.3.3.1. The full name and address of the client, as evidenced by a retained copy of the identity card, relevant sections of the passport, business registration certificate, corporation documents, or any other official document which uniquely identifies the client;

30.2.3.3.2. The full name and registered address of the Broker Dealer.

30.2.3.3.3. The Broker Dealer's registration status with the Commission;

30.2.3.3.4. Undertakings by the Broker Dealer and the client to notify the other in the event of any material change to the information provided in the agreement;

30.2.3.3.5. A description of the nature of services to be provided to or available to the client, such as securities cash account, securities margin account, discretionary account, portfolio management, investment advice, derivatives trading;

30.2.3.3.6. A description of any remuneration (and the basis for payment) that is to be paid by the client to the Broker Dealer, such as commission, brokerage, and any other fees and charges;

30.2.3.3.7. A statement indicating the circumstances under which the Broker Dealer will be acting as principal in relation to the client and that in all other circumstances the Broker Dealer will be acting as agent for the client;

30.2.3.3.8. If the Broker Dealer is acting as a Dealer in relation to securities and is an Exchange Trading Participant, a statement explaining the application of Section 34 of the Code, and if the client specifically authorizes the Dealer to pledge the client's securities or subject such securities to liens of third parties;

30.2.3.3.9. If margin or short selling facilities are to be provided to the client, details of margin requirements, interests charges, margin calls, and the circumstances under which a client's position may be closed without the client's consent; and ScaCEH

30.2.3.3.10. Risk disclosure statement as set forth in "Annex 30.2".

30.2.3.4. A registered person shall ensure that he complies with his obligations under this rule and the Client Agreement.

30.2.3.5. The Client Agreement shall state the nature of the account, whether directory or discretionary.

30.2.4. Suitability Rule

30.2.4.1. In recommending to a customer the purchase, sale or exchange of any security, a Broker Dealer or an associated person or salesman of a Broker Dealer, shall have reasonable grounds for believing that the recommendation is suitable for such customer upon the basis of the facts disclosed by such customer as to his other security holdings and as to his financial situation and needs.

30.2.4.2. Except as provided in SRC Rule 52.1.6, prior to the execution of a transaction recommended to a customer, a Broker Dealer shall execute a Customer Account Information Form ("CAIF") which complies with SRC Rule 52.1.6.

30.2.5. Commissions and Charges for Services Performed by a Broker Dealer

30.2.5.1. Charges by a Broker Dealer for services performed, including:

30.2.5.1.1. Miscellaneous services such as collection of monies due for principal, dividends or interest;

30.2.5.1.2. Exchange or transfer of securities; and

30.2.5.1.3. Appraisals, safekeeping or custody of securities, and other services, shall be reasonable.

30.2.5.2. All Broker Dealers shall file a schedule of their minimum commission rates with the Commission. No discounts and/or rebates shall be permitted from the minimum rates. Before the execution of any transaction, they shall inform their clients of any change in the commission rates charged.

A Broker Dealer shall not effect transaction unless he has disclosed and explained to his customer the various fees, if any, involved in effecting such transaction and the customer has agreed to said fees. The fees to a transaction should be presented in the confirmation advice in an unbundled manner. Clients should signify in writing their assent to the various fees being charged by the broker or dealer.

30.2.6. Supervision

30.2.6.1. The management of every Broker Dealer shall establish and maintain an appropriate and effective compliance function within the firm which is independent of all operational and business functions. The compliance function shall be performed by an Associated Person who shall be registered with the Commission and required to report directly to the board of directors and the company President. The management shall ensure that the Associated Person/s performing the compliance function possesses sufficient training and experience in securities regulation matters and an understanding of the securities activities of the firm enabling them to effectively execute their duties.

30.2.6.2. Associated Persons shall be responsible, in addition to the duties enumerated under SRC Rule 28.1.4.3.2.7, for maintaining a system to supervise the activities of all persons employed by the Broker Dealer who are directly or indirectly related to the conduct of its securities business. The supervisory system shall be reasonably designed to achieve compliance with the Code and rules and regulations adopted thereunder, with the rules of any self regulatory organization which the Broker Dealer is a participant in, other applicable laws, including, but not limited to, the Anti-Money Laundering Act (RA 9160, as amended), and the Broker Dealer's own internal policies and procedures. A company's supervisory system shall include at least the following:

30.2.6.2.1. Establishment and maintenance of written supervisory procedures (WSP), including procedures for establishing and maintaining a "Chinese Wall" taking into consideration the applicable requirements under the AMLA and the Revised Code of Corporate Governance.

30.2.6.2.2. Designation of one or more Associated Persons with the authority and responsibility to carry out the supervision of each type of business in which it engages;

30.2.6.2.3. Titles, registration status and locations of the required Associated Person/s and the responsibilities of each Associated Person as these relate to the types of business engaged in;

30.2.6.2.4. Written documentation to prove that all Associated Persons are qualified by virtue of experience or training to carry out their assigned supervisory responsibilities;

30.2.6.2.5. Written documentation to prove that each person engaged in securities transactions, either collectively or individually, has participated no less than annually in an interview or meeting conducted by the Associated Person/s designated by the firm in which compliance matters relevant to the activities of these persons are discussed. There shall be prompt notification in writing to each such person of new or modified compliance obligations;

30.2.6.2.6. Establishment of an effective management and organizational structure which ensures that the operations of the business are conducted in a sound, efficient and effective manner; and

30.2.6.2.7. Establishment, maintenance and enforcement of policies and procedures to ensure the proper handling of complaints from clients and that appropriate remedial action is promptly taken. Where possible, complaints should be investigated by the Associated Person performing the compliance function who is not directly involved in the subject matter of the complaint. Where a complaint is not remedied promptly, the client shall be advised of any further steps which may be available to the client under the law.

The WSP shall always be updated to address any adoption of new rules and requirements or any change in the existing rules and requirements and in the Broker Dealer's internal policies, and activities. A copy of the WSP shall be submitted to the Commission on or before the 30th day of January of the succeeding year, provided that any amendment to the WSP shall be promptly provided to the Commission.

30.2.6.3. Although final responsibility for proper supervision shall rest with the Broker Dealer company, diligence of a good father of the family is required from the Associated Person/s in the conduct of their compliance function.

30.2.6.4. Associated Person/s shall promptly report to management all occurrences of material non-compliance by the company or its staff with legal and regulatory requirements, as well as with the company's own policies and procedures. Management shall then promptly notify the Commission and any self-regulatory organization of which such Broker Dealer is a trading participant of such findings and action taken. For this purpose, the Associated Person must maintain a logbook of all material non-compliance reports with the appropriate notation of the action taken by management on the said occurrences. Such logbook must be duly registered with the Commission within fifteen (15) days from issuance of the Associated Person/s new/renewal license.

30.2.6.5. Notwithstanding the requirement in the immediately preceding SRC Rule, all Associated Persons must prepare, sign and file with the Commission within fifteen (15) calendar days after the end of each quarter, a Compliance Report which shall follow the format of SEC Form 30.2-BD (QCR) on the company's compliance and/or non-compliance with the provisions of the Code and these Rules including, but not limited to, the following matters:

30.2.6.5.1. Whether the company complies with the requirements of the Code and these Rules;

30.2.6.5.2. The significant findings of non-compliance; and

30.2.6.5.3. Information on the action taken by management to address the issue.

The Report shall also include a summary of all events of material non-compliance by the company or its staff with legal and regulatory requirements and the actions taken by management on such violations.

30.2.7. Internal or Accredited Training Program

30.2.7.1. Every Broker Dealer shall establish, implement and maintain a reasonably comprehensive system of training towards —

30.2.7.1.1. Ensuring the continuing improvement in critical areas of its principal activities and operations; and

30.2.7.1.2. Enhancing the technical knowledge of its employees to enable them to understand the operational and internal control policies and procedures of that Broker Dealer and all applicable legal and regulatory requirements.

30.2.7.2. Such system of training shall be properly documented in a manual which shall:

30.2.7.2.1. Set out details of the training programs that the Broker Dealer proposes to implement; and

30.2.7.2.2. Be regularly updated in line with the development in the securities industry.

30.2.7.3. All Broker Dealers shall submit to the Commission and to the SRO (for Exchange Trading Participants), no later than January 30 of each year, a yearly schedule/timetable of the implementation of its training programs. At a minimum, such report should contain the following information:

30.2.7.3.1. The implementation of the previous year's internal training programs with details on seminar dates, number of participants, and other pertinent information; and

30.2.7.3.2. Current year's seminar topics (with description), projected dates, target market, and planned speakers.

30.2.7.4. The Broker Dealer may, at its option, substitute its internal training program by enrolling in training programs sponsored by associations or organizations duly accredited or recognized by the Commission, provided, however, that proper approval is obtained from the Commission on such substitution. It is the responsibility of Broker Dealers, through its Associated Person, to provide periodic training to its officers and employees whether externally or internally, the occurrence of which shall not be dependent solely on the expectation that an external seminar will be sponsored at a later time. TIEHDC

30.2.8. Block Sale

30.2.8.1. A Broker Dealer may engage in block sales on an Exchange, and an Exchange may execute block sales, provided that:

30.2.8.1.1. Such transaction complies with Exchange rules, which have been approved by the Commission; and

30.2.8.1.2. The Exchange notifies the Commission in writing, not later than one (1) business day after the date such transaction has been executed, of the price and volume thereof or in such form and manner that the Commission may prescribe.

30.2.8.2. A block sale shall mean a matched trade that does not go through the automated order matching system of an Exchange trading system but instead has been prearranged by and among the Broker Dealer's clients and is then entered as a done deal directly into the trading system.

30.2.8.3. Other transactions such as but not limited to options, warrants or those emanating from a tender offer, rights offering, and conversion of a security with convertibility features, shall be allowed to be consummated within the Exchange trading system using the block sale facility of an Exchange, and in accordance with the relevant rules of the Exchange as approved by the Commission.

30.2.9. Done Through Transactions

30.2.9.1. Done-Through Transactions ("DTT") shall refer to transactions of clients of a Trading Participant ("TP") or Non Trading Participant ("NTP") which are executed by another Trading Participant.

30.2.9.2. A requesting TP or NTP may request an executing TP to execute transactions for the account of the requesting TP's or NTP's clients subject to the requirements under these rules.

30.2.9.2.1. The executing TP shall maintain a designated trading account code exclusively for DTTs. The trading account code shall indicate that it is for Done Through Transactions only.

30.2.9.2.2. An executing TP shall designate a trading account code classified as Special Account Institutional and secure a corresponding account code, prior to executing DTTs.

30.2.9.2.3. The executing TP shall classify the Special Account Institutional as either local or foreign, depending on the nationality of the beneficial owner/s. All DTTs must be executed using this account.

30.2.9.2.4. Upon order or instruction, the requesting TP or Non TP shall inform the executing TP the nationality of client(s) for which the DTT will be executed.

30.2.9.2.5. Executing TP shall not aggregate DTTs with the Orders of its other clients.

30.2.9.2.6. Amendment of DTTs shall not be allowed.

30.2.9.2.7. The Requesting TP or NTP and the Executing TP shall submit, not later than 12:00 noon of T+1, a written report to the Exchange or its designated SRO, regarding the details of the DTTs. The report shall follow a format prescribed by the Exchange and/or the SRO and shall contain, at the minimum, the following information: (i) Trade Date; (ii) Confirmation Number; (iii) Trading Account Codes of clients for whose accounts the DTT was executed; (iv) Corresponding names of clients for whose accounts the DTT was executed; (v) If the DTT was for multiple clients, the corresponding shares of each client as well as the names of the clients corresponding to the account codes; and (vi) Foreign or Local.

30.2.10. 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 referred to as "registered person") shall immediately report to the Commission and any person deputized and/or duly authorized by the Commission pursuant to Section 5 (h) of the Code, the names of their owners/stockholders, members, participants, and clients, and other related information in its or his possession, upon order of the Commission, or as required by the rules of a self-regulatory organization in which he is a member or participant, in pursuance of an investigation, examination, official inquiry or as part of a surveillance procedures, and/or in compliance with other pertinent laws.

30.2.11. Publication of Transactions and Quotations

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, newspaper article, investment service, or communication of any kind that purports to report any transaction as a purchase or sale of any security unless he believes that such transaction was a bona fide purchase or sale of such security. Neither shall he publish or circulate or cause to be published or circulated such notice, circular, advertisement, newspaper article, investment service, or communication of any kind that purports to quote the bid price or asked price for any security, unless he believes that such quotation represents a bona fide bid for, or offer of, such security. [SRC Rule 24.1(d).2]

30.2.12. Payment to Influence Market Prices

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 such person in connection with the publication or circulation in any newspaper, investment service, or similar publication, of any matter which has, or is intended to have, an effect upon the market price of any security, provided that this rule shall not be construed to apply to a matter which is clearly identifiable as paid advertising. [SRC Rule 24.1(d).3]

30.2.13. Best Execution Rule

In any transaction for or with a customer, a Broker Dealer shall use reasonable diligence to ascertain the best market for the subject security and buy and sell in such market so that the result to the customer is as favorable as possible under prevailing market conditions. Among the factors that shall be considered in determining whether a Broker Dealer has used reasonable diligence are the price, promptness of execution of the order, size of the transaction, available markets, settlement cycle and attendant transaction costs.

RULE 31 Commission Role in the Development of Securities Market Professionals

31.1. The Commission shall periodically meet with organizations and associations of securities market participants and private educational and research institutions to discuss new regulatory developments and related compliance issues.

31.2. The Commission, in coordination with such organizations, associations and institutions, shall help facilitate the organization of, and participate in, workshops on regulatory requirements.

31.3. The Commission shall encourage all securities market participants to participate in the continued development of the securities market through such organizations, associations and institutions.

RULE 32.1 Trading Limited to Listed Securities and Exchanges Registered under the Code

No Broker Dealer or any registered person shall effect any transaction in any security in an Exchange or any other trading market, unless such Exchange or any other trading market and the securities listed or allowed to be traded therein are registered under the Code or exempt from registration pursuant to Sections 9 and 10 of the Code.

RULE 32.2 Exchanges and Other Securities Trading Markets to be Supervised by Self-Regulatory Organization

32.2.1. No broker, dealer, salesman or associated person of a broker or dealer, singly or in concert with any other person, shall make, create or operate, or enable another to make, create or operate, any securities trading market, for the buying and selling of any security, unless such market participants are registered with the Commission.

32.2.2. No broker or dealer shall participate in any trading market unless he is a member of an SRO which has been registered with the Commission to regulate and supervise the activities of the broker or dealer in such market.

32.2.3. In case a broker or dealer is already a member of an existing SRO which is authorized to regulate and supervise a market other than the market in which a broker or dealer will participate, such broker or dealer may be allowed by the SRO to participate in such other market; Provided, that the broker or dealer shows proof and the existing SRO is able to demonstrate that such SRO is capable of performing its regulatory and supervisory obligations as regards to the activities of the broker or dealer in the other market; Provided further, that the SRO has committed in writing to regulate and supervise the broker or dealer with respect to such activities; Provided finally, that the SRO files an amendment to its current SRO registration to reflect its intention to act as SRO in such other market.

32.2.4. The Commission may prescribe the governance and ownership structure of an SRO or require amendment thereto to ensure the effective regulation and supervision of different markets.

RULE 33 Registration of Exchange

33.1. Registration Requirements

33.1.1. An application for registration as an Exchange shall be filed on SEC Form 33 and be accompanied by the statements and exhibits prescribed to be filed under Section 33 of the Code; Provided, however, that an Exchange shall also apply for registration as a Self-Regulatory Organization under Section 40 of the Code at the time it files SEC Form 33-SRO. An application on SEC Form 33-SRO shall also be accompanied by the statements and exhibits prescribed under Section 40 of the Code. Any registered Exchange existing prior to the effectivity of these Rules shall, within forty-five (45) days from effectivity of these Rules, comply with all the requirements provided under this Rule, which were not provided for in its original registration.

The following exhibits shall accompany the duly accomplished SEC Form 33-SRO:

33.1.1.1. Board Resolution attesting to particulars in the application.

33.1.1.2. Copies of identity cards/passports of directors and persons who control more than 10% of the applicant.

33.1.1.3. Copy of the Articles of Incorporation with all amendments thereto, and of existing By-Laws or instruments corresponding thereto, whatever the name, of the Exchange. The Articles must state that the purpose of the applicant/corporation is to engage in the business of an exchange.

33.1.1.4. Copy of proposed Exchange rules to be submitted for SEC approval pursuant to procedures set forth in Sections 33 and 40 of the Code.

33.1.1.5. Copy of the Articles of Incorporation with all amendments thereto, and of existing By-laws or rules or instruments corresponding thereto, whatever the name, of each affiliate and subsidiary listed in answer to Item 7 of the Statement.

33.1.1.6. Original signed copy of the applicant's audited balance sheet and statement of income and expenses, and all notes and schedules thereto as of the end of the last fiscal year.

33.1.1.7. Projected balance sheet and statement of income and expenses for the first five years in its capacity as an exchange.

33.1.1.8. A complete set of all forms pertaining to application for membership in the Exchange.

33.1.1.9. A complete set of all forms pertaining to application for approval as a person associated with a member of the Exchange (Such as associated persons and salesmen).

33.1.1.10. A complete set of all forms of financial statements, reports or questionnaires required of members, relating to such matters as members' responsibility or minimum capital requirements.

33.1.1.11. A complete set of documents, comprising the Exchange's listing applications, including the agreements required to be executed in connection therewith, and a schedule of listing fees.

33.1.1.12. List and explanation of all dues, fees and charges for exchange activities.

33.1.1.13. Study made as to comparative fees and charges imposed by other major and neighboring exchanges.

33.1.1.14. The organizational chart of the Exchange, indicating filled and unfilled positions and the identity of persons presently occupying the title or position. The chart should be accompanied by the list of qualifications/requirements and Statement of Duties and Responsibilities for each position/item.

33.1.1.15. List of present officers, governors, members of all standing committees, or persons performing functions similar to any of the foregoing, whatever their title or technical status may be, of the Exchange, who presently hold or have their offices or positions during the previous year, including for each:

33.1.1.15.1. Name;

33.1.1.15.2. Title;

33.1.1.15.3. Dates of commencement and termination of office or position;

33.1.1.15.4. Length of time each has held the same position or office;

33.1.1.15.5. Type of business in which each is primarily engaged.

33.1.1.16. List of present officers, directors, members of all standing committees or persons performing functions similar to any of the foregoing, whatever their title or technical status may be, of each affiliate and subsidiary listed in answer to Item 7 of the Statement, including for each Name and Title;

33.1.1.17. List of the names of participants and of current applications to become participants.

33.1.1.18. Complete set of all forms pertaining to identification and description of any qualifications or criteria that have the effect of denying or limiting access or use by any person, including a broker dealer and custodian participant or their clients, of the Exchange. If such data in the rules and procedures already, quote the specific provision(s).

33.1.1.19. Complete set of all forms pertaining to copies of proposed participation agreement/s.

33.1.1.20. Detailed plan of operation and economic justification for operating an Exchange with description and analysis of the industry and the market environment from which the Exchange expects to draw majority of its business, as well as the strategy for its ongoing operation. This should include the target security instruments (e.g., equities, bonds) and target participants (e.g., brokers, dealers).

33.1.1.21. Comprehensive Information Technology Plan, to include among others, list and brief description of the following: software and hardware to be primarily used in its exchange function and their location; back-up system or subsystem and their location; security system and procedures to be employed; procedures to check sufficiency of system's capacity and expansion program, if necessary; and IT system maintenance schedule.

33.1.1.22. Business Continuity and Disaster Recovery Plan.

33.1.1.23. Risk Management Manual and Internal Control Procedures.

33.1.1.24. Insurance plan to cover any operational risks and other risks, to be specified by type, total amount and risk area.

33.1.1.25. Copies of service contracts/proposed contract of any activities or services to be outsourced, if any.

33.1.1.26. The following undertakings executed by the President of the Exchange:

33.1.1.26.1. That the Exchange will comply and enforce compliance by its members with the provisions of the Code, its implementing rules and regulations and any amendments to these, the rules of the Exchange, and as with any terms and conditions imposed by the Commission in connection with registration of the applicant;

33.1.1.26.2. Undertaking to subject the information technology, trading, business continuity and disaster recovery plans, and risk management systems to regular review and audit by an independent firm at least once every three (3) years and such other frequency that the Commission may deem necessary. The results of such review and audit shall be submitted to the Commission within thirty (30) days from completion of the audit.

33.1.1.26.3. That in the event a member firm becomes insolvent or when the Exchange/SRO shall have found that the financial condition of its member form has so deteriorated that it cannot readily meet the demands of its customers for the delivery of securities and/or payment of sales proceeds, the Exchange/SRO shall, upon order of the SEC, take over the operation of the insolvent member firm and immediately proceed to settle such firm's liabilities to its customers.

33.1.1.26.4. Statement of Readiness and Undertaking to link the proposed system with other capital market participants, within and outside of the Philippines.

33.1.1.27. Brief description as to any judicial or any other legal, including arbitration, proceedings, pending or terminated within the last five (5) years or affecting the applicant directly or to which any of its properties or assets, directors, or officers.

33.2. An amendment to such application shall be made in duplicate on SEC Form 33-A, and each amendment shall be dated and numbered in the order of filing.

33.3. No later than seven (7) days after the discovery that any information in the statement, any exhibit, or any amendment was inaccurate when filed, an Exchange shall file with the Commission an amendment correcting such inaccuracy.

33.4. Whenever the number of changes to be reported in an amendment, or the number of amendments filed, are so great that the purpose or clarity of the disclosure will be promoted by the filing of a new complete statement and exhibits, an Exchange may, at its election, or shall, upon request of the Commission, file as an amendment a completely new statement together with all exhibits which are prescribed to be filed in connection with SEC Form 33.

33.5. 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 protect the interest of the investing public.

33.6. Within ninety (90) days after the filing of the application the Commission may issue an order either granting or denying registration as an Exchange, unless the Exchange applying for registration shall withdraw its application or shall consent to the Commission's deferring action on its application for a stated longer period after the date of filing. The filing with the Commission of an application for registration by an Exchange shall be deemed to have taken place upon the receipt thereof. Amendments to an application may be made upon such terms as the Commission may prescribe.

33.7. Upon the registration of an Exchange, it shall pay a fee in such amount and within such period as the Commission may fix.

33.8. Upon appropriate application in accordance with the rules and regulations of the Commission and upon such terms as the Commission may deem necessary for the protection of investors, an Exchange may withdraw its registration or suspend its operations or resume the same.

RULE 33.1(D) Protection of Customer Accounts in Case of Business Failure of an Exchange Trading Participant

33.1(d).1. When a Trading Participant has filed or is the subject of a petition for insolvency, suspension of payment and/or rehabilitation or when an Exchange or pertinent SRO determines that the Trading Participant's financial condition has so deteriorated that it cannot readily meet the demands of its customers for the delivery of securities and/or payment of sales proceeds, the Commission may issue ex parte an order compelling the insolvent or failed Trading Participant and the Exchange or pertinent SRO to take the necessary action to protect customer accounts including, but not limited to, the preservation of the failed Trading Participant's books and records. Said order shall remain in effect until lifted by the Commission motu proprio or upon petition of the failed Trading Participant.

33.1(d).2. Based on any of the grounds mentioned in the preceding SRC Rule, the Commission, after proper investigation or verification, motu proprio or upon verified complaint by any party, order an Exchange or pertinent SRO to take over the operation of the failed Trading Participant for the purpose of preserving and protecting the failed Trading Participant's books, records, customer accounts, trade-related assets and settling its liabilities to its customers.

33.1(d).3. Where the Commission has ordered an Exchange or pertinent SRO to take over the operations of a failed Trading Participant, an Exchange or pertinent SRO shall:

33.1(d).3.1. Suspend such failed Trading Participant and immediately arrange for another Trading Participant to take over the outstanding contracts relating to securities, and simultaneously notify the Commission of such suspension and takeover;

33.1(d).3.2. Promptly notify customers of the failed Trading Participant that their accounts have been transferred to another Trading Participant and provide such customers with the opportunity to transfer anew their accounts to another Trading Participant of their choice;

33.1(d).3.3. Settle the failed Trading Participant's liabilities to customers through the sale of the Trading Participant's trading rights and other trade-related assets as may be prescribed by the Commission; the liquidation of paid up capital; and/or the supervision of payment of claims against the surety bond.

33.1(d).3.4. Simultaneously inform the Accredited Trust Fund referred to in Section 36.5 of the Code, where such failed Trading Participant is a Participant, of such takeover and inform the customers that they may also claim compensation for losses from the Trust Fund, subject to the validation of their claims by the Exchange or pertinent SRO and the Trust Fund; SaIEcA

33.1(d).3.5. Where after such settlement and liquidation of the failed Trading Participant's trade-related assets, there are outstanding liabilities to customers of the failed Trading Participant, refer the same to the Accredited Trust Fund and inform the customers of the further steps necessary for claiming compensation for unsatisfied losses; and

33.1(d).3.6. The Accredited Trust Fund, based on its rules and regulations or upon order of the Commission, shall release payments to the failed Trading Participant's customers even before the Exchange or pertinent SRO has finalized the settlement of the failed Trading Participant's liabilities, subject to the validation as provided in SRC Rule 33.1(d)3.4 herein; Provided, however, that the Trust Fund shall be subrogated to the customers' rights to claim before the Exchange or pertinent SRO to the extent that it has paid the customers' claims before final settlement of the failed Trading Participant's liabilities.

33.1(d).4. In the determination of business failure, SRC Rule 36.5.1 on accredited trust funds for Broker Dealer customers shall be taken into account.

RULE 33.2(C) Ownership of an Exchange

33.2(c).1. 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 operate in the public interest.

33.2(c).1.1. The Exchange Controller shall become registered with the Commission as a Self-Regulatory Organization under Section 40 of the Code and comply with its duties regarding rulemaking under this section and rules adopted thereunder; Provided, however, that for purposes of Section 40 and SRC Rule 30.1.1, the enforcement responsibilities of an SRO shall be delegated to the Exchange which is being controlled by the Exchange Controller or to another entity which the Commission may order.

33.2(c).1.2. The Board of an Exchange Controller shall include in its composition the president of the Exchange Controller, and unless the Commission otherwise agrees to a different governance structure based on findings that the Exchange Controller can operate the Exchange in the public interest and that the Exchange can effectively operate as an SRO, no less than fifty one (51%) percent of the remaining members of the Board shall be comprised of three (3) independent directors and persons who represent the interest of issuers, investors and other market participants who are not associated with any Broker Dealer, participant of the Exchange controlled by the Exchange Controller, for a period of two (2) years prior to his appointment. No officer or employee of a Broker Dealer, its subsidiaries or affiliates or related interests may become an independent director.

33.2(c).1.3. Unless the Commission prescribes otherwise, no person shall beneficially own or control, directly or indirectly, more than five percent (5%) of the voting rights of the Exchange Controller and no industry or business group shall beneficially own or control, directly or indirectly, more than twenty percent (20%) of the voting rights of the Exchange Controller; Provided that pursuant to SRC Rule 33.2(c).2.3, the Exchange Controller shall disclose the names of its beneficial owners, their business or industry affiliation, and share ownership to the Commission and, no less than once a month, update such disclosure.

33.2(c).1.4. An Exchange Controller shall obtain prior Commission approval regarding share ownership or any other investment in any clearing agency, other securities related business, or any other non-related business.

33.2(c).2. For purposes of Section 33.2 (c) of the Code, the 2009 Philippine Standard Industrial Classification (PSIC) shall be the primary basis for the industry or business classification with the following sections:

33.2(c).2.1. Agriculture, Hunting, Forestry, Fishing

33.2(c).2.2. Mining and Quarrying

33.2(c).2.3. Manufacturing

33.2(c).2.4. Electricity, Gas, Steam and Air-Conditioning

33.2(c).2.5. Water Supply, Sewerage

33.2(c).2.6. Construction

33.2(c).2.7. Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles

33.2(c).2.8. Transportation and Storage

33.2(c).2.9. Accommodation and Food Service Activities

33.2(c).2.10. Information and Communication

33.2(c).2.11. Financial and Insurance Activities

33.2(c).2.12. Real Estate Activities

33.2(c).2.13. Professional, Scientific, Technical Services

33.2(c).2.14. Administrative and Support Service Activities

33.2(c).2.15. Public administration; compulsory social security

33.2(c).2.16. Education

33.2(c).2.17. Human health and social work activities

33.2(c).2.18. Arts, entertainment and recreation

33.2(c).2.19. Other service activities

33.2(c).2.20. Activities of private households

33.2(c).2.21. Activities of extraterritorial organizations

The business grouping shall be by Industry Class as represented by four (4)-digit numeric codes under the 2009 PSIC provided that brokers and dealers shall be treated as belonging to one industry group.

The Commission may, depending on attendant circumstances, make a reclassification of the business classification aforementioned.

33.2(c).2.3. * To ensure 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 divide one group into several groups or re-designate the industry classification chosen by a business group; Provided, however that where the shares of stock of the Exchange or Exchange Controller are not yet listed or traded in an exchange or any other trading market, prior to the sale of shares of an Exchange or Exchange Controller to any person, the Exchange or Exchange Controller shall disclose in writing to the Commission the proposed ownership to ensure compliance with ownership restrictions. No shares of an Exchange or Exchange Controller may be transferred without prior Commission approval.

33.2(c).2.4. 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, a person violating this restriction shall be barred from exercising his voting rights thereunder.

RULE 34 Segregation and Limitation of Functions of Members, Brokers and Dealers

34.1. Segregation of Broker and Dealer Transactions, Affiliations and Practices

An Exchange Trading Participant shall not effect any transaction on such Exchange for its own account, the account of an Associated Person, salesmen, or any other person associated with the Trading Participant, including its affiliates, or an account with respect to which an associated person exercises investment discretion, unless it complies with the "Customer First" Policy as prescribed below:

34.1.1. A trader or salesman of an Exchange Trading Participant shall execute a customer order in the Exchange trading terminal immediately upon the receipt thereof.

34.1.2. The Dealer-Broker shall give priority to the orders of its customers over trades for its own account.

34.1.3. The time the customer order was received shall be recorded either manually or electronically.

34.1.4. All orders whether customer or proprietary shall be executed in their assigned trading terminals and by the designated trader.

34.1.5. Orders of stockholders, officers, directors, Associated Persons and salesmen, or any other person associated with the Exchange Trading Participant, including affiliated persons, traded within the Trading Participant shall be treated as the proprietary account of the Trading Participant's account, in which case, the "Customer First" Policy shall apply.

34.2. A trader or salesman shall use and maintain only one (1) dealing account, and only with his employing broker, which shall be registered under his name or jointly with members of his family within the first degree of consanguinity and shall be treated as the Trading Participant's proprietary account only for the purpose of complying with the Customer First Policy.

34.3. Orders from a Done-through Account shall be executed in accordance with the "Customer First" policy.

34.3.1. Done-through transactions of the initiating Trading Participant shall be recorded in the executing Trading Participant's records under the name of the initiating Trading Participant. The initiating Trading Participant shall prepare and maintain a list of its done-through transactions.

34.3.2. Requests for Done-through order from the initiating Trading Participant shall include a disclosure to the executing Trading Participant of the beneficial owner/s for the said order. Orders for the account of a customer shall be executed by the executing Trading Participant in the Exchange trading terminal assigned for customers and orders of proprietary accounts shall be executed in the Exchange trading terminal for proprietary accounts.

34.4. Stockholders, directors, officers, Associated Persons, salesmen, and other employees cannot trade outside their employing Trading Participant unless they obtain the appropriate permission, and the Executing Trading Participant agrees to send duplicate account statements to the employing Trading Participant.

34.5. Non-Exchange Broker Dealers shall likewise observe the "Customer First" Policy whenever applicable.

34.6. For purposes of this Rule, "affiliated person" of a Trading Participant is any person who (a) exercises control, as defined in SRC Rule 3.1.8, is controlled by, or is under common control with the Trading Participant; (b) has stockholders, directors, officers (such as president, vice president, manager, treasurer, comptroller, secretary or others occupying positions of trust and responsibility), Associated Persons, salesmen, or authorized clerks of a Trading Participant or a relative of any of the foregoing within the first civil degree of consanguinity; or (c) directly or indirectly owns more than ten percent (10%) of the equity of the Trading Participant.

34.7. An Exchange Trading Participant and any other Broker or Investment House as defined in P.D. 129, as amended, with securities accounts of other Trading Participants, and/or their Associated Persons, other employees, owners, directors and/or officers, including discretionary accounts on behalf thereof, for transactions executed, shall, when receiving and executing such transactions, identify such accounts as that of the Exchange Trading Participant, its Associated Persons, other employees, affiliates or discretionary accounts on behalf thereof, and require the company's Associated Person or, in the case of an Investment House, a person responsible for compliance, to review such accounts on a daily basis. CcSTHI

34.8. A Broker Dealer shall adopt proper internal controls to prevent the commission of fraud and ensure that customers' cash and securities positions are intact and are properly accounted for by segregating trading, settlement, accounting and back-office functions including their respective physical facilities.

34.9. Access to computer files should be limited to authorized users and the appropriate security measures shall be adopted.

34.10. The Associated Person of a Broker Dealer shall supervise the functions of the employees and check all executed trades and other transactions of the company.

34.11. Segregation of Functions (Chinese Walls)

34.11.1. Any Broker Dealer that assumes more than one function whether as a dealer, adviser, or that engages in market making transactions, shall maintain proper segregation of those functions within the company to prevent the flow of information between the different units of the company that performs functions that may have potential conflict of interest.

34.11.2. For purposes of this rule, information means matter:

34.11.2.1. Of a specific nature which has not been made public;

34.11.2.2. Relating to one or more public companies or securities of a public company; and

34.11.2.3. Which, if it were made public, would likely affect the market price of the securities.

34.11.3. A Broker Dealer shall at all times ensure that its trading functions and back-office settlement functions and physical setup are properly segregated and shall establish written procedures to ensure compliance with this rule.

34.11.4. The Broker Dealer shall file an annual report on the measures it has taken to enforce these Chinese Wall rules.

34.11.5. Broker Dealers with other functions shall submit an undertaking under oath to comply with the rules and regulations, orders, memorandum circulars and policies promulgated by the Commission, and of other rules, procedures, standards and policies set by other Exchanges or SROs and duly approved by the Commission, and its own internal rules and procedures regarding Chinese Walls.

34.12. In all instances where the member-broker effects a transaction on an Exchange for its own account or the account of an associated person or an account with respect to which it exercises investment discretion, it shall disclose to such customer at or before the completion of the transaction it is acting for its own account: Provided, further, That this fact shall be reflected in the order ticket and the confirmation slip.

34.13. Any member-broker who violates the provisions of this Section shall be subject to the administrative sanctions provided in Section 54 of the Code.

RULE 35 Additional Fees of Exchanges

In addition to the registration fee prescribed in Section 33 of the Code, every Exchange shall pay to the Commission, on a semestral basis on or before the tenth day of the end of every semester of the calendar year, a fee in such an amount as the Commission shall prescribe, but not more than one-hundredth of one per centum (1%) of the aggregate amount of the sales of securities transacted on such Exchange during the preceding calendar year, for the privilege of doing business, during the preceding calendar year or any part thereof.

RULE 36.1-3 Powers with Respect to Exchanges and Other Trading Market

36.1. The Commission is authorized, if in its opinion such action is necessary or appropriate for the protection of investors and the public interest so requires, summarily to suspend trading in any listed security on any Exchange or other trading market for a period not exceeding thirty (30) days or, with the approval of the President of the Philippines, summarily to suspend all trading on any securities Exchange or other trading market for a period of more than thirty (30) but not exceeding ninety (90) days: Provided, however, That the Commission, promptly following the issuance of the order of suspension, shall notify the affected issuer of the reasons for such suspension and provide such issuer with an opportunity for hearing to determine whether the suspension should be lifted.

36.2. Wherever two or more Exchanges or other trading markets exist, the Commission may require and enforce uniformity of trading regulations in and/or between or among said Exchanges or other trading markets.

36.3. In addition to the existing Philippine Stock Exchange, the Commission shall have the authority to determine the number, size and location of stock Exchanges, other trading markets and commodity Exchanges and other similar organizations in the light of national or regional requirements for such activities with the view to promote, enhance, protect, conserve or rationalize investment.

RULE 36.4 Registration of Transfer Agents and Clearing & Settlement

36.4.1. Registration of Transfer Agents

36.4.1.1. No person shall act as a transfer agent for a security which is listed or traded on an Exchange, over-the-counter, or any other trading market without being registered with the Commission in accordance with the provisions of this Rule. The Commission may, for the protection of investors, require Issuers to engage the services of transfer agents that are neither affiliated nor in a conflict-of-interest situation with the Issuer.

36.4.1.2. To apply for registration under this Rule, a transfer agent shall:

36.4.1.2.1. Be a corporation;

36.4.1.2.2. Have unimpaired paid-up capital of at least One Million Pesos (PhP1,000,000.00) or such amount as the Commission may determine;

36.4.1.2.3. Have an officer who is a certified public accountant;

36.4.1.2.4. Submit an undertaking that it shall comply with the Rules, orders, memorandum circulars and policies promulgated by the Commission, and of other rules, procedures, standards and policies set by other market participants and duly approved by the Commission, and its own internal rules and procedures;

36.4.1.2.5. Submit schedule of fees and charges for approval of the Commission. Such schedule shall not be effective until and unless approved by the Commission; and

36.4.1.2.6. The Commission may require transfer agents to subject their information technology, business continuity and disaster recovery, and risk management systems to a regular review and audit by an independent firm at least once every three (3) years and such other frequency that the Commission may deem necessary. The Commission may also require that the results of said review and audit shall be submitted to the Commission within thirty (30) days from completion of the audit.

36.4.1.3. Every application for registration as a transfer agent shall be filed with the Commission on SEC Form 36 — TA and be accompanied by the following documents:

36.4.1.3.1. For an existing corporation:

36.4.1.3.1.1. Certified True Copy of Articles of Incorporation;

36.4.1.3.1.2. Certified True Copy of By-Laws;

36.4.1.3.1.3. Latest Annual Audited Financial Statements; and

36.4.1.3.1.4. General Information Sheet.

36.4.1.3.2. For a newly registered corporation:

36.4.1.3.2.1. Certified True Copy of Articles of Incorporation;

36.4.1.3.2.2. Certified True Copy of By-Laws; and

36.4.1.3.2.3. List of Officers and Stockholders.

36.4.1.3.3. Transfer agent Rules and Procedures, certified true and correct by its President, including procedures on withdrawal as transfer agent and successor transfer agent;

36.4.1.3.4. Organizational Chart;

36.4.1.3.5. Business Plan;

36.4.1.3.6. Manual of Corporate Governance;

36.4.1.3.7. Copy of the sample engagement letter containing, among others, the identification of the services to be rendered and specification of the responsibilities of the transfer agent;

36.4.1.3.8. Undertaking under oath to comply with the rules and regulations, orders, memorandum circulars and policies promulgated by the Commission, and of other rules, procedures, standards and policies set by other Exchanges or SROs and duly approved by the Commission, and its own internal rules and procedures set for transfer agency operation;

36.4.1.3.9. Undertaking under oath to be a member of a transfer agent association/organization and to submit a copy of the transfer agent agreement with issuer companies;

36.4.1.3.10. Undertaking to conduct due diligence prior to engagement to warrant the completeness and reliability of the records to be received from the company or its former transfer agent; and

36.4.1.3.11. Undertaking to assume the obligation in relation to the stock transfer services as provided in the engagement letter during the period of engagement.

Any amendment to such application shall be filed with the Commission on SEC Form 36-TA, in accordance with the instructions contained therein.

36.4.1.4. If any of the information reported on SEC Form 36-TA becomes inaccurate, misleading, or incomplete or requires updating for any reason, such as change/s in operating procedures and/or the list of directors and officers, the Issuer shall file an amendment within seven (7) days after the date on which the information in the application became inaccurate, misleading, or incomplete.

36.4.1.5. After reviewing an application for registration as a transfer agent, or an amendment thereto, the Commission shall, by order: acEHCD

36.4.1.5.1. Grant registration or approve the amendment; or

36.4.1.5.2. Deny registration or the amendment, place limitations on the activities, functions or operations of, suspend or revoke its registration, if the Commission finds, after notice and opportunity for hearing:

36.4.1.5.2.1. That such order is in the public interest;

36.4.1.5.2.2. That the Issuer does not meet applicable qualifications;

36.4.1.5.2.3. That the application is incomplete, inaccurate or misleading; or

36.4.1.5.2.4. That the transfer agent has been found to:

36.4.1.5.2.4.1. Be insolvent or not in sound financial condition;

36.4.1.5.2.4.2. Have violated or have not complied with the applicable provisions of the Code or the rules and regulations adopted thereunder, or any order of the Commission;

36.4.1.5.2.4.3. Have engaged in, or be engaged in, or is about to engage in fraudulent transactions;

36.4.1.5.2.4.4. Be in any other way dishonest or not of good repute;

36.4.1.5.2.4.5. Have not conducted its business in accordance with law or be engaged in a business that is illegal or contrary to government rules and regulations;

36.4.1.5.2.4.6. Have an officer, member of the board of directors, or principal shareholder who is disqualified to be such an officer, director or principal shareholder;

36.4.1.5.2.4.7. Have a backlog of share certificate transfers which indicates the inability of the Issuer to fulfill its responsibilities as a transfer agent;

36.4.1.5.2.4.8. Have repeatedly or materially failed to comply with its procedures or those of a registered clearing agency; or

36.4.1.5.2.4.9. Have filed an application for registration or an amendment thereto which is incomplete or inaccurate in any material respect or which includes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the application or amendment not misleading.

36.4.1.6. A transfer agent cannot be the auditor of an issuer for whom it acts as transfer agent.

36.4.1.7. The procedures of a transfer agent are binding on and enforceable against issuers for which they act, registered securities holders and transferees who present securities for transfer. To minimize the issuance and movement of and to facilitate other dealings with those securities eligible to the operations of a registered clearing agency, a transfer agent and registered clearing agency shall jointly formulate and abide by written procedures addressing certificated and uncertificated securities issuance, transfers, cancellations, registration, confirmation and reconciliation of positions in securities, audit, replacement of lost securities, signature guarantees, delivery processes and turnaround times.

36.4.1.8. Every transfer agent registered pursuant to this Rule shall file the appropriate registration renewal form every June 1 to June 30 of each year, surrender its old license, and pay to the Commission the prescribed annual renewal fee.

If such fee is not paid or the registration renewal form is not filed as required, the registration of such transfer agent shall be suspended or terminated as the case may be.

36.4.1.9. Nothing in this Rule shall be construed as precluding the Commission from requiring an applicant for registration or a registered transfer agent to submit other requirements it may deem reasonably necessary to effectively regulate and supervise the transfer agent and/or to protect the interest of the investing public.

36.4.2. Reports from Transfer Agents

36.4.2.1. Annual Report — Every registered transfer agent shall file with the Commission an annual report on SEC Form 36-AR in accordance with the instructions contained therein within 120 days after the end of its fiscal year. Reports filed on SEC Form 36-AR shall be deemed to satisfy Section 141 of the Corporation Code of the Philippines.

36.4.2.2. Exception Reports to the Commission — A transfer agent shall provide to the Commission within seven (7) days of the occurrence of any of the following events, a report detailing the reasons and circumstances for:

36.4.2.2.1. Any delay in the turnaround or processing of an issue, transfer or replacement of a security;

36.4.2.2.2. Any discrepancy between its records and those of the registered clearing agency, if applicable;

36.4.2.2.3. Actual termination of its function as a transfer agent for a particular security;

36.4.2.2.4. Withdrawal from business of a transfer agent; and

36.4.2.2.5. Additional listed issues being handled or have ceased from servicing.

36.4.2.3. Periodic Reporting to Issuer — At regular intervals within each and every year and upon request by the issuer, a transfer agent shall supply the issuer, for whom it acts in that capacity, with the list of holders of its securities, as shown by the register of holders of securities, and the changes to the register of transfers, showing the name and registered address of, and the number or face value of the securities held by each such holder and supply any other statements, lists, entries, information and material concerning issues, transfers and cancellations of securities.

36.4.2.4. Complaint Log — A record of all claims and complaints made to a transfer agent shall be kept by it at its principal office. The record shall contain:

36.4.2.4.1. The name of the security holder and a description of the security;

36.4.2.4.2. The date of the complaint or claim and a complete description thereof; and

36.4.2.4.3. The steps taken by the transfer agent, the manner in which the complaint or claim is resolved and any subsequent action taken or to be taken by the holder or the transfer agent.

The record shall be open for inspection during normal business hours by the Commission and by any issuer with respect to securities issued by it.

36.4.3. Records Retention by Transfer Agents

36.4.3.1. In addition to the records required to be maintained pursuant to Section 74 of the Corporation Code of the Philippines, every transfer agent shall make and retain for a period of five (5) years the following books and records relating to its transfer agent activities: SDHTEC

36.4.3.1.1. Its rules and procedures;

36.4.3.1.2. Exception reports filed with the Commission pursuant to SRC Rule 36.4.2.2;

36.4.3.1.3. Complaint log as required to be maintained under SRC Rule 36.4.2.4;

36.4.3.1.4. Reports to the issuers for whom the firm acts as transfer agent as required under SRC Rule 36.4.2.3; and

36.4.3.1.5. Annual report on SEC Form 36-AR.

36.4.3.2. Every transfer agent shall make available any or all of its books and records upon request of an authorized representative of the Commission. Failure to do so shall result in an immediate suspension of the transfer agent's registration. Such suspension shall continue until such time as the books and records are made available to the Commission.

36.4.4. Clearing and Settlement

36.4.4.1. Exchanges and other trading markets shall ensure that the clearing and settlement arrangement in the exchange of assets subject of the trade shall be on a delivery versus payment (DVP) scheme such that delivery of the securities occurs if and only if payment occurs.

36.4.4.2. Exchanges and other trading markets shall have their DVP systems approved by the Commission.

36.4.4.3. No broker or dealer shall effect transactions in an OTC market unless it has secured an agreement from the counterparty as to how a transaction shall be cleared and settled. The broker or dealer shall ensure that the clearing and settlement arrangement shall be prompt and accurate and shall define among others: (1) Due date as to settlement; (2) Due date as to delivery of the security; and (3) Due date as to payment of cash.

36.4.4.4. No broker or dealer shall allow the clearing and settlement of transaction via an intermediary unless such intermediary is a registered clearing agency or has been authorized by the Commission to act as intermediary.

36.4.4.5. The Commission may require market participants to use uniform settlement systems in the public interest and for the protection of the investors including the use of a central counterparty (CCP) in the clearing and settlement of trades in all markets.

RULE 36.5 Trusts and Other Similar Funds for Broker Dealer Customers

36.5.1. A trust fund established to compensate customers for the extraordinary losses or damage they may suffer due to the business failure or fraud or mismanagement of a Broker Dealer shall be registered as an Accredited Trust Fund under this Rule. For purposes of this Rule, the term "extraordinary losses and damages" refers only to actual damages.

36.5.2. An application for registration shall be filed on SEC Form 36-TF and contain the following supporting documents:

36.5.2.1. Data on its organization, rules of procedure and membership/participation;

36.5.2.2. Copies of its rule; and

36.5.2.3. List of directors and officers and a list of their affiliations.

36.5.3. Business failure of the Broker Dealer shall be established upon a determination that the financial condition of the Broker Dealer has so deteriorated that the Broker Dealer cannot readily meet the demands of its customers for the delivery of securities and/or the payment of sales proceeds; provided, however, that such determination shall not be dependent upon a judicial declaration of insolvency. Such determination will be made by: a. the Exchange or the pertinent SRO; or b. the Commission, when the Exchange or the pertinent SRO fails or does not exercise such timely determination.

36.5.4. As a condition of their registration, all Broker Dealers shall be a member of or a participant in an Accredited Trust Fund.

36.5.5. An Accredited Trust Fund shall establish a Customer Protection Fund (the "Fund"). All amounts received by the Accredited Trust Fund, except amounts set outside for operating expenses, shall be deposited into the Fund which shall serve as trustee in compliance with general rules of trust.

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

36.5.6.1. The initial and the continuing required balance for the Fund;

36.5.6.2. Assessments to be imposed on members/participants and procedures for collecting such assessment;

36.5.6.3. Borrowing by the Fund;

36.5.6.4. Investment of Fund assets;

36.5.6.5. Procedures for paying customers for the extraordinary losses or damage they may suffer due to business failure or fraud or mismanagement of the Broker Dealer;

36.5.6.6. Role and duty of the trust fund as trustee; and

36.5.6.7. The composition of the trust fund's Board of Directors.

36.5.7. All rules of the Accredited Trust Fund, including amendments thereto, shall be approved by the Commission prior to becoming effective.

36.5.8. If the Exchange, pertinent SRO, or the Commission is aware of facts which may lead one to believe that the financial condition of a Broker Dealer, including an Exchange Trading Participant, has so deteriorated and the Broker Dealer has difficulties meeting the demands of its customers for the delivery of securities and/or the payment of sales proceeds, it shall immediately notify the Accredited Trust Fund; Provided, however, where such notification involves an Exchange Trading Participant, the Exchange or pertinent SRO shall simultaneously notify the Commission.

36.5.9. Every Exchange, or other SRO responsible for monitoring the financial condition of Broker Dealer shall file with the Accredited Trust Fund copies of financial reports submitted by such Broker Dealers.

36.5.10. The Commission may, having due regard to the public interest or the protection of investors, regulate, supervise, examine, suspend or otherwise discontinue such and other similar funds under such rules and regulations which the Commission may promulgate, and which may include taking custody and management of the fund itself as well as investments in and disbursements from the funds under such forms of control and supervision by the Commission as it may from time to time require. The authority granted to the Commission under this subsection shall also apply to all funds established for the protection of investors, whether established by the Commission or otherwise.

RULE 37 Registration of Innovative and Other Trading Markets

The Commission, having due regard for national economic development, shall encourage competitiveness in the market by promulgating within six (6) months upon the enactment of the Code, rules for the registration and licensing of innovative and other trading markets or Exchanges covering, but not limited to, the issuance and trading of innovative securities, securities of small, medium, growth and venture enterprises, and technology-based ventures pursuant to Section 33 of the Code. AScHCD

RULE 38 Requirements on Nomination and Election of Independent Directors 5

38.1. This Rule shall apply to companies mentioned under Sec. 38 of the Code and to companies 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 shall be referred to in this Rule as "covered companies".

38.2. As used in Section 38 of the Code, independent director means a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in any covered company and includes, among others, any person who:

38.2.1. Is not a director or officer of the covered company or of its related companies or any of its substantial shareholders except when the same shall be an independent director of any of the foregoing;

38.2.2. Does not own more than two percent (2%) of the shares of the covered company and/or its related companies or any of its substantial shareholders;

38.2.3. Is not related to any director, officer or substantial shareholder of the covered company, any of its related companies or any of its substantial shareholders. For this purpose, relatives include spouse, parent, child, brother, sister, and the spouse of such child, brother or sister;

38.2.4. Is not acting as a nominee or representative of any director or substantial shareholder of the covered company, and/or any of its related companies and/or any of its substantial shareholders, pursuant to a Deed of Trust or under any contract or arrangement;

38.2.5. Has not been employed in any executive capacity by the covered company, any of its related companies and/or by any of its substantial shareholders within the last two (2) years;

38.2.6. Is not retained, either personally or through his firm or any similar entity, as professional adviser, by that covered company, any of its related companies and/or any of its substantial shareholders, within the last two (2) years; or

38.2.7. Has not engaged within the last two (2) years and does not engage in any transaction with the covered company and/or with any of its related companies and/or with any of its substantial shareholders, whether by himself and/or with other persons and/or through a firm of which he is a partner and/or a company of which he is a director or substantial shareholder other than transactions which are conducted at arms length and are immaterial. (SEC Memorandum Circular No. 07-18, [April 20, 2018])

38.3. No person convicted by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of this Code, committed within five (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 Governance provides.

38.4. Any controversy or issue arising from the selection, nomination or election of independent directors shall be resolved by the Commission by appointing independent directors from the list of nominees submitted by the stockholders.

38.5. When used in relation to a company subject to the requirements of this Rule and Section 38 of the Code:

38.5.1. Related company means another company which is: (a) its holding company; (b) its subsidiary; or (c) a subsidiary of its holding company; and

38.5.2. Substantial shareholder means any person who is directly or indirectly the beneficial owner of more than ten percent (10%) of any class of its equity security.

38.6. Qualifications and Disqualifications

38.6.1. An independent director shall have the following qualifications:

38.6.1.1. He shall have at least one (1) share of stock of the corporation;

38.6.1.2. He shall be at least a college graduate or he shall have been engaged or exposed to the business of the corporation for at least five (5) years;

38.6.1.3. He shall possess integrity/probity; and

38.6.1.4. He shall be assiduous. HESIcT

38.6.2. No person enumerated under Section II (5) of the Code of Corporate Governance shall qualify as an independent director. He shall likewise be disqualified during his tenure under the following instances or causes:

38.6.2.1. He becomes an officer or employee of the corporation where he is such member of the board of directors/trustees, or becomes any of the persons enumerated under Section II (5) of the Code on Corporate Governance;

38.6.2.2. His beneficial security ownership exceeds two percent (2%) of the outstanding capital stock of the company where he is such director;

38.6.2.3. Fails, without any justifiable cause, to attend at least 50% of the total number of Board meetings during his incumbency unless such absences are due to grave illness or death of an immediate family;

38.6.2.4. Such other disqualifications which the covered company's Manual on Corporate Governance provides.

38.7. Number of Independent Directors

38.7.1. All companies are encouraged to have independent directors. However, issuers of registered securities and public companies are required to have at least two (2) independent directors or at least twenty percent (20%) of its board size, whichever is the lesser. Provided further that said companies may choose to have more independent directors in their boards than as above required.

38.7.2. The Exchange/s are required to have at least three (3) independent directors. To effectively carry out the provisions of Section 33.2 (g) of the Securities Regulation Code, the Exchange's independent director or a nominee for such director shall not solicit votes for himself.

38.8. Nomination and Election of Independent Director/s

The following rules shall be applicable to all covered companies:

38.8.1. The Nomination Committee (the "Committee") shall have at least three (3) members, one of whom is an independent director. It shall promulgate the guidelines or criteria to govern the conduct of the nomination. The same shall be properly disclosed in the company's information or proxy statement or such other reports required to be submitted to the Commission.

38.8.2. Nomination of independent director/s shall be conducted by the Committee prior to a stockholders' meeting. All recommendations shall be signed by the nominating stockholders together with the acceptance and conformity by the would-be nominees.

38.8.3. The Committee shall pre-screen the qualifications and prepare a final list of all candidates and put in place screening policies and parameters to enable it to effectively review the qualifications of the nominees for independent director/s.

38.8.4. After the nomination, the Committee shall prepare a Final List of Candidates which shall contain all the information about all the nominees for independent directors, as required under Part IV(A) and (C) of Annex "C" of SRC Rule 12, which list, shall be made available to the Commission and to all stockholders through the filing and distribution of the Information Statement, in accordance with SRC Rule 20, or in such other reports the company is required to submit to the Commission. The name of the person or group of persons who recommended the nomination of the independent director shall be identified in such report including any relationship with the nominee.

38.8.5. Only nominees whose names appear on the Final List of Candidates shall be eligible for election as Independent Director/s. No other nominations shall be entertained after the Final List of Candidates shall have been prepared. No further nominations shall be entertained or allowed on the floor during the actual annual stockholders'/memberships' meeting.

38.8.6. Election of Independent Director/s

38.8.6.1. Except as those required under this Rule and subject to pertinent existing laws, rules and regulations of the Commission, the conduct of the election of independent director/s shall be made in accordance with the standard election procedures of the company or its by-laws.

38.8.6.2. It shall be the responsibility of the Chairman of the Meeting to inform all stockholders in attendance of the mandatory requirement of electing independent director/s. He shall ensure that an independent director/s are elected during the stockholders' meeting.

38.8.6.3. Specific slot/s for independent directors shall not be filled-up by unqualified nominees.

38.8.6.4. In case of failure of election for independent director/s, the Chairman of the Meeting shall call a separate election during the same meeting to fill up the vacancy.

38.8.6.5. The covered companies shall amend its by-laws in accordance with the foregoing requirements as soon as practicable.

38.9. Termination/Cessation of Independent Directorship

In case of resignation, disqualification or cessation of independent directorship and only after notice has been made with the Commission within five (5) days from such resignation, disqualification or cessation, the vacancy shall be filled by the vote of at least a majority of the remaining directors, if still constituting a quorum, upon the nomination of the Committee otherwise, said vacancies shall be filled by the stockholders in a regular or special meeting called for that purpose. An independent director so elected to fill a vacancy shall serve only for the unexpired term of his predecessor in office.

RULE 39.1 Registration, Responsibilities and Oversight of Self-Regulatory Organizations

and Other Securities-Related Organizations

39.1.1. Rules Governing a Self-Regulatory Organization which is an Organized Exchange

39.1.1.1. All organized Exchanges shall be subject to these procedures and requirements set forth in this Rule.

39.1.1.2. For purposes of this Rule:

39.1.1.2.1. Organized Exchange or Exchange means a registered Exchange, whether or not registered as an SRO under the Code.

39.1.1.2.2. Participant refers to any person who has been authorized to use the SRO's services and facilities.

39.1.1.2.3. Securities laws refers to the Code and rules, regulations and orders issued by the Commission.

39.1.1.2.4. SRO rule refers to the constitution, articles of incorporation, by-laws and rules, or instruments corresponding to the foregoing and such policies, guidelines, practices, conventions and interpretations of the SRO including the annexes, forms and checklists to such rule, other than those establishing or concerning solely matters of SRO administration under SRC Rule 40.3.3.

39.1.1.3. SRO Rulemaking

39.1.1.3.1. Subject to Commission approval and pursuant to the procedures set forth in SRC Rule 40.3, an SRO's power to adopt and amend rules shall also include the power to repeal existing rules and provide interpretative guidance; Provided that, an SRO shall not suspend, alter or modify the enforcement of rules, guidelines, or policies earlier approved by the Commission without the prior approval of the latter.

39.1.1.3.2. An SRO shall adopt comprehensive rules governing its organization and governance, qualifications and rights of shareholders, listing of securities, trading of securities, settlement of contracts, qualification of members and other participants, ethical conduct of members and other participants, supervision and control of members, financial and operational responsibility of members, and discipline of members and other participants.

39.1.1.4. Power over listed companies

The SRO shall be solely responsible for processing and approving or rejecting applications for new listing of securities, suspension and delisting of listed issues and imposition of sanctions on listed companies for violation of SRO rules; Provided, however, that such powers shall be exercised pursuant to SRO rules. caITAC

39.1.1.5. Compliance and Surveillance

39.1.1.5.1. An SRO shall establish an independent audit, compliance and surveillance office separate from the Exchange or within the Exchange, and in such form and substance that the Commission, by order, may prescribe. Such office shall not be subordinated or otherwise controlled in its activity by the Exchange Board or its review unit, and shall be responsible for carrying out the SRO's enforcement role pursuant to the securities law and for the discipline of participants. Such office shall further submit to the Commission a copy of its findings within three (3) business days from completion or at the same time that such office provides a copy to the Board or a review unit, if such office is an entity separate from the Exchange, or to any person or unit outside of the office if such office is an integral unit within the Exchange, whichever is earlier. Nothing in this rule shall be understood to preclude the Commission from requiring such office to submit a status report or any other kind of report on any of the activities that it is performing.

39.1.1.5.2. The Compliance and Surveillance office, in order to protect the interest of investors and the public in general, and to arrest the further commission of violations of securities laws, prevent financial instability and damage to the capital market caused by delay, and/or risk manage Broker Dealer operations effectively, may summarily suspend or impose limitations upon the erring Broker Dealer without need of approval from the Exchange Board or its review unit. Provided, however, that the Exchange Board shall, within five (5) trading days from implementation of such order, convene to review, confirm, modify, or reverse the Compliance and Surveillance office's action. Failure by the Exchange Board or its review unit to resolve the summary order shall be deemed an automatic confirmation of the action taken by the Compliance and Surveillance office.

39.1.1.5.3. The SRO shall enforce compliance with provisions of the securities laws regulating brokers, dealers and trading on the SRO and SRO rules by its members. The SRO shall notify the Commission within forty eight (48) hours of any instance where it fails to enforce compliance with the provisions of the securities laws and its implementing rules and regulations, and of the SRO rules, which it believes is justifiable, and within ten (10) days submit a complete report of such an instance to the Commission.

39.1.1.5.4. An SRO shall enter into a Memorandum of Understanding with other SROs to clarify its oversight responsibilities over persons who are members of or participants in more than one SRO and coordinate with other SROs to ensure adequate oversight. Such plan shall be submitted to the Commission for approval under SRC Rule 39.1.3.

39.1.1.5.5. An SRO shall monitor market conditions and trading activity to detect violations of the securities law and SRO rules.

39.1.1.5.5.1. The SRO shall conduct market surveillance of all trading activity on the SRO pursuant to SRO rules setting forth surveillance procedures and guidelines.

39.1.1.5.5.2. The SRO shall monitor compliance by listed companies with continuing listing obligations; Provided, however, primary oversight for compliance with full disclosure regulation under the securities law shall remain the responsibility of the Commission.

39.1.1.5.6. The Commission may, on its own initiative, monitor the market to ensure that the SRO is fulfilling its functions and to ensure further that each activity or potential problem area in the market is adequately covered and being reasonably addressed. For this purpose, SROs, exchanges, operators of trading markets, trading participants and other market participants shall, upon request, provide the Commission or its authorized representatives direct access to their trading systems, platforms, repositories and databases for information about particular accounts, orders, trades, positions, clearing data, trading account codes and the names of clients corresponding to such codes, or any other information reasonably needed for effective market surveillance, reconstruction of trade events and conduct of trade analysis.

39.1.1.6. Periodic Examinations

39.1.1.6.1. The SRO shall periodically examine all its members to determine whether they are in compliance with the securities law and SRO rules governing, among other things, financial responsibility, dealings of members with the public, back office procedures, trading practices, and supervision and shall submit to the Commission for review and comment its audit calendar for the year on or before the 30th day of January of the succeeding year, provided that any amendment to the calendar shall be promptly provided to the Commission. The submitted calendar shall include the manner of selection and prioritization used by the SRO in formulating it. The manner of selection and prioritization shall be based on the historical and potential risks that each member posed to the market. This calendar shall be treated as confidential information. Periodic examination of each member firm shall be conducted without prior notice to the member firm.

39.1.1.6.2. The SRO shall file with the Commission monthly reports of its periodic examinations started and completed during the month, within ten (10) days after the end of each month, together with a summary of findings for audits completed. Periodic examinations of each member firm shall be made by the SRO pursuant to written procedures approved by the Commission. Where deficiencies are detected, the SRO shall either send a letter to the firm within three (3) business days of the completion of such examination directing that such deficiencies be corrected or, where such deficiencies show evidence of violations of the securities law, SRO rules and/or otherwise negatively reflect upon the firm's integrity or solvency, promptly notify the Commission through a brief written report and without delay, initiate an investigation.

39.1.1.6.3. The Commission may, on its own initiative, conduct periodic or parallel examinations of members to validate the SRO's findings and conduct on-spot audit inspections of the relevant SRO department to check if it is fulfilling its duties and responsibilities as an SRO.

39.1.1.7. Investigations

39.1.1.7.1. An SRO shall investigate suspected violations of the securities law and SRO rules based on complaints, examination audit findings or unusual trading activities or verified referrals from a member, other trading participant, SRO other than an Exchange, clearing agency, transfer agent, any registered person, or the Commission and take disciplinary action, where appropriate, pursuant to SRO rules.

39.1.1.7.2. The SRO shall be primarily responsible for conducting investigations which concern suspected violation of rules governing sales practices, financial and operational requirements, trading and floor related violations, and compliance procedures/supervision of members. ICHDca

39.1.1.7.3. The SRO shall promptly notify the Commission of any investigation which involves suspected violations of the securities law involving persons not subject to the SRO's jurisdiction, concerning the disclosure obligations of listed companies under the securities law, and/or involving fraud or manipulation. The SRO shall cooperate with the Commission which shall have primary investigative authority over such suspected violations.

39.1.1.7.4. The Commission shall not be precluded from initiating its own investigation ahead of, parallel to or following an investigation conducted by an SRO. In such an event, the SRO shall coordinate, cooperate, and provide a copy to the Commission, upon notice or order, documents, pieces of evidence or other information related to the case that it may have earlier gathered or are available in its database and which it may readily procure. Unless specifically ordered by the Commission or by a competent court to cease, the SRO shall continue to conduct its own investigation pursuant to its mandate. In case of conflict between the findings of the Commission and the Exchange, the former's decision shall prevail. For purposes of initiating its own investigation, the Commission, through the Chairperson, may designate any department, other than the Enforcement and Investor Protection Department or form the task force for the purpose of taking the lead in such investigation.

39.1.1.8. Discipline of SRO Members and Participants

39.1.1.8.1. An SRO shall discipline a member, to include suspension or expulsion, if such person has been found to have been engaged in a violation of SRO rules or provisions of the securities law, including, but not limited to, illegal sales practices, financial and operational requirements, trading and floor related violations, and/or violation of SRO listing rules.

39.1.1.8.2. In any disciplinary hearing by the SRO, other than a proceeding brought pursuant to SRC Rule 39.1.1.8.3, the SRO shall bring specific charges, provide notice to the member or participant charged, afford such person charged with an opportunity to defend against the charges, and keep a written record of the proceedings. A determination to bring a disciplinary sanction shall be supported by a written statement of the offense, a summary of the evidence presented, and a statement of the sanction/s imposed.

39.1.1.8.3. The SRO may summarily suspend a member or person associated with a member who has been expelled or suspended from another SRO, and/or suspend a member who the SRO finds to be in such financial or operating difficulty that the member cannot be permitted to do business as a member with safety to investors, creditors, other members, or the SRO; Provided, however, that the SRO immediately provides written notice to the Commission of the action taken. Any person aggrieved by a summary action pursuant to this SRC Rule shall be promptly afforded an opportunity for a hearing by the SRO in accordance with SRC Rule 39.1.1.8.2. The Commission, by order, may stay a summary action motu proprio or upon application by any person aggrieved thereby if the Commission determines summarily or after notice and an opportunity for hearing (which may consist solely of the submission of affidavits or presentation of oral arguments) that a stay is consistent with the public interest and the protection of investors.

39.1.1.8.4. The SRO shall promptly notify the Commission in written reports of any disciplinary sanction imposed on any member or participant. Within thirty (30) days after receipt of such notice, any aggrieved person may appeal to the Commission from, or the Commission motu proprio within such period, may institute review of, the decision of the SRO, at the conclusion of which, after due notice and opportunity for hearing which may consist solely of review of the record before the SRO, the Commission shall affirm, modify or set aside the sanction. In such proceeding, the Commission shall determine whether the aggrieved person has engaged or omitted to engage in the acts and practices as found by the SRO; whether such acts, and practices, or omission constitute willful violations of the securities law or SRO rules, whether such provisions were applied in a manner consistent with the purposes of the securities law; and whether, with due regard for the public interest and the protection of investors, the sanction is excessive or oppressive.

39.1.1.9. SRO Discipline by the Commission

The Commission may, if in its opinion such action is necessary or appropriate in the public interest or for the protection of investors, or otherwise in furtherance of the purposes of the securities law, after due notice and an opportunity for a hearing:

39.1.1.9.1. Suspend for a period not to exceed twelve (12) months or revoke the registration of an SRO, or censure or impose limitations on the activities, functions and operations of the SRO as an SRO, if the Commission finds that the SRO has willfully violated or is unable to comply with any provision of the securities law or SRO rules, or has failed to enforce compliance therewith by a member or participant;

39.1.1.9.2. Take over the activities of an SRO pursuant to SRC Rule 40.5;

39.1.1.9.3. Suspend for a period not exceeding twelve (12) months or to expel from the SRO any member who is subject to an order of the Commission under Section 29 of the Code or is found to have willfully violated any provision of the securities law, or effected, directly or indirectly, any transaction for any person who such member had reason to believe was violating, in respect of such transaction, any of such provisions;

39.1.1.9.4. Remove from office or censure any officer or director of the SRO if it finds that such officer or director has violated any provision of the securities law or the rules of such SRO, abused his authority or has failed to enforce compliance with any of such provisions; and/or

39.1.1.9.5. Take other actions as may be reasonably necessary to enforce the provisions of the Code.

39.1.1.10. SRO Reporting

An SRO shall submit the following reports to the Commission:

39.1.1.10.1. Monthly reports on dockets of examinations and investigations being conducted to be submitted on or before the 15th of the following month, containing the docket number, name of SRO examiner/investigator, how audit/examination originated (investor complaint, examination, surveillance), name of the member or participant, including a listed company being audited/investigated, nature of the violations alleged, status, findings, sanctions imposed and other courses of action taken by the SRO relative thereto;

39.1.1.10.2. Monthly reports on risk based capital adequacy requirements by members;

39.1.1.10.3. Quarterly reports on the result of investigations conducted with respect to the trading of listed companies to be submitted on or before the 15th of the month after each quarter;

39.1.1.10.4. Annual report to be submitted on or before the 30th of every January containing information on the number of newly listed issues; delisted/suspended issues and reasons therefor; the number, type of securities; issuers of current listed issues. The report shall also include profile of investors and their investments such as estimate of number of investors in the market by type (retail, institutional, qualified buyer, etc.), investment portfolio, amount of investment, mode of access (traditional or online), geographical location of investors, and other relevant market data.

39.1.1.10.5. Such other report as may, from time to time, be required by the Commission from the SRO; TCAScE

39.1.1.10.6. The reports on examination and investigation being conducted, the results thereof, and the cases resolved shall also include the following information: (1) Names and designations of the persons allegedly responsible for the violations; (2) Description of the nature of the violations with brief narration of the participation of the persons allegedly responsible for such violations; (3) Supporting documents.

Further, if the persons allegedly responsible for the violations have existing registration with the Commission (e.g., salesman, associated persons) such fact shall be indicated in the report. In this case, the SRO shall initiate proceedings to suspend or revoke such registration, if warranted, without prejudice to the filing of a criminal case. On the other hand, if the persons allegedly responsible for the violations are not registered with the Commission, such fact shall be indicated in the report. In this case, the SRO shall initiate a criminal case against such persons if warranted;

39.1.1.10.7. The SRO shall inform the public of violations of its own rules, the SRC and its implementing rules committed by, its trading participants, issuers and the persons responsible for the violations and the sanctions it has imposed. For this purpose, the SRO shall immediately publish on its website and/or the pertinent Exchange's website the nature of violations and sanctions imposed on the trading participants, issuers and the persons responsible for the violations, as soon as the SRO affirms the sanctions or the period to appeal or move for reconsideration with SRO lapses without the aggrieved party taking the appeal or move for reconsideration.

The SRO shall likewise post on its own website and/or the pertinent Exchange's website the list of trading participants whose regular and special audits did not result in any examination findings or are fully compliant.

The reports containing the results of examinations and investigations on trading participants, issuers and the persons responsible for the violations, shall remain posted and accessible in the website of the SRO and the Commission for the guidance of the investing public.

39.1.2. Registration of Associations of Brokers and Dealers and Other Self-Regulatory Organizations

39.1.2.1. An application for registration as an Association of Securities Brokers and Dealer shall be filed on SEC Form 39-BD accompanied by copies of the statements and exhibits required to be filed with it under Section 40 of the Code and SEC Form 39-BD.

39.1.2.2. Any other application for registration as a Self-Regulatory Organization shall be filed on SEC Form 39 accompanied by the statements and exhibits required to be filed with it under Section 40 and SEC Form 39; Provided, however, that an applicant for registration as an Exchange and SRO shall file Form 33-SRO and an applicant for registration as a Clearing Agency and SRO shall file SEC Form 42-SRO.

39.1.2.3. Every SRO shall maintain the integrity of its registration and report to the Commission any material change within seven (7) days from the occurrence of such change through the filing of SEC Form 39-A.

39.1.2.4. For registered SRO whose fiscal year ends on December 31, SEC Form 39-AR shall be filed with the Commission depending on the last numerical digit of its registration number as prescribed by the Commission. SRO whose fiscal year ends on a date other than December 31 shall file SEC Form 39-AR 110 calendar days after the close of such fiscal year.

39.1.2.5. Amendments to its registration shall be filed, at least one copy of which shall be signed and attested, in the same manner as required in the case of the original registration. All amendments shall be dated and numbered in the order of filing. One amendment may include a number of changes.

39.1.2.6. In addition to the formal filing of amendments and the annual return, every registered SRO shall send to the Commission copies of any notices, reports, circulars, loose leaf instructions, riders, new additions, lists, or other records of changes covered by amendments or supplements when, as, and if such records are made available to members and/or participants of the SRO.

39.1.3. Allocation of Regulatory Responsibilities among Self-Regulatory Organizations

39.1.3.1. Any two (2) or more Self-Regulatory Organizations (SROs) may file with the Commission a plan for allocating among SROs the responsibility to receive regulatory reports from persons who are members of or participants in more than one SRO, to examine such persons for compliance, or to enforce compliance by such persons, with the Code and rules and regulations adopted under it, and the rules of such SRO, and to carry out other specified regulatory functions with respect to such persons.

39.1.3.2. Any plan filed under this Rule may contain provisions for the allocation among the parties of expenses reasonably incurred by the SRO having regulatory responsibility under the plan.

39.1.3.3. After appropriate notice and opportunity for comment, the Commission may, by written notice, declare such a plan, or any part thereof, effective if it finds the plan, or any part thereof, necessary or appropriate in the public interest and for the protection of investors, to foster cooperation and coordination among SROs.

39.1.3.4. Upon the effectivity of such a plan, or part of it, any SRO which is a party to the plan shall be relieved of responsibility to any person for whom another SRO is responsible under the plan, to the extent of the responsibility allocated.

39.1.3.5. After the Commission has declared a plan or part of it effective pursuant to SRC Rule 39.1.3.3, or has acted pursuant to SRC Rule 39.1.3.6, an SRO relieved of responsibility may notify customers of, and persons doing business with, such member or participant of the limited nature of its responsibility for such member's or participant's acts, practices and course of business.

39.1.3.6. If a plan declared effective pursuant to SRC Rule 39.1.3.3 does not provide for all members or participants or does not allocate regulatory responsibilities, the Commission may, after notice and opportunity for hearing, designate one or more SROs responsible for specified regulatory responsibilities with respect to such members or participants.

39.1.4. Rules Governing Registrars of Qualified Institutional and Individual Buyers

39.1.4.1. Authorized Registrars — The following entities which have been granted the appropriate secondary license by the Commission may be authorized to act as Registrar upon proper application and compliance with registration requirements under these rules:

39.1.4.1.1. Banks with respect to their registration as broker-dealer, Government Securities Eligible Dealer, Government Securities Brokers and/or underwriter of securities;

39.1.4.1.2. Brokers;

39.1.4.1.3. Dealers;

39.1.4.1.4. Investment Houses;

39.1.4.1.5. Investment Company Advisers; and

39.1.4.1.6. Issuer companies with respect to offerings of their own securities.

39.1.4.2. Initiation and Cessation of Function as Registrar — An entity that wants to act as registrar of qualified buyers shall inform the Commission in writing of such intention before it can perform the duties and responsibilities of a Registrar by filing SEC Form 39-Registrar.

If a registrar-entity no longer wants to act as Registrar, it shall inform the Commission in writing of such intention at least thirty (30) days before the intended cessation date. Notwithstanding the cessation of its Registrar functions, an entity shall continue to comply with its record-keeping obligations under these rules.

39.1.4.3. Registrar's Internal Procedures — A Registrar shall establish its own internal procedures to guide its personnel in evaluating the qualifications of applicants for qualified buyer status; Provided that, only registered persons (salesman, fixed income market salesman, certified investor solicitor and associated person) shall conduct such evaluation, It shall act with due diligence in the conduct of the evaluation and ensure that the required supporting documents are submitted to it at the time of registration. These documents shall be considered and treated as records of the Registrar in accordance with the applicable provisions of the Code. cTDaEH

39.1.4.4. Responsibilities of a Registrar — The duties and responsibilities of a registrar in relation to applicants for registration and registrants (persons who have been registered as qualified buyers) shall be as follows:

39.1.4.4.1. Ensure that the applicants for registration affirm in writing that the information and documents that they have submitted to it are true and correct;

39.1.4.4.2. Inform the applicants that the qualifications prescribed for registration should be maintained during the registration period.

39.1.4.4.3. Require the registrants to submit an undertaking that they shall refrain from representing themselves or dealing in securities as qualified buyers if, after their registration, there are circumstances that disqualify them from enjoying that status, such as — diminution of their net worth below the prescribed minimum, or commission of acts that constitute misrepresentation, fraud or deceit under the SRC and its implementing rules and regulations.

39.1.4.4.4. Prepare a letter of undertaking for the registrant and cause its signature, which shall state, among others, that the registrant shall comply with the requirements for qualified buyer status, and that the registrant authorizes the Commission's representatives to inspect and examine the documents it submitted to the registrar.

39.1.4.4.5. Issue a certificate of registration in favor of the registrant who shall acknowledge receipt thereof. The certificate of registration shall be valid for three (3) years from the date of registration.

39.1.4.4.6. Inform the applicant that the SEC Information Sheets and the supporting documents will be submitted to the Commission as required in these rules for purposes of verification, and may be used in pursuance of an investigation, examination, official inquiry or as part of a surveillance procedures, and/or in compliance with other pertinent laws, and secure the applicant's written consent to such submission.

39.1.4.4.7. File with the Commission a report using SEC Form 39-Registrar — AR which shall include the following information: total number of registered qualified institutional and individual buyers; number of registered qualified individual buyers whose registrations have been effective for more than three (3) years; number of registered qualified institutional and individual buyers whose registrations have been renewed for during the covered year; number of registered qualified institutional and individual buyers whose registrations have expired during the covered year; key objectives for the investment being considered as stated in the Information Sheet; status of current portfolio investments; current total portfolio of securities; intended investment horizon; appetite for risk; current net worth; years of experience in trading in securities personally or through a fund manager. This report shall be filed with the Commission not later than thirty (30) days from the end of the covered calendar year.

39.1.4.4.8. Report to the Commission any change in the information provided in their application forms and other information that may be required under these rules or orders. Such report must be in SEC Form 39 — Registrar-A and must be filed within seven (7) days from such change.

39.1.4.5. Registry Book of Qualified Buyers — A registrar shall maintain and make available for inspection by the Commission's representatives a registry book of qualified buyers, in manual or electronic form, which shall contain a chronological listing of the following information of qualified buyers based on the dates they were qualified and registered:

39.1.4.5a.1. The names of the qualified buyer;

39.1.4.5a.2. Name and designation of the registrar's personnel who conducted the evaluation;

39.1.4.5a.3. Date of evaluation; and

39.1.4.5a.4. Other details that the registrar may deem necessary.

The following shall also be maintained by the registrar:

39.1.4.5b.1. Signed SEC Information Sheet;

39.1.4.5b.2. Applicant's written consent to the submission of such information and verification procedures to be conducted by the Commission; and

39.1.4.5b.3. Supporting documents required by the registrar and submitted by the applicant to prove financial capacity and sophistication.

The supporting documents that may be required in evaluating the applicant's financial capacity and sophistication include the certified true copies of income tax returns, audited financial statements, statements of account and certificates of deposit issued by the applicant's bank, statements of portfolio investments issued by the applicant's securities brokers or investment managers, certificates of employment with statement of income issued by the applicant's employer and other sources of information which are equally objective, reliable and verifiable that may prove financial capacity and sophistication.

If, after verification a qualified buyer is found to be no longer entitled to that status due to intervening events, the registrar shall note that fact in the registry that such person in no longer a qualified buyer.

39.1.4.6. Report of List of Qualified Buyers — A registrar shall submit to the Commission the list of persons on whom it conferred the status of "qualified institutional buyers" and "qualified individual buyers", within seven (7) days from the date of conferment or renewal of said status. The list shall contain the following information:

39.1.4.6.1. The names of the qualified buyers;

39.1.4.6.2. The name and designation of the Registrar's personnel who conducted the evaluation;

39.1.4.6.3. Date of evaluation;

39.1.4.6.4. Date of registration as qualified buyer; and

39.1.4.6.5. Signed SEC Information Sheet and, supporting documents required by the Registrar and submitted by the applicant to prove financial capacity and sophistication. The applicant's written consent to the submission of such information, verification and use to be conducted by the Commission.

39.1.4.7. Central Registry of Qualified Buyers — The Commission shall maintain a central registry of qualified institutional and individual buyers based on the reports submitted by the Registrars. A Registrar may request the Commission to treat such report as confidential pursuant to Section 66 of the Code.

39.1.4.8. Other Records — A Registrar shall maintain and make available for inspection by the Commission's representatives the registrant's application forms, information sheets and proof of qualifications for a period of at least five (5) years. It shall retain the records that relate to an on-going investigation beyond this period until the Commission declares the case closed and terminated.

The Commission may require the Registrar and any qualified buyer to furnish it with copies of the records mentioned in the preceding sections or to file reports based on the same records.

39.1.4.9. Review of Registration — The Commission reserves the authority to review the registration of qualified buyers to ensure that the requirements prescribed herein are complied with. Non-compliance with any of these requirements shall cause the revocation of the certificate of registration of the qualified buyer and shall constitute a ground for the imposition of sanctions against the Registrar and the registrant if warranted.

39.1.5. Rules Governing Credit Rating Agencies

[SEC MC 07 (2014)]

39.1.5.1. Definition

A credit rating agency (CRA) means any corporation principally and regularly engaged in the business of performing credit evaluation of corporations and business projects or of debt issues with the intention of assessing the overall creditworthiness or of ascertaining the willingness and ability of the issuer to pay its financial obligations as they fall due, and which assessment is translated by credit ratings periodically and publicly announced.

39.1.5.2. Scope and Limitations

39.1.5.2.1. The accreditation of a CRA does not relieve it from its liabilities and responsibilities.

39.1.5.2.2. The Commission shall not be liable for any liability or loss that may arise from the selection of the said CRA by any issuer.

39.1.5.2.3. The accreditation of a CRA shall continue until suspended or revoked by the Commission after due notice and hearing.

39.1.5.2.4. No person or entity shall, under pain of sanctions under the Code, hold itself out as an accredited credit rating agency or otherwise regulated in providing credit rating services unless it has been accredited by this Commission under these rules.

39.1.5.3. Requirements for Accreditation

39.1.5.3.1. To qualify for accreditation, a credit rating agency shall submit proof of compliance with the following requirements:

39.1.5.3.1.1. The CRA must be a stock corporation;

39.1.5.3.1.2. It has a paid-up capital of at least Ten Million Pesos (PhP10,000,000.00);

39.1.5.3.1.3. It has qualified and independent officers and personnel to conduct the rating activities;

39.1.5.3.1.4. It has no conflict of interest with prospective clients;

39.1.5.3.2. The CRA must submit among others, the following supporting documents:

39.1.5.3.2.1. List of shareholders and their corporate affiliations;

39.1.5.3.2.2. List of other business activities, if any;

39.1.5.3.2.3. Copies of the company's Articles of Incorporation and By-Laws;

39.1.5.3.2.4. A statement pertaining to ownership structure and possible conflict/s of interest;

39.1.5.3.2.5. Names, professional qualification and independence of staff involved in the rating decision ("rating specialists");

39.1.5.3.2.6. A written code of conduct which insures the independence of the rating specialists and the rating agency from the issuers it is rating;

39.1.5.3.2.7. Disclosure of affiliations, training, assistance or support it receives from international rating agencies, if any;

39.1.5.3.2.8. Rating scales, criteria, measurements, symbols and the like, which it has in use;

39.1.5.3.2.9. Operating procedures, rating policies, rating criteria and other rationale used in arriving at a rating;

39.1.5.3.2.10. Copy of model written agreement with issuers; and

39.1.5.3.2.11. Manual on Corporate Governance.

An applicant may request confidentiality of the foregoing information except its operating procedures, rating policies and rating criteria.

39.1.5.3.3. All applications for accreditation shall be accompanied by an initial filing fee of Sixty Thousand Pesos (PhP60,000.00) or such amount as the Commission may determine through its Scale of Fees and Charges.

39.1.5.3.4. All accredited credit rating agencies shall ensure that the information set forth in their application form and all documents appended thereto are current, true and correct. Any change in such information shall be filed with the Commission no later than ten (10) business days from the occurrence of such change. CHTAIc

39.1.5.3.5. An annual fee of Twelve Thousand Pesos (PhP12,000.00) or such amount as the Commission may determine, shall be paid yearly at least forty five (45) days prior to the anniversary date of the CRA's accreditation. If such annual fee is not paid, the registration of the CRA shall be suspended until payment is made, provided that if the same is not paid prior to the thirtieth (30th) day after the required payment date, such accreditation shall be automatically terminated and any issuer which has been rated by such rating agency shall be required to obtain a new credit rating within thirty (30) days after notification by such agency of such termination.

39.1.5.4. Operating Requirements 6

39.1.5.4.1. Pre-Rating Requirements

39.1.5.4.1.1. A CRA and the entity it proposes to rate must sign a written contract, covering the CRA's obligation to render credit rating services.

This contract will list all CRA obligations included in the provision of credit opinion, the main service. A written contract enables the rated entity to better understand a CRA's deliverables, and is in line with high standards of ethical conduct. A well-drafted contract will avoid any disparity between a CRA and the rated entity regarding the responsibilities and obligations of each party, and will forge a formal legal relationship between the two. In the contract, the obligations of the rated entity for cooperation and provision of updated information to conduct periodic surveillance shall be clearly spelled out and the rights of the rated entity over the use of ratings clearly communicated. Conditions for contract termination, including withdrawal of assigned ratings, shall also be clearly spelled out.

This contract shall also be the underlying legal document for arbitration between a CRA and the entity, shall the need arise. Each CRA shall have a standardized version of such a document for each type of rating, and use it consistently.

39.1.5.4.1.2. A CRA shall not promise, assure, or guarantee a particular rating outcome — either implicitly or explicitly — while soliciting business.

Considering that ratings shall be based on an analytical decision by a rating committee and not the subjective view of an individual, no rating outcome shall be promised or committed either implicitly or explicitly to the rated entity and/or the arranger while soliciting business. No employee with business development responsibility or any other representative of the CRA shall be allowed to promise, assure, or guarantee — either implicitly or explicitly — a particular rating outcome. Any employee who does shall face disciplinary proceedings, including possible dismissal.

CRAs shall provide objective and fair credit opinions for use by debt market investors. The assignment of a rating shall therefore be derived purely from independent and unbiased views based on the determinants of credit quality and not on any assurance or guarantee given beforehand.

39.1.5.4.1.3. Rating definitions, policy for use, and rating criteria shall be explained to the rated entity before rating services are engaged.

A CRA shall explain to an entity that is being rated the scope and use of the ratings, as well as the broad credit assessment framework followed. This shall be done before or at the time the CRA is engaged to enable the entity to make an informed decision about that engagement. This shall be communicated using standard presentations, brochures, and other materials, and disclosed on the CRA's website to minimize misinterpretation.

A CRA shall clearly communicate the rating definition and the rating scale. It shall also make clear that the ratings do not constitute recommendations to buy, hold, or sell any security, and shall inform the entity how to use the rating. Policies for use of ratings, conditions for withdrawal, and possible circumstances for rating actions shall also be clearly communicated.

39.1.5.4.1.4. The basic policies, practices, and methodologies used for assignment of ratings shall be published and freely available in print and on the website.

Each CRA shall make a well-defined rating policy and rating methodology freely available to entities being rated, investors, market intermediaries, regulators, and other interested parties. Such disclosure shall help develop — among investors and issuers — an understanding of the credit risk assessment framework and related policies and practices.

A CRA's policy for assigning, revising, and withdrawing ratings shall be clearly outlined and made public. The validity of the rating shall be stated up front. A CRA shall institute a policy of not withdrawing any rating until the instrument that is rated has been redeemed in full; this shall allow the agency to fulfill its role of communicating the credit quality of the rated instrument at all times to investors.

No ratings shall be withdrawn until redemption of a rated instrument except when the CRA requests the Commission to withdraw ratings and the same is approved due to local market conditions and CRA's publication of a notice to the market about the withdrawal, the reason for it, and the rating outstanding on the instrument as of the date prior to withdrawal. Depending on the reason of withdrawal, the Commission may require the CRA keep its rating on "notice of withdrawal" for some pre-specified period, and withdraw the rating once this period has expired. Accredited CRAs shall publish their withdrawal policies and ensure strict compliance with disclosed policies.

39.1.5.4.1.5. Adequate resources shall be made available.

A CRA must devote sufficient resources to ensure the high analytical quality of all its credit risk assessments. These resources shall include personnel with adequate skills, and facilities such as access to required information and tools and software to analyze information. Moreover, a CRA shall invest regularly in personnel training.

A CRA shall allocate financial resources for business development functions, outreach activities, and surveillance processes.

In addition to its initial capital stock, a CRA shall build up its resources by increasing its paid-up capital to at least PhP15 Million after three (3) years reckoned from date of its accreditation or from the effectivity of this Rule for those already accredited. After said period, the Commission may prescribe additional capital taking into account the volume of rating activities of the accredited CRA.

39.1.5.4.1.6. The organizational structure and design of the rating process shall ensure that rating decisions are not influenced by rating fees, any other revenues or business potential from the rated entity, or the consequences of a rating action.

The rating process must ensure that the final rating assigned is not influenced by the amount of rating fees received from the rated entity. A CRA shall publicly disclose its broad fee structure, including the minimum and maximum rating fees charged for any issue or issuer. EATCcI

Personnel with business development responsibility shall be separate from those with analytical responsibility to ensure that business pressures do not influence ratings assigned. Compensation of CRA's rating analysts shall be independent of rating fees and the final rating assigned. Analytical staff and rating committee members shall not know the rating fee charged for the specific issues that they rate.

The business relationship of an entity with a CRA shall in no way influence the process of assigning a rating to that entity or any of its group entities. Business relationships should be kept completely isolated from the analytical process. All CRAs shall remove employees with business development responsibility from the analytical process to prevent influence of the business development viewpoint on the credit risk assessment.

If complete segregation of responsibilities between business development and analytical process is not doable considering the size and structure of the company, sufficient measures shall be established to eliminate or reduce the threat of influence of fees over the process of assigning ratings. These measures shall be clearly provided in the CRA's manual of operation.

39.1.5.4.2. Rating Definitions and Recognition of Default