Securities Regulation Code (R.A. No.

8799)

a. Implementing Agency of Securities Regulation Code – The law shall be implemented by

Securities and Exchange Commission which is a collegial body composing of Chairperson and four
(4) Commissioners.
i. Powers and Functions of Securities and Exchange Commission
1. Have jurisdiction and supervision over all corporations, partnership or associations
who are the grantees of primary franchises and/or a license or a permit issued by the
Government;
2. Formulate policies and recommendations on issues concerning the securities market,
advise Congress and other government agencies on all aspect of the securities market and
propose legislation and amendments thereto;
3. Approve, reject, suspend, revoke or require amendments to registration statements,
and registration and licensing applications;
4. 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;
5. Impose sanctions for the violation of laws and rules, regulations and orders, and issued
pursuant thereto;
6. Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions
and provide guidance on and supervise compliance with such rules, regulation and orders;
7. Enlist the aid and support of and/or deputized 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 function under its Code;
8. Issue cease and desist orders to prevent fraud or injury to the investing public;
9. Punish for the contempt of the Commission, both direct and indirect, in accordance
with the pertinent provisions of and penalties prescribed by the Rules of Court;
10. Compel the officers of any registered corporation or association to call meetings of
stockholders or members thereof under its supervision;
11. 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;
12. Suspend, or revoke, after proper notice and hearing the franchise or certificate of
registration of corporations, partnership or associations, upon any of the grounds provided by
law; and
13. 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.
ii. Jurisdiction of Securities and Exchange Commission to Intra-Corporate Disputes
1. 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 a.k.a. Special Commercial Courts.
iii. Four Principal Departments of Securities and Exchange Commission
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.
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.
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. 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.

b. Requirement for Registration of Securities Prior to Disposal in Public

i. 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 Securities and
Exchange Commission.
ii. No information relating to an offering of securities shall be disseminated unless a
registration statement has been filed with the Securities and Exchange Commission and the
written communication proposed to be released contains the required information under SRC.
iii. No person shall offer, sell or enter into commodity futures contracts except in
accordance with the rules, regulations and orders the SEC may prescribe in the public interest.
The SEC shall promulgate rules and regulations involving commodity futures contracts to
protect investors to ensure the development of a fair and transparent commodities market.
iv. Requirements for Registration of Securities
 1. All securities required to be registered under Subsection 8. I shall be registered
through the filing by the issuer in the main office of the Commission, of a sworn
registration statement with the respect to such securities, in such form and containing
such information and document as the Commission prescribe. The registration
statement shall include any prospectus required.
2. 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.
3. 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 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 be filed.
4. 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.
5. 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 SEC shall declare the
registration statement effective or rejected, unless the applicant is allowed to amend
the registration statement.
6. Upon affectivity 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 herein or necessary to make the statement therein not misleading shall
constitute fraud.
7. If a registration statement is on its face incomplete or inaccurate in any material
respect, the SEC shall issue an order directing the amendment of the registration
statement.

v. Grounds for Rejection or Revocation of Registration of Securities

1. The issuer:
a. Has been judicially declared insolvent;
b. Has violated any of the provision of this Code, the rules promulgate pursuant
thereto, or any order of the Commission of which the issuer has notice in connection
with the offering for which a registration statement has been filed
c. Has been or is engaged or is about to engage in fraudulent transactions;
d. Has made any false or misleading representation of material facts in any
prospectus concerning the issuer or its securities;
 e. Has failed to comply with any requirements that the Commission may impose
as a condition for registration of the security for which the registration statement has
been filed; or
2. The registration statement is on its face incomplete or inaccurate in any
material respect or includes any untrue statements of a material fact required to be
stated therein or necessary to make the statement therein not misleading; or
3. The issuer, any officer, director or controlling person performing similar
functions, or any under writer 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 or administrative body for violations of securities, commodities, and other
related laws.

vi. Grounds for Suspension of Registration of Securities

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.
2. Refusal to furnish information required by the SEC.

c. Kinds of Securities under Securities Regulation Code

i. Definition of Securities - "Securities" are shares, participation or interests in a
corporation or in a commercial enterprise or profit-making venture and evidenced by a
certificate, contract, instruments, whether written or electronic in character.
1. Commodity futures contract means a contract providing for the making or
taking delivery at a prescribed in the future of a specific quantity and quality of a
commodity or the cash value thereof, which is customarily offset prior to the delivery
date, and includes standardized contracts having the indicia of commodities futures,
commodity options and commodity leverage, or margin contracts.
2. Commodity means any goods, articles, agricultural and mineral products,
services, rights and interests, financial instruments, foreign currencies, including any
group or index of any of the foregoing, in which commodity interest contracts are
presently or in the future dealt in.
3. Forward means a contract between a buyer and a seller whereby the buyer is
obligated to take delivery and the seller is obliged to deliver a fixed amount of an
underlying commodity at a pre-determined price and date. Payment in full is due at
the time of delivery.
4. Warrant Certificate - means the certificate representing the right to a Warrant,
which mayor may not be detachable, that is issued by an Issuer to a Warrant holder.
5. 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.
 6. 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.
7. 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.
8. Beneficiary Securities - means the shares of stock and other securities of the
Issuer which form the basis of entitlement in a Warrant.
9. Underlying Shares - means the unissued shares ofa corporation that may be
purchased by the Warrant holder upon the exercise of the right granted under the
Warrant.
10. Pre-need plans are contracts which provide for the performance of future
services of or the payment of future monetary considerations at the time actual need,
for which plan holders 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.

ii. Securities Required To Be Registered to SEC

1. Shares of stocks,
2. Bonds, debentures, notes or evidences of indebtedness
3. Asset-backed securities and Investment contracts
4. Certificates of interest or participation in a profit sharing agreement
5. Certifies of deposit for a future subscription
6. Fractional undivided interests in oil, gas or other mineral rights
7. Derivatives like option and warrants
8. Certificates of assignments, certificates of participation, trust certificates
9. Voting trust certificates or similar instruments
10. Proprietary or nonproprietary membership certificates in corporations
11. Other instruments as may in the future be determined by the Securities and
Exchange Commission

iii. Exempted Securities from Requirement of Registration with SEC

1. 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.
2. 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 for disclosures the
Commission may prescribe.
3. Certificates issued by a receiver or by a trustee in bankruptcy duly approved
by the proper adjudicatory body.
 4. 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 Rule Regulatory Board, or the Bureau of Internal Revenue.
5. Any security issued by a bank because covered by BSP Regulation except its
own shares of stock.
6. Ordinary deeds or instruments that are not normally sold to the public such as
contract of lease, contract of sale, contract of real estate mortgage

iv. Exempted Transactions from Requirement of Registration with SEC

1. At any judicial sale, or sale by an executor, administrator, guardian or receiver
or trustee in insolvency or bankruptcy.
2. By or for the account of a pledge holder, or mortgagee or any of a pledge lien
holder selling of offering for sale or delivery in the ordinary course of business and
not for the purpose of avoiding the provision of this Code, to liquidate a bonafide
debt, a security pledged in good faith as security for such debt.
3. An isolated transaction in which any security is sold, offered for sale,
subscription or delivery by the owner therefore, or by his representative for the
owner’s account, such sale or offer for sale or offer for sale, subscription or delivery
not being made in the course of repeated and successive transaction 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.
4. 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.
5. 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.
6. The issuance of bonds or notes secured by mortgage upon real estate or
tangible personal property, when the entire mortgage together with all the bonds or
notes secured thereby are sold to a single purchaser at a single sale.
7. 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
provision 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.
8. Broker’s transaction, executed upon customer’s orders, on any registered
Exchange or other trading market.
9. Subscriptions for shares of the capitals stocks of a corporation prior to the
incorporation thereof or in pursuance of an increase in its authorized capital stocks
 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 subscription 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
increase.
10. The exchange of securities by the issuer with the existing security holders
exclusively, where no commission or other remuneration is paid or given directly or
indirectly for soliciting such exchange.
11. The sale of securities by an issuer to fewer than twenty (20) persons in the
Philippines during any twelve-month period.
12. 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 manage 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 rule by 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.

d. Protection of Shareholders Interest

i. 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.
ii. Issuer Tender Offers - 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.
iii. "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.
iv. Instances of Mandatory Tender Offers
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 SEC.
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. 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. 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.
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.

v. Transactions Exempted from Mandatory Tender Offers

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
2. Any purchase of securities from an increase in authorized capital stock
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;
4. Purchases in connection with a privatization undertaken by the government of the Philippines
5. Purchases in connection with corporate rehabilitation under court supervision
6. Purchases in the open market at the prevailing market price; and
7. Merger or consolidation.

vi. Tender Offer by an Issuer or Buy Back - 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:
1. To implement a stock option or stock purchase plan;
2. To meet short-term obligations which can be settled by the re-issuance of the repurchased
shares;
3. To pay dissenting or withdrawing stockholders entitled to payment for their securities under
the Corporation Code; and
4. Such other legitimate corporate purposes.

vii. Dissemination Requirements of Tender Offer

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.
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.

viii. Period and Manner of Making Tender Offers

1. Expiration Period of Tender Offer - A tender offer shall, unless withdrawn, remain open until
the expiration of:
a. 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
b. 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.
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.
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:
a. Issue any authorized but unissued shares;
b. Issue or grant options in respect to any unissued shares;
c. Create or issue, or permit the creation or issuance of, any securities carrying
d. rights of conversion into, or subscription to, shares;
e. 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
f. Enter into contracts that are not in the ordinary course of business.
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.
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.
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.
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.
8. No tender offer shall be made unless:
a. It is open to all security holders of the class of securities subject to the tender offer; and
b. 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.
9. 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.

10. Prohibited Acts in any Tender Offer

a. To employ any device, scheme or artifice to defraud any person;
b. 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
c. To engage in any act, practice or course of business which operates or would operate as a
fraud or deceit upon any person.
d. If a person shall become aware of a potential tender offer before the tender offer has been
publicly announced, such person shall 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 which is prohibited Section 27.4 of the Code.

i. Manipulation of Security Prices, Devices and Practices (Unlawful Acts Involving Manipulation
of Security Prices, Devices and Practices). It shall be unlawful for any person acting for himself or
through a dealer or broker, directly or indirectly:

1. To create a false or misleading appearance of active trading in any listed security traded in an
Exchange of any other trading market (hereafter referred to purposes of this Chapter as "Exchange"):
2. By effecting any transaction in such security which involves no change in the beneficial
ownership thereof;
3. 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
4. By performing similar act where there is no change in beneficial ownership.
5. To affect, alone or with others, a securities or 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 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.
6. 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.
7. 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.
8. 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 for the protection of investors.
9. 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.

ii. Fraudulent Transactions - It shall be unlawful for any person, directly or indirectly, in
connection with the purchase or sale of any securities to:
1. Employ any device, scheme, or artifice to defraud;

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

iii. Insider Trading - 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 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.
1. 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.
2. 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 whole in possession of such
information.
3. 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.

b. Regulation of Pre-need Plans

i. 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 recording 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.
e. Code of Corporate Governance (Revised Code of Corporate Governance)

ix. Companies Covered by the Revised Code of Corporate Governance

1. Corporations that sell equity and/or debt securities to the public that are required to be
registered with the Commission, or
2. Corporations that have assets in excess of Fifty Million Pesos and at least two hundred (200)
stockholders who own at least one hundred (100) shares each of equity securities, or
3. Corporations whose equity securities are listed on an Exchange Market; or
4. Corporations that are grantees of secondary licenses from the SEC.
x. Corporation Governance refers to the framework of rules, systems and processes in the
corporation that governs the performance by the Board of Directors and Management of their
respective duties and responsibilities to the stockholders.

xi. Board of Directors refers to the governing body elected by the stockholders that
exercises the corporate powers of a corporation, conducts all its business and controls its
properties.

xii. Composition of the Board of Directors of Corporations covered by Revised Code of

Corporate Governance
1. The Board shall be composed of at least five (5), but not more than fifteen (15), members who
are elected by the stockholders.
2. All companies covered by this Code shall have at least two (2) independent directors or such
number of independent directors that constitutes twenty percent (20%) of the members of the Board,
whichever is lesser, but in no case less than two (2). All other companies are encouraged to have
independent directors in their boards.
3. The membership of the Board may be a combination of executive and non-executive directors
(which include independent directors) in order that no director or small group of directors can
dominate the decision making process.
4. The non-executive directors should possess such qualifications and stature that would enable
them to effectively participate in the deliberations of the Board.

xiii. Additional Qualifications of Directors of Corporations covered by Revised Code of

Corporate Governance. In addition to the qualifications for membership in the Board provided for
in the Corporation Code, Securities Regulation Code and other relevant laws, the Board may provide
for additional qualifications which include, among others, the following:
1. College education or equivalent academic degree;
2. Practical understanding of the business of the corporation;
3. Membership in good standing in relevant industry, business or professional organizations; and
4. Previous business experience.

xiv. Grounds for Permanent Disqualifications of Directors of Corporations covered by

Revised Code of Corporate Governance
1. Any person convicted by final judgment or order by a competent judicial or administrative
body of any crime that (a) involves the purchase or sale of securities, as defined in the Securities
Regulation Code; (b) arises out of the person’s conduct as an underwriter, broker, dealer, investment
adviser, principal, distributor, mutual fund dealer, futures commission merchant, commodity trading
advisor, or floor broker; or (c) arises out of his fiduciary relationship with a bank, quasi-bank, trust
company, investment house or as an affiliated person of any of them;
2. Any person who, by reason of misconduct, after hearing, is permanently enjoined by a final
judgment or order of the Commission or any court or administrative body of competent jurisdiction
from: (a) acting as underwriter, broker, dealer, investment adviser, principal distributor, mutual fund
dealer, futures commission merchant, commodity trading advisor, or floor broker; (b) acting as
director or officer of a bank, quasibank, trust company, investment house, or investment company;

3. engaging in or continuing any conduct or practice in any of the capacities mentioned in sub-
paragraphs (a) and (b) above, or wilfully violating the laws that govern securities and banking activities.
The disqualification shall also apply if such person is currently the subject of an order of the
Commission or any court or administrative body denying, revoking or suspending any registration,
license or permit issued to him under the Corporation Code, Securities Regulation Code or any other
law administered by the Commission or Bangko Sentral ng Pilipinas (BSP), or under any rule or
regulation issued by the Commission or BSP, or has otherwise been restrained to engage in any activity
involving securities and banking; or such person is currently the subject of an effective order of a self-
regulatory organization suspending or expelling him from membership, participation or association
with a member or participant of the organization;
4. Any person convicted by final judgment or order by a court or competent administrative body
of an offense involving moral turpitude, fraud, embezzlement, theft, estafa, counterfeiting,
misappropriation, forgery, bribery, false affirmation, perjury or other fraudulent acts;
5. Any person who has been adjudged by final judgment or order of the Commission, court, or
competent administrative body to have wilfully violated, or wilfully aided, abetted, counselled, induced
or procured the violation of any provision of the Corporation Code, Securities Regulation Code or
any other law administered by the Commission or BSP, or any of its rule, regulation or order;
6. Any person earlier elected as independent director who becomes an officer, employee or
consultant of the same corporation;
7. Any person judicially declared as insolvent; (vii) Any person found guilty by final judgment or
order of a foreign court or equivalent financial regulatory authority of acts, violations or misconduct
similar to any of the acts, violations or misconduct enumerated in sub-paragraphs (i) to (v) above;
8. Conviction by final judgment of an offense punishable by imprisonment for more than six (6)
years, or a violation of the Corporation Code committed within five (5) years prior to the date of his
election or appointment.

xv. Grounds for Temporary Disqualification of Directors of Corporations covered by

Revised Code of Corporate Governance

1. Refusal to comply with the disclosure requirements of the Securities Regulation Code and its
Implementing Rules and Regulations. The disqualification shall be in effect as long as the refusal
persists.
2. Absence in more than fifty (50) percent of all regular and special meetings of the Board during
his incumbency, or any twelve (12) month period during the said incumbency, unless the absence is
due to illness, death in the immediate family or serious accident. The disqualification shall apply for
purposes of the succeeding election.
3. Dismissal or termination for cause as director of any corporation covered by this Code. The
disqualification shall be in effect until he has cleared himself from any involvement in the cause that
gave rise to his dismissal or termination.
4. If the beneficial equity ownership of an independent director in the corporation or its
subsidiaries and affiliates exceeds two percent of its subscribed capital stock. The disqualification shall
be lifted if the limit is later complied with.
5. If any of the judgments or orders cited in the grounds for permanent disqualification has not
yet become final.
6. A temporarily disqualified director shall, within sixty (60) business days from such
disqualification, take the appropriate action to remedy or correct the disqualification. If he fails or
refuses to do so for unjustified reasons, the disqualification shall become permanent.

xvi. Specific Duties and Responsibilities of a Director - A director’s office is one of trust and
confidence. A director should act in the best interest of the corporation in a manner characterized by
transparency, accountability and fairness. He should also exercise leadership, prudence and integrity
in directing the corporation towards sustained progress.
1. Conduct fair business transactions with the corporation, and ensure that his personal interest
does not conflict with the interests of the corporation.
2. Devote the time and attention necessary to properly and effectively perform his duties and
responsibilities.
3. Act judiciously.
4. Exercise independent judgment.
5. Have a working knowledge of the statutory and regulatory requirements that affect the
corporation, including its articles of incorporation and by- laws, the rules and regulations of the
Commission and, where applicable, the requirements of relevant regulatory agencies.
6. Observe confidentiality.

xvii. Establishment of Audit Committee

1. Audit Committee shall assist the Board in the performance of its oversight responsibility for
the financial reporting process, system of internal control, audit process, and monitoring of
compliance with applicable laws, rules and regulations
2. The Audit Committee shall consist of at least three (3) directors, who shall preferably have
accounting and finance backgrounds, one of whom shall be an independent director and another with
audit experience. The chair of the Audit Committee should be an independent director.

xviii. Appointment of Compliance Officer - The Board shall appoint a Compliance Officer who
shall report directly to the Chair of the Board. He shall perform the following duties:

1. Monitor compliance by the corporation with this Code and the rules and regulations of
regulatory agencies and, if any violations are found, report the matter to the Board and recommend
the imposition of appropriate disciplinary action on the responsible parties and the adoption of
measures to prevent a repetition of the violation;
2. Appear before the Commission when summoned in relation to compliance with this Code;
and
3. Issue a certification every January 30th of the year on the extent of the corporation’s
compliance with this Code for the completed year and, if there are any deviations, explain the reason
for such deviation.

f. Period for Filing of Annual Financial Statements and General Information Sheet (SEC
Circular No. 2 Series of 2017)
i. Corporation whose fiscal year ends on a date other than December 31– The audited financial
statements shall be filed within 120 calendar days from the end of fiscal year.
ii. Corporation whose fiscal year ends on December 31– The SEC issues a specific schedule or
specific date depending on the license number of the corporation for the submission of audited
financial statements. There are various date provided in the circular depending on the registration
number of the entity.
iii. The audited financial statements shall have the stamped ―received by the BIR or its authorized
banks.‖
iv. All corporations shall filed their General Information Sheet within 30 calendar days from
1. Stock corporation – date of actual annual stockholder’s meeting
2. Non-stock corporation – date of actual annual member’s meeting
3. Foreign corporation – Anniversary date of the issuance of the SEC License.

g. Securities Regulation Code Rule 68 (SRC Rule 68) (Financial Reporting Requirements)
(a) Covered entities
i. Stock corporations with paid-up capital stock of P50,000 or more
ii. Non-stock corporations with total assets of P500,000 or more, or gross annual receipts
of P100,000 or more
iii. Branch offices of stock foreign corporations with assigned capital in the equivalent
amount of P1,000,000 or more
iv. Branch offices of nonstock corporations with total assets in the equivalent amount of
P1,000,000 or more
v. Regional operating headquarters of foreign corporations with total revenues in the
equivalent amount of P1,000,000 or more

(b) Applicable Financial Reporting Framework

i. Full Philippine Financial Reporting Standards (Full PFRS)
1. Large and/or Publicly-Accountable Entities
a. Those with total assets of more than P350M or total liabilities of more than P250M; or
b. Those which are required to file financial statements under Part II of SRC Rule 68; or
c. Those in the process of filing their financial statements for the purpose of issuing any class of
instruments in a public market; or
d. Those which are holders of secondary licenses issued by regulatory agencies.

ii. Philippine Financial Reporting Standards for Medium Entities (PFRS for SMEs)

1. Medium-Sized Entities
a. Total assets of between P100M to P350M or total liabilities of between P100M to P250M. If
the entity is a parent company, the said amount shall be based on consolidated figures; and
b. Are not required to file financial statements under Part II of SRC Rule 68; and
c. Are not in the process of filing their financial statements for the purpose of issuing any class
of instruments in a public market; and
d. Are not holders of secondary licenses issued by regulatory agencies.

iii. Philippine Financial Reporting Standards for Small Entities (PFRS for Small Entities)

1. Small Entities
a. Total assets of between P3M to P100M or total liabilities of between P3M to P100M. If the
entity is a parent company, the said amount shall be based on consolidated figures; and
b. Are not required to file financial statements under Part II of SRC Rule 68; and
c. Are not in the process of filing their financial statements for the purpose of issuing any class
of instruments in a public market; and
d. Are not holders of secondary licenses issued by regulatory agencies.

iv. Full PFRS or PFRS for SMEs or PFRS for Small Entities or Tax/Cash Basis

1. Micro Entities
a. Total assets and total liabilities below P3M; and

b. Are not required to file financial statements under Part II of SRC Rule 68; and
c. Are not in the process of filing their financial statements for the purpose of issuing any class
of instruments in a public market; and
d. Are not holders of secondary licenses issued by regulatory agencies.

h. Code of Corporate Governance for Publicly Listed Companies

(a) Coverage or Applicability and Effectivity Date – The Code of Corporate Governance for
Publicly-Listed Companies shall take effect on January 1, 2017 to all Publicly-Listed Companies which
are required to submit a new Manual on Corporate Governance to SEC on or before May 31, 2017.

(b) Introduction to Code of Corporate Governance for Publicly Listed Companies

i. The Code of Corporate Governance is intended to raise the corporate governance standards
of Philippine corporations to a level at par with its regional and global counterparts. The latest
G20/OECD1 Principles of Corporate Governance and the Association of Southeast Asian Nations
Corporate Governance Scorecard were used as key reference materials in the drafting of this Code.
ii. The Code will adopt the ―comply or explain‖ approach. This approach combines
voluntary compliance with mandatory disclosure. Companies do not have to comply with the Code,
but they must state in their annual corporate governance reports whether they comply with the Code
provisions, identify any areas of non-compliance, and explain the reasons for non-compliance.
iii. The Code is arranged as follows: Principles, Recommendations and Explanations. The
Principles can be considered as high-level statements of corporate governance good practice, and are
applicable to all companies.
iv. The Recommendations are objective criteria that are intended to identify the specific features
of corporate governance good practice that are recommended for companies operating according to
the Code. Alternatives to a Recommendation may be justified in particular circumstances if good
governance can be achieved by other means. When a Recommendation is not complied with, the
company must disclose and describe this non-compliance, and explain how the overall Principle is
being achieved. The alternative should be consistent with the overall Principle. Descriptions and
explanations should be written in plain language and in a clear, complete, objective and precise
manner, so that shareholders and other stakeholders can assess the company's governance framework.
v. The Explanations strive to provide companies with additional information on the
recommended best practice. This Code does not, in any way, prescribe a ―one size fits all‖ framework.
It is designed to allow boards some flexibility in establishing their corporate governance arrangements.
Larger companies and financial institutions would generally be expected to follow most of the Code’s
provisions. Smaller companies may decide that the costs of some of the provisions outweigh the
benefits, or are less relevant in their case. Hence, the

(c) Definition of Terms

i. Corporate Governance – the system of stewardship and control to guide organizations in
fulfilling their long-term economic, moral, legal and social obligations towards their stakeholders.
Corporate governance is a system of direction, feedback and control using regulations, performance
standards and ethical guidelines to hold the Board and senior

management accountable for ensuring ethical behavior – reconciling long-term customer satisfaction
with shareholder value – to the benefit of all stakeholders and society. Its purpose is to maximize the
organization’s long-term success, creating sustainable value for its shareholders, stakeholders and the
nation
ii. Board of Directors – the governing body elected by the stockholders that exercises the
corporate powers of a corporation, conducts all its business and controls its properties.
iii. Management – a group of executives given the authority by the Board of Directors to
implement the policies it has laid down in the conduct of the business of the corporation.
iv. Independent director – a person who is independent of management and the controlling
shareholder, and is 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.
v. Executive director – a director who has executive responsibility of day- to-day operations of
a part or the whole of the organization.
vi. Non-executive director – a director who has no executive responsibility and does not perform
any work related to the operations of the corporation.
vii. Conglomerate – a group of corporations that has diversified business activities in varied
industries, whereby the operations of such businesses are controlled and managed by a parent
corporate entity.
viii. Internal control – a process designed and effected by the board of directors, senior
management, and all levels of personnel to provide reasonable assurance on the achievement of
objectives through efficient and effective operations; reliable, complete and timely financial and
management information; and compliance with applicable laws, regulations, and the organization’s
policies and procedures.
ix. Enterprise Risk Management – a process, effected by an entity’s Board of Directors,
management and other personnel, applied in strategy setting and across the enterprise that is designed
to identify potential events that may affect the entity, manage risks to be within its risk appetite, and
provide reasonable assurance regarding the achievement of entity objectives.
x. Related Party – shall cover the company’s subsidiaries, as well as affiliates and any party
(including their subsidiaries, affiliates and special purpose entities), that the company exerts direct or
indirect control over or that exerts direct or indirect control over the company; the company’s
directors; officers; shareholders and related interests (DOSRI), and their close family members, as well
as corresponding persons in affiliated companies. This shall also include such other person or juridical
entity whose interest may pose a potential conflict with the interest of the company.

xi. Related Party Transactions – a transfer of resources, services or obligations between a

reporting entity and a related party, regardless of whether a price is charged. It should be interpreted
broadly to include not only transactions that are entered into with related parties, but also outstanding
transactions that are entered into with an unrelated party that subsequently becomes a related party.
i. Stakeholders – any individual, organization or society at large who can either affect and/or be
affected by the company’s strategies, policies, business decisions and operations, in general. This
includes, among others, customers, creditors, employees, suppliers, investors, as well as the
government and community in which it operates.
ii. Operational risk summarizes the uncertainties and hazards a company faces when it attempts
to do its day-to-day business activities within a given field or industry. A type of business risk, it can
result from breakdowns in internal procedures, people and systems—as opposed to problems incurred
from external forces, such as political or economic events, or inherent to the entire market or market
segment, known as systematic risk.

(d) The Board’s Governance Responsibilities

i. Principle 1: The company should be headed by a competent, working board to foster the long-
term success of the corporation, and to sustain its competitiveness and profitability in a manner
consistent with its corporate objectives and the long-term best interests of its shareholders and other
stakeholders.
ii. Principle 2: The fiduciary roles, responsibilities and accountabilities of the Board as provided
under the law, the company’s articles and by-laws, and other legal pronouncements and guidelines
should be clearly made known to all directors as well as to stockholders and other stakeholders.
iii. Principle 3: Board committees should be set up to the extent possible to support the effective
performance of the Board’s functions, particularly with respect to audit, risk management, related
party transactions, and other key corporate governance concerns, such as nomination and
remuneration. The composition, functions and responsibilities of all committees established should
be contained in a publicly available Committee Charter.
iv. Principle 4: To show full commitment to the company, the directors should devote the time
and attention necessary to properly and effectively perform their duties and responsibilities, including
sufficient time to be familiar with the corporation’s business.
v. Principle 5: The Board should endeavor to exercise objective and independent judgment on
all corporate affairs.
vi. Principle 6: The best measure of the Board’s effectiveness is through an assessment process.
The Board should regularly carry out evaluations to appraise its performance as a body, and assess
whether it possesses the right mix of backgrounds and competencies.
vii. Principle 7: Members of the Board are duty-bound to apply high ethical standards, taking into
account the interests of all stakeholders.

(e) Disclosure and Transparency

i. Principle 8: The company should establish corporate disclosure policies and procedures that
are practical and in accordance with best practices and regulatory expectations.
ii. Principle 9: The company should establish standards for the appropriate selection of an
external auditor, and exercise effective oversight of the same to strengthen the external auditor’s
independence and enhance audit quality.
iii. Principle10: The company should ensure that material and reportable non-financial and
sustainability issues are disclosed.
iv. Principle 11: The company should maintain a comprehensive and cost- efficient
communication channel for disseminating relevant information. This channel is crucial for informed
decision-making by investors, stakeholders and other interested users.

(f) Internal Control and Risk Management Framework

i. Principle 12: To ensure the integrity, transparency and proper governance in the conduct of
its affairs, the company should have a strong and effective internal control system and enterprise risk
management framework.

(g) Cultivating a Synergic Relationship with Stockholder

i. Principle 13: The company should treat all shareholders fairly and equitably, and also
recognize, protect and facilitate the exercise of their rights.

(h) Duties of Stockholders

i. Principle 14: The rights of stakeholders established by law, by contractual relations and
through voluntary commitments must be respected. Where stakeholders’ rights and/or interests are
at stake, stakeholders should have the opportunity to obtain prompt effective redress for the violation
of their rights.
ii. Principle 15: A mechanism for employee participation should be developed to create a
symbiotic environment, realize the company’s goals and participate in its corporate governance
processes.
iii. Principle 16: The company should be socially responsible in all its dealings with the
communities where it operates. It should ensure that its interactions serve its environment and
stakeholders in a positive and progressive manner that is fully supportive of its comprehensive and
balanced development.