04BAROPS - SecuritiesRegulationCode - 163to183 4

THE SECURITIES
REGULATION CODE
(RA 8799)
I
OVERVIEW:
THE FINANCIAL MARKETS
A. Capital Ma!"t#
The places to go if you want to raise new
money
1. Equity Capital for the investor, the
stock market provides a variale
return
a. !tock "arket
!ecurity eg, shares of
stock
#. $et Capital for the lender, the
money or ond market provides a
fi%ed return
a. "oney "arket for short term
dets, ie, those normally
maturing within 1 year from
date of issuance
!ecurity commercial paper
&an unsecured '() of a
company, issued on a discount
asis, promising to pay the
holder the full face value
thereof upon redemption*
. +ond "arket for long term
dets, ie, those normally
maturing after a year from date
of issuance
!ecurity ,unk onds &high
yield onds having high
interest rates and are issued
y lower credit rated
companies or companies with
no credit rating*
+. N$%&Capital Ma!"t#
The places to go if you want to hedge or
mitigate the risks attached to holding
capital assets
1. Commodity "arket The instruments
traded in this market are not present
assets like shares of stock,
commercial papers or onds ut
future contracts calling for delivery of
an asset - for this reason, a
commodity market is usually referred
to as a futures market. &eg,
agricultural products, metals and
financial instruments*
!ecurity a futures contract &one
which entitles the holder to uy or
sell a specific amount of the
underlying commodity
represented y the contract in a
prearranged, deliverale grade at
a specific date in the future at a
specified price.
#. .oreign E%change "arket This
market is an over/the/counter market
conducted y international anks and
does not have a central location
!ecurity a forward e%change
contract
0. (ptions "arket 't enales an
investor to purchase an option giving
him the right to uy or sell a specific
numer of shares at a future date, at
a specific price. .or this right, the
investor either pays or receives
money ut &,ust like in a commodity
market* the money involved is only a
fraction of the market value of the
shares concerned.
!ecurity call or put options
II
OVERVIEW OF THE LAW

A. Stat" '$li()
The !tate shall estalish a socially
conscious, free market that regulates
itself, encourages the widest participation
of ownership in enterprises, enhances the
democrati1ation of wealth, promotes the
development of the capital market,
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163
protect investors, ensures full and fair
disclosure aout securities, minimi1es if
not totally eliminates insider trading and
other fraudulent or manipulative devices
and practices which create distortions in
the free market.
+. '$/"# a%+ F,%(ti$%# $4 t*" SEC
The shall have, among others, the
following powers and functions?
1. <ave ,urisdiction and supervision
over all corporations, partnerships
or associations who are the
grantees of primary franchises
and:or a license or permit issued y
the >overnment-
#. .ormulate policies and
recommendations on issues
concerning the securities market,
advise Congress and other
government agencies on all aspects
of the securities market
0. Approve, re,ect, suspend, revoke or
require amendments to registration
statements, and registration and
licensing applications-
@. ;egulate, investigate or supervise
the activities of persons-
A. !upervise, monitor, suspend or take
over the activities of e%changes,
clearing agencies and other !;(s-
B. 'mpose sanctions for the violation of
laws, rules, regulations and orders-
C. 9repare, approve, amend or repeal
rules, regulations and orders-
D. Enlist the aid and support of and:or
deputi1e any and all enforcement
agencies of the >overnment, as well
as any private institution,
corporation, firm, association or
person-
E. 'ssue cease and desist orders to
prevent fraud or in,ury-
1F. 9unish for contempt of the
Commission, oth direct and
indirect-
11. Compel the officers of any
registered corporation or association
to call meetings of stockholders or
memers-
1#. 'ssue supoena duces tecum and
summon witnesses to appear,
search and sei1ure of all documents,
papers, files and records, ta%
returns, and ooks of accounts of
any entity or person under
investigation-
10. !uspend, or revoke the franchise or
certificate of registration of
corporations, partnerships or
associations-
1@. !uch other powers as may e
provided y law as well as those
which may e implied from, or which
are necessary or incidental.
The CommissionGs ,urisdiction over all
cases enumerated under !ec A of 9$ EF#/
A is herey transferred to the Courts of
general ,urisdiction or the appropriate
;egional Trial Court.
The Commission shall retain ,urisdiction
over pending cases involving intra/
corporate disputes sumitted for final
resolution which should e resolved within
1 year from the enactment of this Code.
The Commission shall retain ,urisdiction
over pending suspension of
payments:rehailitation cases filed as of
0F 7une #FFF until finally disposed.
C. D"4i%iti$% $4 T"0#
1. S"(,iti"# & are shares, participation
or interests in a corporation or in a
commercial enterprise or profit/
making venture and evidenced y a
certificate, contract, instrument,
whether written or electronic in
character. 't includes?
&a* !hares of stock, onds,
deentures, notes, evidences of
indetedness, asset/acked
securities-
&* 'nvestment contracts, certificates
of interest or participation in a
profit sharing agreement,
certificates of deposit for a future
suscription-
&c* .ractional undivided interests in
oil, gas or other mineral rights-
&d* $erivatives like option and
warrants-
&e* Certificates of assignments,
certificates of participation, trust
certificates, voting trust
certificates or similar instruments-
&f* 9roprietary or non proprietary
memership certificates
incorporations- and
&g* (ther instruments as may in the
future e determined y the
Commission.
#. I##," & the originator, maker,
oligor, or creator of the security.
164
0. 5$!" & a person engaged in the
usiness of uying and selling
securities for the account of others.
@. D"al" & any person who uys and
sells securities for his:her own
account in the ordinary course of
usiness.
A. A##$(iat"+ p"#$% $4 a 2$!" $
+"al" / an employee thereof who,
directly e%ercises control of
supervisory authority, ut does not
include a salesman, or an agent or a
person whose functions are solely
clerical or ministerial.
B. Cl"ai%- A-"%() / any person who
acts as intermediary in making
deliveries upon payment to effect
settlement in securities transactions.
C. E3(*a%-" & an organi1ed
marketplace or facility that rings
together uyers and sellers and
e%ecutes trades of securities and:or
commodities.
D. I%#i+" 6
&a* the issuer-
&* 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 aout the
issuer or the security that is not
generally availale to the pulic-
&d* a government employee, or
director, or officer of an
e%change, clearing agency
and:or self/regulatory
organi1ation who has access to
material information aout an
issuer or a security that is not
generally availale to the pulic-
or
&e* a person who learns such
information y a communication
from any of the foregoing
insiders.
E. '$0$t" & a person who, acting
alone or with others, takes initiative
in founding and organi1ing the
usiness or enterprise of the issuer
and receives consideration therefor.
1F. R"-i#tati$% #tat"0"%t & is the
application for the registration of
securities required to e filed with the
Commission7
11. Sal"#0a% & a natural person,
employed as such or as an agent, y
a dealer, issuer or roker to uy and
sell securities.
1#. U%+"/it" & a person who
guarantees on a firm commitment
and:or declared est effort asis the
distriution and sale of securities of
any kind y another company.
$. R"-i#tati$% $4 S"(,iti"#
!ecurities shall not e sold or offered for
sale or distriution within the 9hilippines,
without a registration statement duly filed
with and approved y the Commission.
1. Fili%- $4 R"-i#tati$% Stat"0"%t
All securities shall e registered
through the filing y the issuer in the
main office of the Commission, of a
sworn registration statement. The
registration statement shall include
any prospectus required or permitted
to e delivered.
The information required for
registration shall include, among
others the effect of the securities
issue on ownership, on the mi% of
ownership, especially foreign and local
ownership.

The registration statement shall e
signed y
the issuerGs e%ecutive officer
principal operating officer
principal financial officer
comptroller
principal accounting officer
corporate secretary or
persons performing similar
functions
Accompanied +y a duly verified
resolution of the oard of directors.
The written consent of the e%pert
named as having certified any part of
the registration statement or any
document used in connection
therewith shall also e filed.
165
Hhere the registration statement
includes shares to e sold y selling
shareholders, a written certification
y such selling shareholders as to
the accuracy of any part of the
registration statement contriuted to
y such selling shareholders shall
also e filed.
#. 'a)0"%t $4 F""
The issuer shall pay to the
Commission a fee of not more than
1:1F of 1I of the ma%imum
aggregate price at which such
securities are proposed to e
offered. The Commission shall
prescrie y rule diminishing fees in
inverse proportion to the value of
the aggregate price of the offering.
0. N$ti(" $4 Fili%-
6otice of the filing shall e
immediately pulished y the issuer
in # newspapers of general
circulation in the 9hilippines, once a
week for # consecutive weeks, or in
such other manner as the
Commission shall prescrie, reciting
that?
a registration statement has
een filed,
the registration statement, as
well as the papers attached
thereto are open to inspection,
copies shall e furnished to
interested parties at such
reasonale charge as the
Commission may prescrie.
@. Wit*+a/al $4 R"-i#tati$%
Stat"0"%t
A registration statement may e
withdrawn y the issuer only with
the consent of the Commission.
A. A0"%+0"%t# t$ R"-i#tati$%
Stat"0"%t
'f 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. )pon compliance with
such order, the amended registration
statement shall ecome effective.

An amendment filed pi$ t$ t*"
"44"(ti1" +at" of the registration
statement shall recommence the @A
day period within which the
Commission shall act on a registration
statement.
An amendment filed a4t" t*"
"44"(ti1" +at" of the registration
statement shall ecome effective only
upon such date as determined y the
Commission.

'f any change occurs in the facts set
forth in a registration statement, the
issuer shall file an amendment thereto
setting forth the change.
B. A(("pta%(" $ R"8"(ti$% 2) SEC
Hithin @A days after the date of filing
of the registration statement, or y
such later date to which the issuer
has consented, the Commission shall
declare the registration statement
effective or re,ected, unless the
applicant is allowed to amend the
registration statement.
a* A(("pta%("
The Commission shall declare the
registration statement to e
effective if it finds that the
registration statement together
with all the other papers and
documents attached thereto, is on
its face complete and that the
requirements have een complied
with.
* R"8"(ti$% 9 R"1$(ati$%
The Commission may re,ect a
registration statement and refuse
registration of the security, or
revoke the effectivity of a
registration statement and the
registration of the security
thereunder after due notice and
hearing if it finds that?
The issuer?
166
o <as een ,udicially declared
insolvent-
o <as violated any of the
provisions of this Code, the
rules promulgated pursuant
thereto, or any order of the
Commission in connection
with the offering for which a
registration statement has
een filed-
o <as een or is engaged or is
aout to engage in
fraudulent transactions-
o <as made any false or
misleading representation of
material facts in any
prospectus-
o <as failed to comply with
any requirement that the
Commission may impose as
a condition for registration
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 e
stated therein or necessary to
make the statements therein not
misleading- or
The issuer, any officer, director
or controlling person of the
issuer, or person performing
similar functions, or any
underwriter has een convicted,
y a competent ,udicial or
administrative ody, upon plea of
guilty, or otherwise, of an offense
involving moral turpitude and:or
fraud or is en,oined or restrained
y the Commission or other
competent ,udicial or
administrative ody for violations
of securities, commodities, and
other related laws.
'f any issuer shall refuse to
permit an e%amination to e
made y the Commission, its
refusal shall e ground for the
refusal or revocation of the
registration of its securities.
C. Oat* $4 I##,"
)pon effectivity of the registration
statement, the issuer shall state
under oath in every prospectus that
all registration requirements have
een met and that all information are
true and correct as represented y
the issuer or the one making the
statement.
Any untrue statement of fact or
omission to state a material fact
required to e stated or necessary to
make the statement therein not
misleading shall constitute fraud.
E. S,#p"%#i$% $4 O44" a%+ Sal"
'f the Commission deems it necessary,
it may issue an order suspending the
offer and sale of the securities
pending any investigation.
'f, at any time, the Commission finds
that a registration statement contains
any false statement or omits to state
any fact required to e stated therein
or necessary to make the statements
therein not misleading, the
Commission may conduct an
e%amination, and, after due notice
and hearing, issue an (rder
suspending the effectivity of the
.ailure of the issuer, underwriter, or
any other person to cooperate, or his
ostruction or refusal to undergo an
e%amination, shall e a ground for the
issuance of a suspension order.
'f, at any time, the information
contained in the registration
statement filed is or has ecome
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
necessary to enale the Commission
to ascertain whether the registration
of such security should e revoked.
The Commission may also suspend
the right to sell and offer for sale such
security pending further investigation.
The refusal to furnish information
required y the Commission may e a
ground for the issuance of an order of
suspension.
167
The order shall e deemed confidential,
and shall not e pulished.
)pon the issuance of the suspension
order, no further offer or sale of such
security shall e made until the same is
lifted or set aside y the Commission.
(therwise, such sale shall e void.

6otice of issuance of such order shall e
given to the issuer and every dealer and
roker who shall have notified the
Commission of an intention to sell such
security.

.. E3"0pt S"(,iti"# a%+ Ta%#a(ti$%#
1. E3"0pt S"(,iti"#
&a* Any security issued or
guaranteed y the >overnment
of the 9hilippines, or y any
political sudivision or agency
thereof, or y any person acting
as an instrumentality of said
>overnment.
&* Any security issued or
guaranteed y the government
of any country with which the
9hilippines maintains diplomatic
relations, or y any state,
province or political sudivision
thereof on the asis of
reciprocity.
&c* Certificates issued y a receiver
or y a trustee in ankruptcy
duly approved y the proper
ad,udicatory ody.
&d* Any security or its derivatives
the sale or transfer of which is
under the supervision and
regulation of the (ffice of the
'nsurance Commission, <ousing
and 3and )se ;egulatory +oard,
or the +ureau of 'nternal
;evenue.
&e* Any security issued y a ank
e%cept its own shares of stock.
#. E3"0pt Ta%#a(ti$%# 6
&a* At any ,udicial sale, or sale y
an e%ecutor, administrator,
guardian or receiver or trustee
in insolvency or ankruptcy.
&* +y or for the account of a
pledge holder, or mortgagee or
similar lien holder selling in the
ordinary course of usiness and
not for the purpose of avoiding
the provisions of this Code, to
liquidate a ona fide det, a
security pledged in good faith as
security for such det.
&c* An isolated transaction in which
the sale or offer for sale,
suscription or delivery is not
eing made in the course of
repeated and successive
transactions y the owner or his
representative and such owner or
representative not eing the
underwriter of such security.
&d* The distriution y a corporation
to its stockholders or other
security holders as a stock
dividend or other distriution out
of surplus.
&e* The sale of capital stock of a
corporation to its own
stockholders e%clusively, where
no commission or other
remuneration is paid or given
directly or indirectly.
&f* The issuance of onds or notes
secured y mortgage upon real
estate or tangile personal
property, where the entire
mortgage together with all the
onds or notes secured therey
are sold to a single purchaser at a
single sale.
&g* The issue and delivery of any
security in e%change for any other
security of the same issuer
pursuant to a right of conversion?
9rovided, That the security
surrendered has een registered
under this Code or was e%empt,
and that the security delivered in
e%change, 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.
)pon such conversion the par
value of the security surrendered
in such e%change shall e deemed
the price at which the securities
issued and delivered in such
e%change are sold.
&h* +rokerGs transactions, e%ecuted
upon customerGs orders, on any
registered E%change or other
trading market.
&i* !uscriptions for shares of the
capital stock of a corporation prior
to incorporation or in pursuance
of an increase in its authori1ed
capital stock, when no e%pense is
168
incurred, or no commission,
compensation or remuneration
is paid or given, and only when
the purpose for soliciting, giving
or taking of such suscriptions
is to comply with the
requirements of such law as to
the percentage of the capital
stock which should e
suscried efore it can e
registered and duly
incorporated, or its authori1ed
capital increased.
&,* The e%change of securities y
the issuer with its e%isting
security holders e%clusively,
where no commission or other
remuneration is paid.
&k* The sale of securities y an
issuer to fewer than #F persons
in the 9hilippines during any
twelve/month period.
&l* The sale of securities to any of
the following qualified uyers?
+ank-
;egistered investment
house-
'nsurance company-
9ension fund or retirement
plan maintained y the
>overnment or any political
sudivision or managed y
a ank or other persons
authori1ed y the +angko
!entral to engage in trust
functions-
'nvestment company- or
!uch other person as the
Commission determine as
qualified uyers, on the
asis of such factors as
financial sophistication, net
worth, knowledge, and
e%perience in financial and
usiness matters, or
amount of assets under
management.
The Commission may e%empt other
transactions, if it finds that the
requirement of registration is not
necessary in the pulic interest or
for the protection of the investors
such as y reason of the small
amount involved or the limited
character of the pulic offering.
0. '$("+," t$ :,ali4) 4$
E3"0pti$%
Any person applying for an e%emption
shall file with the Commission a notice
identifying the e%emption relied upon
on such form and at such time as the
Commission y rule may prescrie
and with such notice shall pay to the
Commission a fee equivalent to 1:1F
of 1I of the ma%imum aggregate
price or issued value of the securities.
>. T"%+" O44" a%+ '$3) S$li(itati$%
1. T"%+" O44"#
'ati"# R";,i"+ t$ 0a!"
T"%+" O44"
&a* Any person or group of
persons acting in concert who
intends to acquire at least
1AI 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 9AF,FFF,FFF and having
#FF or more stockholders
with at least 1FF shares each
or
&* who intends to acquire at
least 0FI of such equity over
a period of 1# months shall
make a tender offer to
stockholders y filing with the
Commission a declaration to
that effect- and furnish the
issuer a statement containing
such of the information as the

Withdrawal of tender Offer
!ecurities deposited pursuant to a
tender offer or request or
invitation for tenders may e
withdrawn y or on ehalf of the
depositor at any time throughout
the period that the tender offer
remains open and if the securities
deposited have not een
previously accepted for payment,
and at any time after BF days
from the date of the original
tender offer or request or
invitation, e%cept as the
Commission may otherwise
prescrie.
169

Securities offered exceed
required quantity
Hhere the securities offered
e%ceed that which a person or
group of persons is ound or
willing to take up and pay for,
the securities that are su,ect of
the tender offer shall e taken
up as nearly as may e pro rata,
disregarding fractions, according
to the numer of securities
deposited y each depositor.
The provisions of this susection
shall also apply to securities
deposited within 1F days after
notice of an increase in the
consideration offered to security
holders is first pulished or sent
or given to security holders.

Vaiati$%# $4 T"%+" O44"
Hhere any person varies the
terms of a tender offer or
request or invitation for tenders
efore the e%piration thereof y
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 een taken up
y such person efore the
variation of the tender offer or
request or invitation.

#. '$3) S$li(itati$%#
9ro%ies must e
in writing
signed y the stockholder or
his duly authori1ed
representative and
filed efore the scheduled
meeting with the corporate
secretary.

)nless otherwise provided in the
pro%y, it shall e valid only for the
meeting for which it is intended. 6o
pro%y shall e valid and effective for
a period longer than A years at one
time.

6o roker or dealer shall give any
pro%y, consent or authori1ation to a
person other than the customer,
without the e%press written
authori1ation of such customer.

A roker or dealer who holds or
acquires the pro%y for at least 1FI or
such percentage as the Commission
may prescrie of the outstanding
share of the issuer, shall sumit a
report identifying the eneficial owner
within 1F days after such acquisition,
for its own account or customer, to
the issuer of the security, to the
E%change where the security is traded
and to the Commission.
0. F""# 4$ T"%+" O44"# a%+ C"tai%
'$3) S$li(itati$%#
At the time of filing with the
Commission of any statement
required for any tender offer or for
pro%y or consent solicitation, the
Commission may require that the
person making such filing pay a fee of
not more than 1:1F of 1I of?
The proposed aggregate purchase
price in the case of a transaction
under !ections #F or C#.#-
The proposed payment in cash,
and the value of any securities or
property to e transferred in the
acquisition, merger or
consolidation, or the cash and
value of any securities proposed
to e received upon the sale or
disposition of such assets in the
case of a solicitation under
!ection #F.
<. R"-,lati$% $4 Ta%#a(ti$%# $4
Di"(t$# 9 O44i("# 9 'i%(ipal
St$(!*$l+"#
Every person who is directly or
indirectly the eneficial owner of more
than 1FI of any class of any equity
security 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 ecomes such a eneficial
owner, director, or officer, a statement
with the Commission and, if such security
is listed for trading on an E%change, also
with the E%change, of the amount of all
equity securities of such issuer of which
he is the eneficial owner, and within ten
&1F* days after the close of each calendar
170
month thereafter, if there has een a
change in such ownership during such
month, shall also file a statement
indicating his ownership at the close of
the calendar month and such changes as
have occurred during such calendar
month.

.or the purpose of preventing the unfair
use of information which may have een
otained y such eneficial owner,
director, or officer y reason of his
relationship to the issuer
any profit reali1ed y him from
any purchase and sale, or any
sale and purchase, of any equity
security of such issuer within
any period of less than si% &B*
months,
o unless such security was
acquired in good faith in
connection with a det
previously contracted,
shall inure to and e
recoverale y the issuer,
irrespective of any intention of
holding the security purchased
or of not repurchasing the
security sold for a period
e%ceeding B months.
!uit to recover such profit may e
instituted efore the ;TC y the issuer,
or y the owner of any security of the
issuer in the name and in ehalf of the
issuer if the issuer shall fail or refuse to
ring such suit within BF days after
request or shall fail diligently to
prosecute the same thereafter.
6o such suit shall e rought more
than t# years after the date such
profit was reali1ed.

't shall e unlawful for any eneficial
owner, director, or officer to sell any
equity security of such issuer if the
person selling?
&a* $oes not own the security sold-
or
&* 'f owning the security, does not
deliver it against such sale
within #F days thereafter, or
does not within A days after
such sale deposit it in the mails
or other usual channels of
transportation-
+ut no person shall e deemed to have
violated this susection if he proves that
notwithstanding the e%ercise of good faith
he was unale to make such delivery or
deposit within such time, or that to do so
would cause undue inconvenience or
e%pense.

The provisions shall not apply to any
purchase and:or sale of an equity security
not then or thereafter held y him
in an investment account,
y a dealer in the ordinary course
of his usiness and incident to the
estalishment or maintenance y
him of a primary or secondary
market, otherwise than on an
E%change, for such security.
1. Ma%ip,lati$% $4 S"(,it) 'i("#
't shall e unlawful for any person
acting for himself or through a dealer
or roker, directly or indirectly?
&a* To create a false or misleading
appearance of active trading in
any listed security traded in an
E%change or any other trading
market?
+y effecting any transaction
in such security which involves
no change in the eneficial
ownership thereof-
+y entering an order or
orders for the purchase or sale
of such security with the
knowledge that a
simultaneous order or orders
of sustantially the same si1e,
time and price, for the sale or
purchase of any such security,
has or will e entered y or for
the same or different parties-
or
+y performing similar act
where there is no change in
eneficial ownership.
&* To effect, alone or with others, a
series of transactions in securities
that?
;aises their price to induce
the purchase of a security-
$epresses their price to
induce the sale of a security-
or
171
Creates active trading to
induce such a purchase or
sale through manipulative
devices such as marking the
close, painting the tape,
squee1ing the float, hype
and dump, oiler room
operations and such other
similar devices.
&c* To circulate or disseminate
information that the price of any
security listed in an E%change
will or is likely to rise or fall
ecause 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 reasonale ground to
elieve was so false or
misleading, for the purpose of
inducing the purchase or sale of
any security listed or traded in
an E%change.
&e* To effect any series of
transactions for the purchase
and:or sale of any security
traded in an E%change for the
purpose of pegging, fi%ing or
staili1ing the price of such
security, unless otherwise
allowed y this Code or y rules
of the Commission.
#. I%#i+" Ta+i%-
'ati"# ($1""+ :
'nsider
insiderGs spouse or relatives y
affinity or consanguinity within
the second degree, legitimate or
common/law,
't shall e unlawful for an insider to
sell or uy a security of the issuer,
while in possession of material
information with respect to the
issuer or the security that is not
generally availale to the pulic,
unless?
&a* The insider proves that the
information was not gained from
such relationship- or
&* 'f the other party selling to or
uying from the insider &or his
agent* is identified, the insider
proves?
that he disclosed the
information to the other party,
or
that he had reason to elieve
that the other party otherwise
is also in possession of the
information.
A purchase or sale of a security of the
issuer shall e presumed to have een
effected while in possession of
material non/pulic information if
transacted after such information
came into e%istence ut prior to
dissemination of such information to
the pulic and the lapse of a
reasonale time for the market to
asor such information
This presumption shall e reutted
upon a showing y the purchaser or
seller that he was not aware of the
material non/pulic information at the
time of the purchase or sale.

Mat"ial %$%&p,2li( i%4$0ati$%:
't has not een generally disclosed to
the pulic and would likely affect the
market price of the security after
eing disseminated to the pulic and
the lapse of a reasonale time for the
market to asor the information- or
would e considered y a reasonale
person important under the
circumstances in determining his
course of action whether to uy, sell
or hold a security.
't shall e unlawful for any insider to
communicate material non/pulic
information aout the issuer or the
security to any person who, y virtue
of the communication, ecomes an
insider, where the insider
communicating the information knows
or has reason to elieve that such
person will likely uy or sell a security
of the issuer while in possession of
such information.
172
Insider Trading in Relation to
Tender Offers
a.* 't shall e unlawful where a
tender offer has commenced or
is aout to commence for?
Any person &other than the
tender offeror* who is in
possession of material non/
pulic information relating to
such tender offer, to uy or
sell the securities of the
issuer that are sought or to
e sought y such tender
offer if such person knows or
has reason to elieve that
o the information is
non/pulic and
o has een acquired
directly or indirectly
from the tender
offeror, those acting
on its ehalf, the
issuer of the
securities, or any
insider of such
issuer- and
Any tender offeror, those
acting on its ehalf, the
issuer of the securities, and
any insider to communicate
material non/pulic
information relating to the
tender offer to any other
person.
J. R"-,lati$% $4 Ma!"t '$4"##i$%al#
a%+ Ot*" E%titi"#
1. R"-i#tati$% $4 5$!"#<
D"al"#< Sal"#0"% a%+
A##$(iat"+ '"#$%#
>eneral ;ule ?
o 6o person shall engage in the
usiness of uying or selling
securities in the 9hilippines as
a roker or dealer, or act as a
salesman, or an associated
person of any roker or dealer
unless registered as such with
the Commission.
o 6o registered roker 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.
o Ni($la# 1# CA (=998)?
The futility of petitionerKs action
ecame more pronounced y
the fact that he traded
securities for the account of
others without the necessary
license from the !EC. Clearly,
such omission was in violation
of !ection 1E of the ;evised
!ecurities Act.
The purpose of the statute
requiring the registration of
rokers selling securities and
the filing of data regarding
securities which they propose to
sell, is to protect the pulic and
strengthen the securities
mechanism.
American ,urisprudence
emphasi1es the principle that?
Lan unlicensed person may not
recover compensation for
services as a roker where a
statute or ordinance requiring a
license is applicale and such
statute or ordinance is of a
regulatory nature, was enacted
in the e%ercise of the police
power for the purpose of
protecting the pulic, requires a
license as evidence of
qualification and fitness, and
e%pressly precludes an
unlicensed person from
recovering compensation y
suit, or at least manifests an
intent to prohiit and render
unlawful the transaction of
usiness y an unlicensed
person.L
He see no reason not to apply
the same rule in our
,urisdiction. !tock market
trading, a technical and highly
speciali1ed institution in the
9hilippines, must e entrusted
to individuals with proven
integrity, competence and
knowledge, who have due
regard to the requirements of
the law.
173
E%ception?
The Commission may
conditionally or
unconditionally e%empt any
roker, dealer, salesman,
associated person of any
roker or dealer, or any class
of the foregoing, from
registration as it deems
consistent with the pulic
interest and the protection of
investors.
'$("+,":
o A 2$!" $ +"al" may
apply for registration y filing
with the Commission a written
application.
o ;egistration of a #al"#0a%
$ $4 a% a##$(iat"+ p"#$%
$4 a "-i#t""+ 2$!" $
+"al" may e made upon
written application filed with
the Commission y such
salesman or associated
person. 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.
#. :,ali4i(ati$%# $4 Ma!"t
'$4"##i$%al#
The Commission shall promulgate
rules and regulations prescriing
the qualifications for registration
of each category of applicant,
which shall, among other things,
require as a condition for
registration that?
&a* 'f a natural person, the
applicant satisfactorily
pass a written
e%amination as to his
proficiency and knowledge
in the area of activity for
which registration
&* 'n the case of a roker or
dealer, the applicant
satisfy a minimum net
capital and provide a
ond or other security as
the Commission may
prescrie
&c* 'f located outside of the
9hilippines, the applicant
files a written consent to
service of process.
0. SEC A(ti$%
Hithin 0F days after the filing of
any application, the Commission
shall y order?
&a* >rant registration if it
determines that the
requirements of this
!ection and the
qualifications for
registration have een
satisfied- or
&* $eny said registration.

The names and addresses of all
persons approved for registration
and all orders of the Commission
with respect thereto shall e
recorded in a ;egister of
!ecurities "arket 9rofessionals
kept in the office of the
Commission which shall e open
to pulic inspection.
@. C$%ti%,i%- R";,i"0"%t#
o Every person registered shall
file with the Commission
information necessary to keep
the application for registration
current and accurate,.
o Every person registered shall
pay to the Commission an
annual fee. )pon notice y the
Commission that such annual
fee has not een paid as
required, the registration of
such person shall e suspended
until payment has een made.

A. T"0i%ati$% $4 R"-i#tati$%
The registration of a salesman or
associated person shall e
automatically terminated upon the
cessation of his affiliation with said
registered roker or dealer, or with
an issuer in the case of a salesman
employed, appointed or authori1ed
y such issuer.
174
The registered roker or dealer, or
issuer, as the case may e, shall
file with the Commission a notice
of separation of such salesman or
associated person.
B. R"1$(ati$%< R"4,#al $
S,#p"%#i$% $4 R"-i#tati$% $4
5$!"#< D"al"#< Sal"#0"%
a%+ A##$(iat"+ '"#$%#
'f, after due notice and hearing,
the Commission determines the
applicant or registrant?
&a* <as willfully violated any
provision of this Code, any
rule, regulation or order
made hereunder, or any
other law administered y
the Commission, or in the
case of a registered roker,
dealer or associated person
has failed to supervise, with
a view to preventing such
violation, another person
who commits such violation-
&* <as willfully made or caused
to e made a materially
false or misleading
statement in any application
for registration or report
filed with the Commission or
a self/regulatory
organi1ation, or has willfully
omitted to state any
material fact that is
required to e stated
therein-
&c* <as failed to satisfy the
qualifications or
requirements for
registration-
&d* <as een convicted of an
offense involving moral
turpitude, fraud,
eme11lement,
counterfeiting, theft, estafa,
misappropriation, forgery,
riery, false oath, or
per,ury, or of a violation of
securities, commodities,
anking, real estate or
insurance laws-
&e* 's en,oined or restrained y a
administrative ody from
engaging in securities,
commodities, anking, real
estate or insurance activities
or from willfully violating laws
governing such activities-
&f* 's su,ect to an order of a
administrative ody refusing,
revoking or suspending any
registration, license or other
permit under this Code, the
rules and regulations
promulgated thereunder, any
other law administered y the
Commission-
&g* 's su,ect to an order of a self/
regulatory organi1ation
suspending or e%pelling him
from memership or
participation
&h* <as een found to have willfully
violated any provisions of
securities, commodities,
anking, real estate or
insurance laws, or has
willfully aided, aetted,
counseled, commanded,
induced or procured such
violation- or
&i* <as een ,udicially declared
insolvent.

#E.@. 't shall e sufficient cause for
refusal, revocation or suspension of a
rokerKs or dealerGs registration, if any
associated person thereof or any ,uridical
entity controlled y such associated
person has committed any act or omission
or is su,ect to any disaility enumerated
earlier.
3. R"-,lati$% $4 E3(*a%-"#
1. Nat," $4 St$(! E3(*a%-"#
Sec Opinion #11 (2!"
't is important to stress that the
!ecurities ;egulation Code &!;C*
treats e%changes as a special specie
of corporation and su,ects them to
rules not otherwise applicale to
regular corporations.
The stock e%change performs a
function vital to the national economy,
a function vested with pulic interest.
't is said that the economy moves on
the asis of the rise and fall of the
stocks traded and thus, the integrity
of the e%change overseeing these
transactions can never e over
175
emphasi1ed. 't is for this reason
that the !;C provides for stricter
rules on e%change regulation. The
!;C devotes a whole chapter on
e%changes and other securities
trading markets, and it is replete
with provisions designed to
professionali1e the e%change,
encourage greater pulic
participation, ensure increased
transparency, greater responsiility
and improve corporate governance.
These provisions are not found in
the Corporation Code and are meant
as additional legal requirements
applicale only to e%changes.
't is thus incorrect to argue that the
provisions of the Corporation Code
alone govern the operation of
e%changes. Hhile the Corporation
Code applies to corporations in
general, the !;C is a special law
that primarily governs the regulation
of e%changes. As etween a specific
statute and a general statute, the
former must prevail since it evinces
the legislative intent more clearly
than a general statute does.
Thus the !EC has the power of
supervision over e%changes.
!upervision entails overseeing or
the power or authority to see that
suordinate su,ect performs its
duties. 'f the latter fails or neglects
to fulfill them the former may take
such action or step as prescried y
law to make them perform its
duties. 'n this specific instance, the
!EC can even take over the
management of the e%change as
authori1ed y the !;C.
#. R"-i#tati$% '$("+,"
Any E%change may e registered as
such with the Commission y filing
an application for registration in
such form and containing such
information and supporting
documents as the Commission y
rule shall prescrie, including the
following?
&a* An undertaking to comply and
enforce compliance y its
memers with the provisions
of this Code, its implementing
rules or regulations and the
rules of the E%change-
&* The organi1ational charts of the
E%change, rules of procedure,
and a list of its officers and
memers-
&c* Copies of the rules of the
E%change- and
&d* An undertaking that in the event
a memer firm ecomes
insolvent or when the E%change
shall have found that the
financial condition of its
memer 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 E%change
shall take over the operation of
the insolvent memer firm and
immediately proceed to settle
the memer firmGs liailities to
its customers.
;egistration of an E%change shall e
granted upon compliance with the
following provisions?
&a* That the applicant is organi1ed as
a stock corporation-
&* That the applicant is engaged
solely in the usiness of
operating an e%change?
9rovided, however, That the
Commission may e%empting an
E%change organi1ed as a stock
corporation and owned and
controlled y another ,uridical
person from this restriction-
&c* Hhere the E%change is organi1ed
as a stock corporation, that no
person may eneficially own or
control, directly or indirectly,
more than AI of the voting
rights of the E%change and no
industry or usiness group may
eneficially own or control more
than #FI of the voting rights of
the E%change? 9rovided,
however, That the Commission
may adopt rules, regulations or
issue an order, upon
application, e%empting an
applicant from this prohiition
where it finds that such
ownership or control will not
negatively impact on the
e%changeGs aility to effectively
operate in the pulic interest-
176
&d* The e%pulsion, suspension, or
disciplining of a memer and
persons associated with a
memer for conduct or
proceeding inconsistent with
,ust and equitale principles
of fair trade, and for violations
of provisions of this Code or
the rules of the E%change-
&e* A fair procedure for the
disciplining of memers and
persons associated with
memers, the denial of
memership to any person
seeking to e a memer, the
arring of any person from
association with a memer,
and the prohiition or
limitation of any person from
access to services offered y
the E%change-
&f* That the rokers in the oard of
the E%change shall comprise
of not more than @EI of such
oard and shall
proportionately represent the
E%change memership in
terms of volume:value of
trade and paid up capital, and
that any natural person
associated with a ,uridical
entity that is a memer shall
himself e deemed to e a
memer for this purpose-
&g* .or the oard of the E%change
to include in its composition
&h* &i* the president of the
E%change, and
&ii* no less than A1I of the
remaining memers of the
oard to e comprised of 0
independent directors and
persons who represent the
interests of issuers, investors,
and other market participants,
who are not associated with
any roker or dealer or
memer of the E%change for a
period of # years prior to
his:her appointment.
6o officer or employee of a
memer, its susidiaries or
affiliates or related interests
shall ecome an independent
director? 9rovided, however,
That the Commission may y
rule, regulation, or order upon
application, permit the
e%change organi1ed as a stock
corporation to use a different
governance structure?
9rovided, further, That the
Commission is satisfied that the
E%change is acting in the pulic
interest and is ale to
effectively operate as a self/
regulatory organi1ation under
this Code.
&i* The president and other
management of the E%change
to consist only of persons who
are not memers and are not
associated in any capacity,
directly or indirectly with any
roker or dealer or memer or
listed company of the
E%change? 9rovided, That the
E%change may only appoint,
and a person may only serve,
as an officer of the e%change if
such person has not een a
memer or affiliated with any
roker, dealer, or memer of
the E%change for a period of at
least # years prior to such
appointment-
&,* The transparency of transactions
on the E%change-
&k* The equitale allocation of
reasonale dues, fees, and
other charges among memers
and issuers and other persons
using any facility or system
which the E%change operates or
controls-
&l* 9revention of fraudulent and
manipulative acts and practices,
promotion of ,ust and equitale
principles of trade, and, in
general, protection of investors
and the pulic interest- and
&m* The transparent, prompt and
accurate clearance and
settlement of transactions
effected on the E%change.
0. S"-"-ati$% a%+ Li0itati$% $4
F,%(ti$%# $4 M"02"#< 5$!"#
a%+ D"al"#
't shall e unlawful for any memer/
roker of an E%change to effect any
transaction on such E%change for?
its own account,
177
the account of an associated
person, or
an account with respect to
which it or an associated person
thereof e%ercises investment
discretion
9rovided, however, That this section
shall not make unlawful
&a* Any transaction y a memer/
roker acting in the capacity
of a market maker-
&* Any transaction reasonaly
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 e
defined y the Commission.
S"( Opi%i$% >== (?@@A)
The aove/quoted !ec. 00.#. of the !;C
is not found in the old ;evised !ecurities
Act, nor in the Corporation Code. 'tems
&c*, &f* and &g* thereof are all intended
to encourage greater pulic
participation, ensure increased
transparency, greater responsiility and
improve corporate governance.
!usection &c* mandates that the
ownership of the stocks of the e%change
e roadened and democrati1ed,
therey ensuring greater pulic
participation.
(n the other hand, !usections &f* and
&g* mandate a oard composition where
no more than @EI of the seats shall e
occupied y rokers, and no less than
A1I to e comprised of &0* independent
directors and persons representing other
sectors of the market. Hith respect to
independent directors, their election in
the +oard is intended to ensure that the
+oard will faithfully discharge its
fiduciary responsiilities to its
stockholders.
These provisions aim for a more
representative, democratic, independent
+oard of $irectors that is autonomous
from the control of any sector of the
market.
". I%+"p"%+"%t Di"(t$#
Any corporation with
a class of equity securities listed for
trading on an E%change or
with assets in e%cess of
9AF,FFF,FFF.FF and having #FF or
more holders, at least of #FF of which
are holding at least 1FF shares of a
class of its equity securities or which
has sold a class of equity securities to
the pulic pursuant to an effective
registration statement
!hall have at least # independent
directors or such independent directors
shall constitute at least #FI of the
memers of such oard, whichever is the
lesser.
An Mindependent directorN shall mean a
person other than an officer or employee
of the corporation, its parent or
susidiaries, or any other individual
having a relationship with the corporation,
which would interfere with the e%ercise of
independent ,udgment in carrying out the
responsiilities of a director.
6. S"l4&R"-,lat$) O-a%iBati$%#
1. S($p" 9 D"4i%iti$%
The Commission shall have the power
to register as a self/regulatory
organi1ation organi1ations whose
operations are related to or connected
with the securities market such as ut
not limited to
associations of rokers and
dealers,
transfer agents,
custodians,
fiscal and paying agents,
computer services,
news disseminating services,
pro%y solicitors,
statistical agencies,
securities rating agencies, and
securities information processors
Hhich are engaged in the usiness of?
&a* Collecting, processing, or
preparing for distriution or
178
pulication, or assisting,
participating in, or coordinating
the distriution or pulication
of, information with respect to
transactions in or quotations for
any security- or
&* $istriuting or pulishing on a
current and continuing asis,
information with respect to such
transactions or quotations.
#. R"-i#tati$%

An association of rokers and
dealers may e registered as a
securities association y filing with
the Commission an application for
registration.

!uch association shall not e
registered unless the Commission
determines that?
&a* The association is so organi1ed
and has the capacity to e ale
to carry out the purposes of this
Code and to comply with, and to
enforce compliance y its
memers with the provisions of
this Code.
&* The rules of the association,
notwithstanding anything in the
Corporation Code to the
contrary, provide that?
Any registered roker
or dealer may ecome a
memer of the
association-
There e%ist a fair
representation of its
memers to serve on the
+oard of $irectors and in
the administration of its
affairs, and that any
natural person
associated with a
,uridical entity that is a
memer shall himself e
deemed to e a memer
for this purpose-
The +oard of $irectors
of the association
includes in its
composition? &a* The
president of the
association and &*
9ersons who represent
the interests of issuers
and pulic investors and
are not associated with
any roker or dealer or
memer of the
association- that the
president and other
management of the
association not e a
memer or associated
with any roker, dealer or
memer of the
association-
.or the equitale
allocation of reasonale
dues, fees, and other
charges among memers
and issuers and other
persons using any facility
or system which the
association operates or
controls-
.or the prevention of
fraudulent and
manipulative acts and
practices, the promotion
of ,ust and equitale
principles of trade, and
the protection of investors
and the pulic interest-
That its memers e
appropriately disciplined
for violation of any
provision of this Code-
That a fair procedure for
the disciplining of
memers, the denial of
memership to any person
seeking memership
therein, the arring of any
person from ecoming
associated with a memer
thereof, and the
prohiition or limitation y
the association of any
person with respect to
access to services offered
y the association or a
memer thereof.
0. D"%ial $4 M"02"#*ip 9
E0pl$)0"%t
&a* A registered securities association
shall deny memership to any
person who is not a registered
roker or dealer.
&* A registered securities association
may deny memership to, or
condition the memership of, a
registered roker or dealer if
such roker or dealer?
179
$oes not meet the
standards of financial
responsiility,
operational capaility,
training, e%perience,
or competence that
are prescried y the
rules of the
association- or
&ii* <as engaged, and
there is a reasonale
likelihood it will again
engage, in acts or
practices inconsistent
with ,ust and equitale
principles of fair trade.
&c* A registered securities
association may deny
memership to a registered
roker or dealer not engaged
in a type of usiness in which
the rules of the association
require memers to e
engaged? 9rovided, however,
That no registered securities
association may deny
memership to a registered
roker or dealer y reason of
the amount of usiness done
y the roker or dealer.
&d* A registered securities
association may ar a
salesman or person
associated with a roker or
dealer from eing employed
y a memer or set conditions
for the employment of a
salesman or associated if such
person?
$oes not meet the
standards of training,
e%perience, or
competence that are
prescried y the rules
of the association- or
<as engaged, and
there is a reasonale
likelihood he will again
engage, in acts or
practices inconsistent
with ,ust and equitale
principles of fair trade.
(. Ma-i% Ta+i%-
1. Ma-i% R";,i"0"%t#
.or the purpose of preventing the
e%cessive use of credit for the
purchase or carrying of securities, the
Commission, shall prescrie rules and
regulations with respect to the
amount of credit that may e
e%tended on any security.
.or the e%tension of credit, such rules
and regulations shall e ased upon
the following standard?

An amount not greater than
whichever is the higher of
(a) BAI of the current market price
of the security- or
(2) 1FFI*of the lowest market price
of the security during the
preceding 0B calendar months,
ut not more than CAI of the
current market price.
#. '$*i2it"+ C"+it Aa%-"0"%t#
6o memer of an E%change or roker
or dealer shall, directly or indirectly,
e%tend or maintain credit or arrange
for the e%tension or maintenance of
credit to or for any customer?
&a* (n any security unless such
credit is e%tended and
maintained in accordance with
the rules and regulations which
the Commission shall prescrie-
&* Hithout collateral or on any
collateral other than securities,
e%cept
to maintain a credit
initially e%tended in
conformity with the rules
and regulations of the
Commission- and
in cases where the
e%tension or maintenance
of credit is not for the
purpose of purchasing or
carrying securities or of
evading or circumventing
the provisions of par &a* of
this susection.
0. R"#ti(ti$%# $% 5$$/i%-# 2)
M"02"#< 5$!"#< a%+ D"al"#
't shall e unlawful for any registered
roker or dealer, or memer of an
E%change, directly or indirectly?
180
To permit in the ordinary course
of usiness his aggregate
indetedness including
customersG credit alances, to
e%ceed such percentage of the
net capital &e%clusive of fi%ed
assets and value of E%change
memership* employed in the
usiness, ut not e%ceeding in
any case #,FFFI, as the
To pledge, mortgage, or
otherwise encumer any
security carried for the account
of any customer under
circumstances?
o That will permit the
commingling of his
securities, without his
written consent, with the
securities of any customer-
o That will permit
such securities to e
commingled with the
securities of any person
other than a ona fide
customer- or
o That will permit
such securities to e
pledged, mortgaged or
encumered, or su,ected
to any lien or claim of the
pledgee, for a sum in
e%cess of the aggregate
indetedness of such
customers in respect of
such securities.
To lend or arrange for the
lending of any security carried
for the account of any customer
without the written consent of
such customer.
@. E%4$("0"%t $4 Ma-i%
R";,i"0"%t# a%+ R"#ti(ti$%#
$% 5$$/i%-
To prevent indirect violations of the
margin requirements, the roker or
dealer shall require the customer in
non/margin transactions to pay the
price of the security within such
period as the Commission may
prescrie, which shall in no case
e%ceed the prescried settlement
date.
(therwise, the roker shall sell the
security purchased starting on the
ne%t trading day ut not eyond 1F
trading days following the last day for
the customer to pay such purchase
price, unless such sale cannot e
effected within said period for
,ustifiale reasons.
The sale shall e without pre,udice to
the right of the roker or dealer to
recover any deficiency from the
customer.
9. A+0i%i#tati1" Sa%(ti$%# a%+
S"ttl"0"%t O44"#
1. A+0i%i#tati1" Sa%(ti$%#
'f, after due notice and hearing, the
Commission finds that?
&a* There is a violation of this Code,
its rules, or its orders-
&* Any registered roker or dealer,
associated person thereof has
failed reasonaly to supervise
another person 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
made any untrue statement of
a material fact, or omitted to
state any material fact required
to e stated therein or
necessary to make the
statements therein not
misleading-
&d* or, in the case of an underwriter,
has failed to conduct an inquiry
with reasonale diligence to
insure that a registration
statement is accurate and
complete in all material
respects- or
&e* Any person has refused to permit
any lawful e%aminations into its
affairs,
The imposition of administrative
sanctions shall e without pre,udice to
the filing of criminal charges.
#. S"ttl"0"%t O44"#
At any time, during an investigation or
proceeding under this Code, parties
eing investigated and:or charged
181
may propose in writing an offer of
settlement with the Commission.

The Commission may consider the
offer ased on timing, the nature of
the investigation or proceeding, and
the pulic interest.

The Commission may only agree to
a settlement offer ased on its
findings that such settlement is in
the pulic interest. Any agreement
to settle shall have no legal effect
until pulicly disclosed. !uch
decision may e made without a
determination of guilt on the part of
the person making the offer.

O. Ci1il Lia2iliti"#
1. O% A(($,%t $4 Fal#" R"-i#tati$%
Stat"0"%t
Who #ay sue$
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 e stated therein or
necessary to make such
statements not misleading, and
who suffers damage
'f the person who acquired the
security did so after the issuer has
made generally availale to its
security holders an income
statement covering a period of at
least 1# months, then the right of
recovery shall e conditioned on
proof that such person acquired the
security relying upon such untrue
statement.
Who #ay %e sued$
&a* The issuer and every person
who signed the registration
statement-
&* Every person who was a director
or a partner in the issuer at
the time of the filing of the
registration statement or any
part, supplement or
amendment thereof-
&c* Every person who is named in the
registration statement as eing
or aout to ecome a director
or a partner-
&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 has een
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
&f* Every selling shareholder who
contriuted to and certified as
to the accuracy of a portion of
the registration statement.
&g* Every underwriter with respect to
such security.
'$##i2l" D"4"%#" :
!uch person may allege that at the
time of such acquisition he knew of no
such untrue statement or omission?
#. O% A(($,%t $4 I%#i+" Ta+i%-
W*$ 0a) 2" #,"+C
Any insider who violates !usection
#C.1 and any person in the case of a
tender offer who violates !usection
#C.@ &a*&i*, or any rule or regulation
thereunder, y purchasing or selling a
security while in possession of
material information not generally
availale to the pulic, shall e liale
in a suit rought y any investor who,
contemporaneously with the purchase
or sale of securities that is the su,ect
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.
An insider who communicates
material non/pulic information, shall
e ,ointly and severally liale with and
to the same e%tent as, the insider, or
person in the case of a tender offer.
182
;. Li0itati$% $4 A(ti$%#
6o action shall e maintained to enforce
any liaility created under !ection AB
&false registration statement* or AC
&false prospectus. Communications,
reports* unless rought within # years
after the +i#($1") of the untrue
statement or the omission.
'f the action is to enforce a liaility
created under !usection AC.1&a*
&registration of securities*, unless
rought within # years after the
1i$lati$% upon which it is ased.
'n no event shall any such action e
rought to enforce a liaility created
under !ection AB or !usection AC.1 &a*
more than A years after the security was
ona fide $44""+ t$ t*" p,2li(, or
under !usection AC.1 &* &sale ased
on false prospectus, communications,
reports* more than A years after the
#al".

6o action shall e maintained to enforce
any liaility created under any other
provision of this Code unless rought?
within # years after the
+i#($1") of the facts
constituting the cause of action
and
within A years after such
(a,#" $4 a(ti$% a((,"+7
!. Da0a-"# t$ 2" A/a+"+
1. A0$,%t# 9 Ki%+# $4 Da0a-"#
All suits to recover damages
pursuant to !ections AB &false
registration statement*, AC &false
prospectus, communications,
reports*, AD &fraud in connection
with securities transactions*, AE
&manipulation of prices*, BF
&commodity futures contracts and
pre/need plans* and B1 &insider
trading* shall e rought efore the
;TC, which shall have e%clusive
,urisdiction to hear and decide such
suits.
The Court is herey authori1ed to
award damages in an amount not
e%ceeding triple the amount of the
transaction plus actual damages.

E%emplary damages may also e
awarded in cases of ad faith, fraud,
malevolence or wantonness in the
violation of this Code.

The Court is also authori1ed to award
attorneyGs fees not e%ceeding 0FI of
the award.
#. '"#$%# lia2l" t$ pa)
All persons, including the issuer, held
liale under the provisions of !ections
AB, AC, AD, AE, BF and B1 shall
contriute equally to the total liaility
ad,udged herein.
'n no case shall the principal
stockholders, directors and other
officers, recover their contriution to
the liaility from the issuer. <owever,
the right of the issuer to recover from
the guilty parties the amount it has
contriuted shall not e pre,udiced.
T. N$%&/ai1" $4 '$1i#i$%#
Any condition, stipulation, provision
inding any person to waive compliance
with any provision of this Code or of any
rule of an E%change as well as the waiver
itself, shal e void.
). '"%alti"#
Any person who violates any of the
provisions of this Code or any person who,
in a registration statement makes any
untrue statement of a material fact or
omits to state any material fact required
to e stated therein or necessary to make
the statements therein not misleading,
shall, upon conviction, suffer
a fine of not less than 9AF,FFF.FF
nor more than 9A,FFF,FFF.FF or
imprisonment of not less than C
years nor more than #1 years, or
oth in the discretion of the court.
'f the offender is a corporation,
partnership or association or other
,uridical entity, the penalty may e
imposed upon such ,uridical entity and
upon the officer or officers of the
corporation, partnership, association or
183
entity responsile for the violation. 'f
such officer is an alien, he shall in
addition to the penalties prescried, e
deported.
184

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