securities specialist course lecture

8/12/2019 Securities Specialist Course Lecture

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THE PHILIPPINE STOCK EXCHANGE, INC.

Securities Regulation Code


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Content & Coverage

Securities Regulation and SEC

Definition of Securities

Registration of Securities

Reportorial Requirements

Protection of shareholder interests

Regulation of Securities Market Professionals

Exchanges and Other Securities Trading Markets


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Securities Regulation

State Policy

Objectives:

promote the development of the capital market

protect investors

ensure full and fair disclosure about securities

minimize, if not totally eliminate, insider trading andother fraudulent or manipulative practices


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Who administers the SecuritiesRegulation Code?

the Securities and ExchangeCommission

Composition

1 Chairperson

4 Commissioners

Securities and Exchange Commission

Composition


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Regulatory Investigatory Rule-/Policy-Making

Supervise all corporations,

partnerships and

associations who are

grantees of primary

franchises and/or license

Conduct investigations to

determine whether any

person has violated or is

about to violate the SRC or

its implementing rules.

Formulate policies and

recommendations on

issues concerning the

securities market

Suspend/revoke certificate

of registration

Issue cease and desist

orders to prevent

fraud/injury to the

investing public

Propose legislation

regarding the securities

market and amendments

thereto

Approve/reject/suspend/

revoke/require

amendments to RS and

licensing applications

Punish for direct and

indirect contempt of the

SEC

Prepare, approve, amend

or repeal rules, regulations

and orders, and provide

guidance thereon


Powers & Functions


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Regulatory Investigatory Rule-/Policy-Making

Supervise, monitor, suspend

or take over the activities of

exchanges, clearing agencies

and other SROs

Issue subpoena duces

tecum and summon

witnesses. In appropriate

cases, order search and

seizure of all documents ofany entity or person under

investigation

Regulate or supervise the

activities of securities marketprofessionals

Impose sanctions for the

violation of SRC,

implementing rules and

regulations and SEC orders


Powers & Functions


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Cases formerly under SECs jurisdiction

Fraud and misrepresentation

Intra-corporate controversies

Stockholder vs. stockholder

Stockholder(s) vs. corporation

Corporation vs. State

Election contests

title or claim to any elective office in a corporation validation of proxies

manner and validity of elections

qualifications of candidates


Powers & Functions


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Overlapping of Jurisdiction: SEC vs. RTC

GSIS vs. Court of Appeals(April 2009) - Regulation of proxies:

Proxies for election of directorsRTC (even if it involvedalleged violation of the SEC rules on proxy solicitation)

Proxies for matters unrelated to the cases enumerated inSection 5 of PD 902-A, the SEC has the power to investigateviolations of the rule on proxy solicitation.


Powers & Functions


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Departments & Offices


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MSRD Functions

Registers, monitors and supervises Exchanges andother trading markets, SROs, clearing agencies, transferagents

Monitors and supervises brokers, dealers, and theirassociated persons and salespersons, investmenthouses

Registers securities

Reviews the existing regulatory framework andproposes necessary reforms

Establishes linkages with national and internationalorganizations regarding the securities market




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CGFD Functions

Monitors and supervises compliance by covered

entities with corporate governance rules andrecommends measures to promote corporate

governance

Reviews activities of financial conglomerates




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EIPD Functions

Monitors and supervises compliance by issuers and

all market participants with legal and regulatoryrequirements

Takes appropriate enforcement action for infraction

of the SRC and relevant rulesAdministers programs for the protection of

shareholders




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CRMD Functions

Registers corporations and partnerships

Processes applications for amendment of articlesof incorporation/partnership, by-laws, mergers

Handles petitions for correction and revocation ofarticles of incorporation and by-laws and theiramendments




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Content & Coverage









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Securities

Definition

shares, participation or

interests in a corporation or

in a commercial enterpriseor profit-making venture

and evidenced by a

certificate, contract,

instrument, whetherwritten or electronic in

character.


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Includes:

Shares of stock

Common

preferred

Debt

Bonds

Debentures Notes

Evidences of indebtedness

Asset-backed securities

Securities

Definition


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Investment contracts

a person invests his money in a common enterprise

and is led to expect profits primarily from the efforts

of others

Certificates of interest or participation in a profit sharing

agreement

Certificates of deposit for a future subscription

Securities

Definition


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Derivatives

financial instrument whose value changes in response tothe change in a specified security price or similarunderlying factor

Types:1. Options

right to buy (call option) or sell (put option) anunderlying security at a predetermined exercise/strikeprice on or before a predetermined expiry date

2. Warrants

rights to subscribe or purchase new shares or existingshares in a company on or before the expiry date

Securities

Definition


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Proprietary membership certificates in corporations

entitles the holder to enjoy the use of a specific

property, dividends or earnings of the company,

and to proportionate ownership right over itsassets upon liquidation

Non-proprietary share or certificate

entitles the holder to the use of the property butnot to dividends or assets of the company upon

liquidation

Securities

Definition


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Fractional undivided interests in oil, gas or other

mineral rights

Trust certificates, voting trust certificates or similar

instruments

Other instruments as may in the future be

determined by the SEC

Securities

Definition


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Content & Coverage









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Section 8, SRC

Securities shall not be sold or offered for sale or

distribution within the Philippines, without a

registration statement duly filed with and approved by

the Commission.

Objective: Ensure full disclosure for the benefit of

investors.


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Full Disclosure vs. Merit-Based Registration

Merit-based Full disclosure

SEC looks into the merit of the

securities to be sold to the public (e.g.compliance with min. financial ratios)

SEC does not pass upon judgment on

the investment merit of an issue butleaves it to the investor to make a

decision on whether or not to buy the

shares.

No standards regarding the extent,

manner or nature of disclosures

Issuer must provide adequateand

accuratedisclosure of material factsconcerning it and the securities it

offers.

Issue: lack of equality of access to

information

Objective: To ensure that investors are

equipped with all the necessary

material information upon which tobase their investment decisions.


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REGISTRATION STATEMENT UNDER THE SECURITIES REGULATION CODE

1. SEC Identification Number ................................

2. .Exact name of registrant as specified in its charter .

3. ................................................................. 4.

Province, country or other jurisdiction BIR Tax Identification Number

of incorporation or organization

5. ..........................................................................................

General character of business of registrant.

6. Industry Classification Code: (SEC Use Only)

7. ..........................................................................................Address, including postal code, telephone number, FAX number including area code, of registrant's principal offices

8. ..........................................................................................

If registrant is not resident in the Philippines, or its principal business is outside the Philippines, state name and address

including postal code, telephone number and FAX number, including area code, and email address of resident agent in

the Philippines.

9. Fiscal Year Ending Date (Month and Day) : .................................


SEC Form 12-1


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Information required to be included in the RS

Name of the issuer

Terms of the offer including: Description and amount of securities offered

Public offering price

Where the securities will be traded (exchange or over-

the-counter);

Name(s) of the underwriter(s)

Date of the prospectus


Contents of RS/Prospectus


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A statement in bold face 12 point type that:

THE SECURITIES AND EXCHANGE COMMISSION HAS NOTAPPROVED THESE SECURITIES OR DETERMINED IF THIS

PROSPECTUS IS ACCURATE OR COMPLETE. ANYREPRESENTATION TO THE CONTRARY IS A CRIMINALOFFENSE AND SHOULD BE REPORTED IMMEDIATELY TOTHE SECURITIES AND EXCHANGE COMMISSION.

Number of shares offered by current stockholders

Total number of shares outstanding after the offering




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Total proceeds raised by the offering

Brief description of use of proceeds from the offering

Underwriters' fees

Dividend policy

Address and telephone number of the company'sprincipal office.




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Table of Contents

Brief description of the company's business

Summary paragraph or key points characterizing the risks of theoffering under the caption Risks of Investing

Summary financial information in tabular or graphic form whichis useful to potential investors, including but not limited to:

Abbreviated income statement data for prior 2 years Abbreviated balance sheet data for the prior 2 years

Glossary which defines all technical terms used in theprospectus




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The following statement in bold face 12-point type in the case of a preliminaryprospectus:

A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITHTHE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BEEN DECLARED

EFFECTIVE. NO OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OFTHE PURCHASE PRICE CAN BE ACCEPTED OR RECEIVED UNTIL THE REGISTRATIONSTATEMENT HAS BECOME EFFECTIVE, AND ANY SUCH OFFER MAY BE WITHDRAWNOR REVOKED, WITHOUT OBLIGATION OF COMMITMENT OF ANY KIND, AT ANY TIMEPRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE DATE. ANINDICATION OF INTEREST IN RESPONSE HERETO INVOLVES NO OBLIGATION ORCOMMITMENT OF ANY KIND. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFERTO SELL OR THE SOLICATION OF AN OFFER TO BUY.

In the case of a prospectus that has become effective, the following statement in boldface 12-point type and signed by the president under oath:

ALL REGISTRATION REQUIREMENTS HAVE BEEN MET AND ALL INFORMATIONCONTAINED HEREIN IS TRUE AND CURRENT.




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1



Risk Factors and Other Information

Use of Proceeds

Determination of Offering Price

Dilution


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Selling Security Holders

Plan of Distribution

Description of Securities to be Registered

Interests of Named Experts and IndependentCounsel




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Information with Respect to the Registrant

Description of Business

Description of Property

Legal Proceedings Market Price and Dividends

Management's Discussion and Analysis or Plan of

Operation

Changes in and Disagreements With Accountants On

Accounting and Financial Disclosure




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Directors, Executive Officers, Promoters and ControlPersons

Executive Compensation

Security Ownership of Certain Record and BeneficialOwners and Management

Certain Relationships and Related Transactions

Financial Information

Other Expenses of Issuance and Distribution

Exhibits




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Signature of the issuers: executive officer

principal operating officer

principal financial officer

comptroller

principal accounting officer corporate secretary

Accompanied by:

duly verified resolution of the Board of Directors

written consent of the expert who certified any part of the registrationstatement

Where the registration statement includes shares to be sold by sellingshareholders, a written certification by such shareholders as to theaccuracy of any part of the registration statement contributed to bysuch selling shareholders




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Securities that are exempt from registration requirement

Government securities

issued or guaranteed by the Government of the Philippines, or itspolitical subdivision, instrumentality or agency

issued or guaranteed by the government of any country with which thePhilippines maintains diplomatic relations on the basis of reciprocity

Certificates issued by a receiver or by a trustee in bankruptcy duly approvedby the proper adjudicatory body

Any security or its derivatives the sale or transfer of which, by law, is underthe supervision and regulation of the Office of the Insurance Commission,HLURB, or the BIR

Any security issued by a bank, except its own shares of stock


Exempt Securities


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Sales of securities that are exempt from the registrationrequirement

any judicial sale, or sale by an executor, administrator,guardian or receiver or trustee in insolvency or bankruptcy

Sale by or for the account of a pledge holder, or mortgagee orany other similar lien holder to liquidate a bona fidedebt

An isolated transaction in which any security is sold or offeredfor sale by its owner or representative, such sale or offer forsale not being made in the course of repeated and successivetransactions and such owner or representative not being theunderwriter of such security


Exempt Transactions


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Distribution by a corporation of securities to itsstockholders or other security holders as a stock dividend

Sale of capital stock of a corporation to its own

stockholders exclusively, where no commission or otherremuneration is paid or given directly or indirectly inconnection with the sale of such capital stock

Issuance of bonds or notes, secured by mortgage upon real

estate or tangible personal property, to a single purchaserat a single sale


Exempt Transactions


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Issue of any security in exchange for any other security of the sameissuer pursuant to a right of conversion.

Brokers transactions, executed upon customers orders, on anyregistered Exchange or other trading market.

Subscriptions for shares of the capital stock of a corporation prior tothe incorporation thereof or in pursuance of an increase in itsauthorized capital stock, provided:

no expense is incurred in connection with the sale of such

securities, and the only purpose of such subscription is to comply with the

requirement of law as to the minimum percentage of capitalstock that must be subscribed


Exempt Transactions


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Exchange of securities by the issuer with its existing securityholders exclusively, where no commission or otherremuneration is paid or given directly or indirectly forsoliciting such exchange.

Sale of securities by an issuer to fewer than 20 persons in thePhilippines during any 12-month period.

Sale of securities to any number of the following qualifiedbuyers:

Bank

Registered investment house


Exempt Transactions


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Insurance company

Pension fund or retirement planmaintained by the government or

managed by a bank or other personsauthorized by the BSP to engage in trustfunctions

Investment company

Such other person as the SEC maydetermine as qualified buyers


Exempt Transactions


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SEC Memorandum Circular No. 6, s. 2007

Qualified individual buyer

Natural person who, at the time of registration, has the following

qualifications:

Minimum annual gross income of Php25M for at least 2 years

prior to registration ortotal portfolio investment of at least

Php10M orpersonal net worth of at least Php30M; and

Has been engaged in securities trading for at least 1 year or

held, for at least 2 years, a position of responsibility in an entity

that requires knowledge of securities trading (e.g. financial

adviser, salesman of a broker, trust officer of a bank)


Exempt Transactions


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SEC Memorandum Circular No. 6, s. 2007

Qualified institutional buyer

Juridical person that has any of the followingqualifications:

Minimum annual gross income of Php100Mfor at least 2 years prior to registration

Total portfolio investment of at least Php60M

Net worth of at least Php100M


Exempt Transactions


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Notice of Exemption (SEC Form 10-1)

Sale of securities to fewer than 20 persons

Sale to qualified buyers


Exempt Transactions


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File a sworn registration statement and

prospectus in the main office of the SEC

Pay a fee of not more than 1/10 of 1% of the

maximum aggregate price of the offering

Publish a notice of the filing of the

registration statement in 2 newspapers of

general circulation once a week for 2consecutive weeks


Procedure for Registration


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Grounds

Issuer has been judicially declared insolvent

Issuer has violated the Securities Regulation Code, its implementingrules and regulations, or any order of the SEC in connection with theoffering for which a registration statement has been filed

Issuer has been or is engaged or is about to engage in fraudulenttransactions

Issuer has made any false or misleading representation of materialfacts in any prospectus


Rejection and Revocation of Registration


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Issuer has failed to comply with any requirement imposedby the SEC as a condition for registration of the security

The registration statement is on its face incomplete or

inaccurate in any material respect

The issuer or any of its officers, directors or controllingpersons or underwriter has been convicted of an offenseinvolving moral turpitude and/or fraud or is enjoined or

restrained by the SEC or other competent judicial oradministrative body for violations of securities,commodities, and other related laws.


Rejection and Revocation of Registration


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When is amendment of the registration statement

necessary?

a registration statement or a prospectus filed with theSEC becomes incomplete or inaccurate in any material

respect

The issuer wants to change any material informationtherein


Amendments to the Registration Statement


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Material Information

Any event which increases or creates a risk on theinvestments or on the securities covered by theregistration

Increase/decrease in the volume of the securities beingoffered

Increase/decrease in the issue price range disclosed in theregistration statement

Major change in the primary business of the registrant




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Reorganization of the company

Change in the work program or use of proceeds

Loss, deterioration or substitution of the propertyunderlying the securities

10% or more change in the financial condition or results ofoperation of the registrant

Classification, de-classification or re-classification ofsecurities which results to derogation of rights of existingsecurity holders



f


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Grounds

Information contained in the registration

statement is or becomes misleading,incorrect, inadequate or incomplete in anymaterial respect

the sale or offering for sale of the registeredsecurity may work or tend to work a fraud


Suspension of Registration


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Grounds

The registration statement contains, on its effectivity,an untrue statement of a material fact

The registration statement omits to state a materialfact required to be stated therein or necessary tomake the statements therein not misleading

Registration of SecuritiesCivil Liabilities on Account of False

Registration Statement


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Who may sue for damages?

Any person acquiring a security who suffers

damage on account of the false registration

statement.

Registration of SecuritiesCivil Liabilities on Account of False



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Persons liable

The issuer and every person who signed the registration

statement

The directors of, or partner in, the issuer at the time of thefiling of the registration statement

Every person named in the registration statement as beingor about to become a director of, or a partner in, the issuerand whose written consent is filed with the registrationstatement


Civil Liabilities on Account of False


R i i f S i i


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Auditor or auditing firm named as having certified anyfinancial statements used

Every person named as having prepared or certifiedany part of the registration statement

Every selling shareholder who certified as to theaccuracy of a portion of the registration statement,

with respect to that portion of the registrationstatement contributed by him

Every underwriter

Registration of SecuritiesCivil Liabilities on Account of FalseRegistration Statement

Content & Co erage


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Content & Coverage








R i l R i


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Periodic and Other Reports of Issuers

Companies required to file reports (ReportingCompanies)

Issuer which has sold a class of registered securities

Issuer with a class of securities listed for trading on anExchange

Issuer with assets of at least P50M and 200 or morestockholders, each holding at least 100 shares

R t i l R i t


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Required Reports

1. Annual Report (SEC Form 17-A)

filed within 105 calendar days after the

end of the fiscal year

Simultaneously filed with the Exchange if

any class of the issuers securities are listed

in a stock exchange




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R t i l R i t


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Contents of Annual Report

Business and General Information

Business

Properties

Legal Proceedings

Matters submitted to a vote of stockholders



R t i l R i t


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Operational and Financial Information

Market for Issuer's Common Equity

Management's Discussion and Analysis or Plan of

Operation Financial Statements

Changes in and Disagreements With Accountants

on Accounting and Financial Disclosure



R t i l R i t


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Control and Compensation Information Directors and Executive Officers

Executive Compensation

Security Ownership of Certain Beneficial Owners andManagement

Certain Relationships and Related Transactions

Corporate Governance

Exhibits

Reports on SEC Form 17-C that were filed during the last 6months





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2. Quarterly Report (SEC Form 17-Q)

filed within 45 days after the end of each

quarter

Simultaneously filed with the Exchange if

any class of the issuers securities are

listed in a stock exchange




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Contents of Quarterly Report

Financial Information

Financial Statements Management's Discussion and Analysis of Financial

Condition and Results of Operations

Other Information

any information not previously reported in SEC

Form 17-C




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Contents of Current Report

every material fact or event that occurs, which

would reasonably be expected to affectinvestors' decisions in relation to thosesecurities

clarification of a news report involving analleged material event





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Reportable Events

1. Changes in control of Issuer

2. Acquisition or disposition of assets

3. Changes in Issuer's certifying accountant

4. Resignation, removal or election of directors or

officers5. Legal proceedings

6. Changes in securities





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7. Defaults upon senior securities

8. Change in fiscal year

9. Other events

e.g. changes in the issuers corporate purpose,declaration of dividend, merger, consolidation orspin-off, fines of more than Php50,000 and/orother penalties

10. Fraud and error

11. Financial statements and exhibits





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1. Reports by 5% holders of equity securities (SEC Form 18-A)

Who are required to file

persons who acquire, directly or indirectly, the beneficial ownership of

more than 5% of equity securities of Reporting Companies

When to file

within ten (10) days after acquisition

Where to file

SEC

Exchange where the security is traded

Issuer

Reports of Certain Security Holders



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Beneficial Owner

any person who has voting power (i.e., power to

vote or to direct the voting) and/or investment

power(i.e., power to dispose or to direct the

disposition)





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Indirect beneficial ownership

A person is deemed to have an indirect beneficialownership interest in any security which is:

held by members of his immediate family sharing thesame household

held by a partnership in which he is a general partner

held by a corporation of which he is a controlling

shareholder subject to any contract, arrangement or understanding

which gives him voting power or investment power




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Contents of SEC Form 18-A

Security and Issuer

Identity and Background

name Address

Conviction in a criminal proceeding, if any, in thelast 5 years

Any judgment in a civil proceeding enjoining orlimiting his involvement in any business

citizenship





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Purpose of transaction

Interest in securities of the Issuer

Contracts, Arrangements, Understandings orRelationships with Respect to Securities of the Issuer

Exhibits




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B. Statement of Changes In Beneficial Ownership

of Securities (SEC Form 23-B)

When to file

Within 10 days after the close of each calendarmonth, if there has been a change in beneficialownership during such month





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Contents of SEC Form 23-A and 23-B

Security and Issuer

Identity and Background Purpose of Transaction

Interest in Securities of the Issuer

Contracts, Arrangements, Understandings or

Relationships with Respect to Securities of the Issuer

Exhibits



Content & Coverage


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Content & Coverage








Protection of Shareholder Interests


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Tender Offer

Tender Offer

a publicly announced intention by a person to

acquire equity securities of a public company.



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Objective

To give the minority shareholders the chance to

exit the company under reasonable terms

(i.e., opportunity to sell their shares at the

same price as those of the majority

shareholders)

Tender Offer



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Public Company

any corporation with a class of equity securitieslisted on an Exchange

corporation with assets in excess of Php50M and

having 200 or more stockholders, at least 200 ofwhich are holding at least 100 shares of a class ofits equity securities

Tender Offer



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Mandatory Tender Offer

1. Any person or group of persons acting in

concert intends to acquire 35% or more of

equity shares in a public company

tender offer for the percent sought to all

holders of such class.

Tender Offer



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2. Any person or group of persons acting in

concert intends to acquire 35% or more of

equity shares in a public company in one ormore transactions within a 12-month period

tender offer to all holders of such class forthe number of shares so acquired withinthe said period.

Tender Offer



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3. Any acquisition of even less than 35% if such

acquisition would result in ownership of over

51% of the total outstanding equity securitiesof a public company.

tender offer for all the outstanding equitysecurities to all remaining stockholders ofthe said company

Tender Offer



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CEMCO Holdings, Inc. vs. National Life Insurance

Company of the Philippines (August 2007)

The mandatory tender offer rule covers not only

direct acquisition but also indirect acquisition or

any type of acquisition.

Tender Offer


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BCI Atlas Cement CEMCO

(21.31%) (29.69%) (9%)

Union Cement Holdings Corp. CEMCO National Life Insurance

(60.51%) (17.03%)

Union Cement Corp.



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Tender Offer Report (SEC Form 19-1)

The identity of the bidder and his/its presentoccupation

identity of the target company amount of securities being sought and the type and

amount of consideration being offered

scheduled expiration date of the tender offer

exact dates when security holders who tender will havethe right to withdraw their securities

confirmation by the bidders financial adviser thatbidder has sufficient resources to satisfy fullacceptance of the offer

Tender Offer



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Exemptions from the Mandatory Tender Offer Requirement

1. Purchase of shares from the unissued capital stock if theacquisition will not result to a 50% or more ownership ofshares

2. Purchase of shares from an increase in authorized capitalstock

3.Purchase in connection with foreclosure proceedingsinvolving a duly constituted pledge or security where theacquirer is the debtor or creditor

Tender Offer



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4. Purchases in connection with privatization undertakenby the Government of the Philippines

5. Purchases in connection with court-supervised

corporate rehabilitation

6. Purchases through an open market at the prevailingmarket price

7. Merger or consolidation

Tender Offer



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Issuer Tender Offer / Issuer Buy Back

A publicly announced intention by an issuer toreacquire any of its own class of equity securities,

or by an affiliate of such issuer to acquire suchsecurities.

Allowed, subject to the following conditions:

Issuer has sufficient unrestricted retainedearnings

Tender Offer



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Buy back is for any of the followingpurposes:

to implement a stock option plan

to meet short-term obligations whichcan be settled by the re-issuance of therepurchased shares

to pay dissenting or withdrawingstockholders

other legitimate corporate purpose/s

Tender Offer



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Transactions exempt from the rules on IssuerTender Offer

1. Calls for redemption of any security in

accordance with the terms and conditions of itsgoverning instruments

2. Offers to repurchase securities evidenced by a

certificate or similar document which representsa fractional interest in a share of stock or similarsecurity

Tender Offer



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Penalty for violation

SEC may nullify the purchase, upon complaint

SEC may direct the holding of a tender offer

Tender Offer


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Manipulative Practices

Section 2, SRC

Declaration of State Policy.

minimize if not totallyeliminate insider trading and

other fraudulent or

manipulative devices and

practices which createdistortions in the free

market.


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Market Manipulation


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Market Manipulation

Examples

Painting the tape

Engaging in a series oftransactions in securities that

are reported publicly to givethe impression of activity orprice movement in a security.

E.g.

1. Brokers agree to buy andsell blocks of XYZ shares

among themselves.

2. Client places a buy order for100 XYZ shares. Broker places

20 separate orders at intervalsof 5 stocks.

Market Manipulation


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Marking the close

Buying and selling securities at

the close of the market in an

effort to alter the closing price

of the security.

E.g.

Examples

Name Bid Ask L/T

XYZ 300 302 300

100

BUY

Stock: XYZ

Price : 600

Vol : 500

BUY

Stock: XYZ

Price : 310

Vol : 10,000

Market Manipulation


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Improper matched orders

Buy and sell orders are

entered at the same timewith the same price andquantity by different butcolluding parties.

E.g.

Market Manipulation

Examples

100

BUY

Stock: XYZ

Price : 900

Vol : 500

110

SELL

Stock: XYZ

Price : 900Vol : 500

Market Manipulation


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Hype and dump

Buying at increasingly

higher prices and then

selling securities in the

market at the higher

prices or vice-versa.

E.g.

Market Manipulation

Examples

100

BUY

Stock: XYZ

Price : 320

Vol : 1500

BUY

Stock: XYZ

Price : 350

Vol : 2000

SELL

Stock: XYZ

Price : 370Vol : 3500

M k M i l i


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Wash sales

Engaging in transactions in

which there is no genuinechange in actual

ownership of a security.

E.g.

Market Manipulation

Examples

Buy 100

XYZ

shares

Sell 100

XYZ

shares

Market Manipulation


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Squeezing the float

Taking advantage of a shortage of securities in the

market by controlling the demand side and exploitingmarket congestion during such shortages in a way as

to create artificial prices

Examples

M k t M i l ti


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Disseminating false ormisleading marketinformation through

media, including theinternet, or any othermeans to move the priceof a security in a direction

that is favorable to aposition held or atransaction

Market Manipulation

Examples

Market Manipulation


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Sec. 59, SRC

Any person who willfully participates in any

manipulative practice shall be liable for damages to anyperson who shall purchase or sell any security at a price

affected by such manipulative act or transaction.

Civil Liability for Manipulation of Security Prices

Insider Trading


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Definition of an Insider

Who are insiders

Issuer

director or officer or a person controlling the issuer

a person whose relationship or former relationship tothe issuer gives or gave him access to material non-public information about the issuer or the security

a government employee, or a director or officer of anexchange, clearing agency and/or self-regulatoryorganization who has access to material non-publicinformation about an issuer or a security

a person who learns such information by acommunication from any of the foregoing insiders

Insider Trading


107/181

Material non-public information

Information that:

has not been generally disclosed to the public; and

would likely affect the market price of the securityafter dissemination to the public and the lapse of areasonable time for the market to absorb theinformation; or

would be considered by a reasonable personimportant under the circumstances in determiningwhether to buy, sell or hold a security.

Definition of an Insider

Insider Trading


108/181

1. Trading while in possession of material non-public

information

General Rule:

It is unlawful for an insider to sell or buy a security of the issuerwhile in possession of material non-public information aboutthe issuer or the security.

Presumption:A purchase or sale made by an insider or his spouse or relatives by affinityor consanguinity within the second degree, legitimate or common-law, shall be presumedto have been effected while in possession of material non-public information if transactedafter such information came into existence but prior to its dissemination to the public andthe lapse of a reasonable time for the market to absorb such information.

Prohibitions

Insider Trading


109/181

Exceptions:

The insider proves that the information was notgained from such relationship

The insider proves that:

he disclosed the information to the other party, or

he had reason to believe that the other partyotherwise is also in possession of the information

Prohibitions

Insider Trading


110/181

2. Communicating material non-public

information about the issuer or the security to

any person if the insider knows or has reasonto believe that such person will likely buy or

sell a security of the issuer while in possession

of such information.

Prohibitions

Insider Trading


111/181

3. Where a tender offer has commenced or is about to commence

Purchase or sale of security subject of the tender offer by anyperson (other than the bidder) who is in possession of material

non-public information relating to the tender offer, if such personknows or has reason to believe that the information is non-publicand has been acquired directly or indirectly from the bidder, thoseacting on its behalf, the issuer of the subject securities, or anyinsider of such issuer

Communication by the bidder, those acting on its behalf, the issuerof the subject securities, and any insider of such issuer of materialnon-public information relating to the tender offer to any otherperson, where such communication is likely to result in a violationof the rules.

Prohibitions

Market Manipulation


112/181

Any insider purchases or sells a security while inpossession of material non-public information shall beliable to any investor who contemporaneously purchased

or sold securities of the same class.

Defenses:

Investor knew the information

Investor would have purchased or sold at the sameprice regardless of disclosure of the information to him

Civil Liability for Insider Trading

Insider Trading


113/181

Short swing profit rule

Any profit realized by a beneficial owner,

director, or officer from any purchase and sale,or any sale and purchase, of any equity security

within any period of less than 6 months, by

reason of his relationship to the issuer, shall berecoverable by the issuer.

Short Swing Profits Rule

Insider Trading


114/181

Exceptions:

The security was acquired in good faith in connectionwith a debt previously contracted

such beneficial owner was not such both at the time ofthe purchase and sale, or the sale and purchase, of thesecurity involved

any transaction or transactions which the SEC mayexempt

Short Swing Profits Rule

Content & Coverage


115/181








Registration of Securities Market


116/181

Professionals

Legal Basis

Section 28, SRC

No person shall engage inthe business of buying or

selling securities in thePhilippines as a broker ordealer, or act as a salesman,or an associated person of

any broker or dealer unlessregistered as such with theCommission.

Registration of Securities Market


117/181

Who are the securities market professionals?

1. Brokers and dealers

2. Salesmen

3. Associated Persons

Professionals

Brokers and Dealers


118/181

Brokers and Dealers

Definition

What is a broker?

A person engaged in the

business of buying andselling securities for the

account of others

What is a dealer?

A person who buys and

sells securities for his/herown account in the

ordinary course of

business

Brokers and Dealers


119/181

1. Broker only

2. Dealer Only

3. Broker-Dealer

4. Exchange Trading

Participant Engaged in

Market Making

5. Exchange Trading

Participant Not

Engaged in Market

Making

6. Non-exchange Trading

Participant

Types

Application for Registration as aBroker Dealer

/


120/181

SEC FORM 28 BD/28-BDA

APPLICANTS/BROKER DEALERS NAME:___________________________________________________________

DATE: ____________________________________________ Firm T.I.N ___________________________

SEC FORM 28 BD/28-BDA

APPLICATION FOR REGISTRATION AS A BROKER DEALER

AND AMENDMENTS THERETO

NEW APPLICATION

AMENDMENTS This amendment pertains to items_____________________________________________________

1. Check the applicable boxes:

Broker Dealer To deal only with:

Equity Securities Proprietary Shares

Fixed Income/Debt Securities Non-Proprietary Shares

Licensed as Government Securities Eligible Dealers (GSED)

Exchange Trading Participant

(Exchange Member)

Clearing Trading Participant Non-Clearing Trading

Participant

Plans to or Engages in Market Making Transactions

Non-Exchange Broker Dealer

(Non-Exchange Member)

Operating a Seat for an Exchange Member

Using Trading Rights of an Exchange Member

Brokers and Dealers


121/181

What are the requirementsfor registration?

1. Unimpaired paid-upcapital:

1sttime registrants andsuccessor broker dealersP100M

Existing broker dealers

P30M + 12M surety bond Dealers onlyP2.5M

Brokers and Dealers

General Conditions for Registration

Brokers and Dealers


122/181

Brokers and Dealers

General Conditions for Registration

2. Registration of branch office

3. At least one trained and

registered salesman at eachregistered branch office

4. at least one registered

Associated Person

5. Sufficient number of back

office staff at the main office

6. Computerized and effectiverecording and accounting

system

7. Separate bank accounts forclient funds and firm funds

Exchange TPs


123/181

Exchange TPs

Conditions for Registration

In addition to the general terms andconditions for registration of brokerdealers, what are the conditions forregistration of Exchange TPs?

1. Membership in good standing inan Exchange.

2. Participation in a trust fundaccredited by SEC.

3. If participant in a clearing agency,contribution to the guarantee fund.

Registration of Salesmen andA i d P


124/181

Section 28.2, SRC

No registered broker or

dealer shall employ anysalesman or anyassociated person, and noissuer shall employ any

salesman, who is notregistered as such withthe Commission.

Associated Persons

Legal Basis

Salesmen and Associated Persons


125/181

Definition

What is a Salesman?

A natural personemployed by a Broker

Dealer to buy and sell

securities

Salesman


126/181


What are the requirements for registration ofsalesman?

1. Application for registration verified under oathby the employing Broker Dealer

2. At least 18 years old

2. No disciplinary history that would subject himto disqualification from registration

3. For first time applicants

Must have passed the exam in the last 3years preceding the application

4. If an applicant is a foreigner, certified true copyof valid work permit duly issued by DOLE or anyappropriate agency

Application for Registration as Salesmanof a Broker Dealer

SEC FORM 28 S/28 AMD


127/181

SEC FORM 28-S/28-AMD

SEC FORM 28-S/28-AMD

APPLICATION FOR REGISTRATION AS A SALESMAN OF A BROKER DEALERAND AMENDMENTS THERETO

NEW APPLICATION : [ ] First Time Registrant

[ ] Transferee/Change in Employer

[ ] Returnee (please indicate date of last license) _____________________________

AMENDMENTS This amendment pertains to items _____________________________________________

[ ] Change in Information

[ ] Correction/Completion of Deficiency

Type Of Employer

[ ] Broker Dealer in [ ] Equity Securities [ ] Fixed Income/Debt Securities [ ] Proprietary Shares [ ] Non-ProprietaryShares [ ] GSED

[ ] Others (please specify) __________________________________________________________________________

Salesman


128/181

Registered salesman shall apply for issuance of annual

license in November of each year.


Associated Person


129/181

Definition

What is an Associated Person?

An employee of the Broker

Dealer responsible forinternal control supervisionof other employees, agents,salesmen, officers, directors,clerks and stockholders of

the Broker Dealer forcompliance with the SRC

Associated Person

C di i f R i i


130/181

What are the requirements forregistration as AP?

1. Application for registration verifiedunder oath by the employing BrokerDealer

2. Natural person

3. At least 21 years old

4. Must not have been censured by aregulatory body or dismissed for

negligence, incompetence ormismanagement, or dismissed

5. If an applicant is a foreigner, certifiedtrue copy of valid work permit dulyissued by DOLE or any appropriateagency


Application for Registration as anAssociated Person

S C O 28 /28


131/181

SEC FORM 28-AP/28-AMD

APPLICANTS/ BROKER DEALERS NAME:_______________________________________________________________________

DATE: ____________________________________________ Firm T.I.N ________________________________________

SEC FORM 28-AP/28-AMD

APPLICATION FOR REGISTRATION AS AN ASSOCIATED PERSON OF A BROKER DEALER

AND AMENDMENTS THERETO

NEW APPLICATION : [ ] First Time Registrant

[ ] Transferee/Change in Employer

[ ] Returnee (please indicate date of last license) ______________________________________

AMENDMENTS This amendment pertains to items _________________________________________________________

[ ] Change in Information

[ ] Correction/Completion of Deficiency

Type Of Employer

[ ] Broker Dealer in [ ] Equity Securities [ ] Fixed Income/Debt Securities [ ] Proprietary Shares [ ] Non-Proprietary Shares [

] GSED

[ ] Others (please specify) ___________________________________________________________________________________


132/181

Application for Registration as anAssociated Person

D ti f A i t d P


133/181

4. Develop procedures and monitor compliance with financialresource requirements on a daily basis ;

5. Ensure that there is an audit trail which enables compliancewith applicable laws, Exchange, clearing agency and other

SRO rules;

6. Maintain a supervisory system; and

7. Maintain a logbook of all material non-compliance reportswith the appropriate notation of the action taken bymanagement on the said occurrences.

Duties of an Associated Person

Regulation of Securities MarketProfessionals


134/181

Professionals

Regulatory Authority

Which entity regulates

securities market

professionals?

SEC

SRO of which it is a member

Transactions of Broker Dealers

Affiliated Transactions


135/181

Affiliated Transactions

Section 30.1, SRC (Broker/Director Rule)

No broker or dealer shall deal in or otherwise buy or sell, for its ownaccount or for the account of customers, securities listed on anExchange issued by any corporation where any stockholder, director,associated person or salesman, or authorized clerk of said broker ordealer and all the relatives of the foregoing within the fourth civildegree of consanguinity or affinity, is at the time holding office in saidissuer corporation as a director, president, vice-president, manager,treasurer, comptroller, secretary or any office of trust andresponsibility, or is a controlling person of the issuer.

Rationale: Affiliation between brokers and listed companies gives riseto opportunities for insider trading.

Transactions of Broker Dealers


136/181

Monitoring of Affiliated Transactions

How does the SEC monitor compliancewith Sec. 30.1?

1. Every Broker Dealer must request itsstockholders, directors, AP, salesmen

and authorized clerks to submit to itan executed copy of SEC Form 30.1under oath.

2. If any of the foregoing holds anexecutive position or any position of

trust and responsibility in a listedcompany, broker shall submit SECForm 30.1 and indicate therestrictedsecurity.

3. Broker Dealer must update theinformation contained in this

Form by filing SEC Form 30.1-AMD no later than 24 hours ofsuch changes.

Affiliated Transactions MonitoringSheet

SEC FORM 30 1/30 1 AMD


137/181

SEC FORM 30.1/30.1-AMD

NAME OF PERSON REPORTING: _____________________ Date:

_______________NAME OF RELATED BROKER DEALER: ________________________

Firm T.I.N.: _____________________

SEC FORM 30.1/30.1-AMD

AFFILIATED TRANSACTIONS MONITORING SHEET

NEW

AMENDMENTS This amendment pertains to items: _____________

Check the applicable boxes:

The person accomplishing this Form is a:

[ ] stockholder of a Broker Dealer[ ] director of a Broker Dealer

[ ] partner in a Broker Dealer Firm

[ ] owner of a Broker Dealer Firm

[ ] associated person of a Broker Dealer

[ ] registered salesman of a Broker Dealer

[ ] authorized clerk of a Broker Dealer

(1) LAST NAME JR./SR., etc. FIRST NAME MIDDLE NAME

(2) OTHER NAMES KNOWN BY

(3) CIVIL STATUS

[ ] single [ ] married


138/181

(4) Is your spouse or relative by consanguinity or affinity within the fourth civil degree, a director of a

company listed on a stock exchange, or an affiliate/subsidiary of a company listed on a stock exchange?

[ ] yes [ ] no

(5) Is your spouse or relative by consanguinity or affinity within the fourth civil degree, a president of

accompany listed on a stock exchange, or an affiliate/ subsidiary of a company listed on a stock

exchange?

[ ] yes [ ] no

(6) Is your spouse or relative by consanguinity or affinity within the fourth civil degree, a manager of a


[ ] yes [ ] no

(7) Is your spouse or relative by consanguinity or affinity within the fourth civil degree, a treasurer of a


[ ] yes [ ] no

(8) Is your spouse or relative by consanguinity or affinity within the fourth civil degree, a comptroller of a


[ ] yes [ ] no

(9) Is your spouse or relative by consanguinity or affinity within the fourth civil degree, in an office of trust

and responsibility in a company listed on a stock exchange, or an affiliate/subsidiary of a company listed

on a stock exchange (e.g. as part of their responsibilities they have access to material non-public

information about the company, such as in-house counsel, accountants)?

[ ] yes [ ] no

(10) If you answered yes to any of the questions above, please state the name of the listed

company/affiliate/subsidiary, and the nature of the affiliation in the space provided.

RESTRICTED SECURITY NATURE OF AFFILIATION


139/181

Report by Broker Dealers onRestricted Transactions

SEC REPORT 30.1/30.1-AMD


140/181

Name of Broker Dealer: ______________ Date: ___________

SEC REPORT 30.1/30.1-AMD

REPORT BY BROKER DEALERS ON RESTRICTED TRANSACTIONS

NEW

AMENDMENTS This amendment pertains to _____________.

WARNING: Failure to keep this form current and to file accurate supplementary information on a timelybasis, or the failure to keep accurate books and records or otherwise to comply with the Securities

Regulation Code and rules and regulations adopted thereunder may result in disciplinary,administrative, injunctive or criminal action.

INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACTS MAY CONSTITUTE CRIMINAL VIOLATIONS.

(1) Is the person reporting on this form an associated person?

[ ] yes [ ] no

(2) If the answer to the preceding question is no, please give the full name of the person reporting and theposition occupied in the Firm.

Name: ___________________________

Position: ___________________________

(3) State all securities the Broker Dealer is prohibited from dealing in, purchasing or selling, by virtue of section30.1 of the Securities Regulation Code, in accordance with the information contained in SEC Form 30.1(Affiliated Transactions Monitoring Sheet). If the space below is insufficient, please use another sheet ofpaper and attach hereto.


141/181

Restricted Security Details of Affiliation

Responsibilities of Broker Dealers

Ethical Standards Rule


142/181

Ethical Standards Rule

SRC Rule 30.2

Every Broker Dealer, AP, and salesman of a Broker

Dealer, in the conduct of his business, shallobserve high standards of commercial honor and

just and equitable principles of trade.


IOSCO Standards


143/181

1. Observe ethical standardsin its dealings with clients

1. Honesty and fairness

2. Diligence

3. Capabilities

4. Client information

gathering

5.Dissemination of information

6. Absence of conflict ofinterest

7. Compliance with regulatory

requirements


Confirmation of Customer Orders


144/181

2. Send confirmation ofcustomer orders

Written confirmation of

purchases and sales

By courier, fax or e-mail

Trader confirms to investor

Order Entry


Confirmation of Customer Orders


145/181

Investor

places BUY

order

Broker

transmits

buy order to

the PSE

PSE executes

order and sends

order

confirmation to

broker

Broker

transmits buy

order to the

PSEInvestor

places BUY

orderBroker sendsorder

confirmation

to investor

Broker sendsorder

confirmation

to investor


Client Agreement


146/181

3. Enter into a written Client Agreement

Before providing service

In a language understood by theclient

Contents explained to client:

a. Full name & address of the clientand Broker Dealer

b. Description of the nature ofservices to be provided

c. Remuneration

d. Details of margin requirements,

interest charges, and margin calls, ifmargin or short selling facilities willbe provided

e. Whether account is a discretionaryaccount


Suitability Rule


147/181

4. Observe suitability rule

Ensure that the

recommendation is suitable

for the customer on the basisof the facts disclosed by such

customer as to his financial

situation and other security

holdings


Brokers Commissions and Charges


148/181

5. File a schedule of minimum commission rates with the SEC No discounts and/or rebates on the minimum rates.


Supervision


149/181

6. Establish a compliancefunction within the firm

independent of all operationaland business functions

performed by the Associated

Person, who shall:maintain a supervisory

system

file with SEC, w/in 15 daysafter the end of each

quarter, a ComplianceReport on the firmscompliance or non-compliance with the SRC


Segregation of Broker and Dealer Functions


150/181

SRC Rule 34.1, par. 1.A

An Exchange Trading Participant shall not effect any transaction

on such Exchange for its own account, the account of an

associated person, salesmen, or any other person associatedwith the TP, including affiliated persons, or an account with

respect to which it exercises investment discretion unless it

complies with the CustomerFirstpolicy.


Segregation of Brokers and DealerFunctions


151/181

Functions

Customer First Policy

Objective: To avoid front-running

Under the PSE Trading Rules:

a trader handling client accounts shall be separate from a

trader handling proprietary accounts; and

Broker must maintain Chinese walls to ensure proper

segregation of broker and dealer functions.


Segregation of Functions


152/181

Chinese Walls Policies and procedures implemented within a firm to

prevent flow of information between the different unitsof the firm.

Information refers to material non-public information

Rule is applicable to brokers which assume more thanone function (e.g. As a dealer, adviser, underwriter or

market maker)

Objective: To avoid conflict of interest.

Accounts, Records, and Reportsof Broker Dealers

Records Retention Rule


153/181

Retention Period

5 years

Blotters itemized daily recordof all purchases and sales,receipts and deliveries of

securities and cash, and all otherdebits and credits.

Ledgers reflecting all assets andliabilities, income, expense, andcapital accounts

Audited financial reports

3 years

Ledger reflecting separately foreach security all long or shortpositions carried by the Broker

Dealer for his account or forthe account of customers

Memorandum of each orderand any other instruction givenor received for the purchase orsale of securities, whether

executed or unexecuted.

Accounts, Records, and Reports

of Broker Dealers


154/181

Trial balances and record of

computation of aggregateindebtedness and net capital

Check books, bank statements,cancelled checks, and cashreconciliations

Bills receivable or payable, paid orunpaid

Communications received and sent bythe Broker Dealer, including inter-office memoranda

For Broker Dealers who cease

operation

at least 5 years from approval bythe SEC of cessation of operations

For closed accounts

at least 5 years after closing of theaccount

If money laundering, criminal, oradministrative cases have been filed incourt or investigation is being

conducted,

beyond the 5-year period until it isconfirmed by final judgment thatthe case has been finally resolvedor terminated.

Brokers and Dealers

Audited Financial Reports


155/181

Annual Audited Financial Reports of Broker Dealers

Statement of Financial Condition

Statement of Income

Statement of Cash Flows

Statement of Changes in Stockholders or Partners or Sole Proprietors Equity

Statement of Changes in Liabilities Subordinated to Claims of GeneralCreditors

Computation of Net Capital

Statement of Managements Responsibility

Information Relating to Possession or Control requirements

Computation for Determination of Reserve Requirements

Report of material inadequacies found to have existed since date of previousaudit

Results of Quarterly Securities Count

Customer Account

Information (CAIF Rule)


156/181

Objective

To verify and record the true and full identity of its customers.

Anonymous accounts and accounts under fictitious names areprohibited.

Broker Dealer cannot create new accounts without a face-to-facemeeting.

Broker Dealer is allowed to maintain numbered accounts, providedthe Broker Dealer keeps on file the name of the customer and a writtenstatement signed by the customer that he owns the account.

Customer Account

Information


157/181

Retail accounts Customers name, address, nationality, date and place of birth

Customers TIN, SSS or GSIS number

Occupation of customer and contact details of employer

Whether the customer is employed by or associated withanother Broker Dealer

Whether the customer is an officer or director of a listed

company

Investment objective

Information concerning the customers financial situation

Source of funds

Customer Account

Information


158/181

Institutional accounts

AOI/Articles of Partnership and By-laws

Secretarys Certificate of Board Resolution authorizing the opening of

the account with the Broker Dealer

List of directors/partners

List of stockholders owning at least 2% of the capital stock

Verification of the authority and identification of the clients

representative

Financial information

Investment objective

Customer Account

Information


159/181

Institutional Accountaccount of:

Bank

Insurance company

Registered investment company

Pension fund/retirement plan maintained by GRP or managed by a bank or otherpersons authorized to engage in trust functions

Registered investment house

Any other entity (whether a natural person, corporation, partnership, trust) withtotal assets of at least P1.2B provided the entity confirms ownership of such assetsunder oath.

Customer AccountInformation


160/181

Additional requirements for discretionary accounts

Signature of each person authorized to exercise discretion in

the account

Date of grant of discretion

Order Ticket Rule


161/181

For each buy and sell order

Contents:

Whether the transaction will be matched through the Exchange tradingsystem or transacted as a block sale

Whether the firm is acting as agent or principal in connection with thetransaction

Time of receipt of the customers order and transmission to the tradingfloor

Terms and conditions of the order or instruction, including a notation ifthe order is a short sale

Any subsequent modification or cancellation

Name of the customer for which the order was entered

Name of the salesman who took the order

Price at which it was executed

Whether the order was solicited or unsolicited

Customer Account Statements


162/181

General Rule

Statement of account indicating the customers securitiespositions, money balances, and account activity must be sentnot less than monthly.

Exceptions

Inactive accounts statements may be sent on a quarterlybasis

Dormant accountsclientscash and security positions shall beturned over to SEC for safekeeping, to be escheated in favor ofthe government after 10 years.

If, after 3 attempts, mails/registry cards are returned for failureto locate the customerswhereaboutsbroker is excused fromsending account statements.

Anti-Money Laundering


163/181

Anti-Money Laundering Act of 2001

"Covered institution" refers to:

xxx xxx xxx

(3) securities dealers, brokers, salesmen, investmenthouses and other similar entities managing securitiesor rendering services as investment agent, advisor, orconsultant;


Covered Transactions


164/181

Covered Transaction - transaction in cash or other

equivalent monetary instrument involving a

total amount in excess of P500,000.00 within 1banking day

Reporting obligation is triggered when amatched trade exceeds P500,000.00

Trading

Matching will be at the limit price or better.


165/181

165

101

BUY

Stock: XYZ

Price : 905

Vol : 1000

XYZBID OFFER

Bkr Vol PhP PhP Vol Bkr

905 1000 121145 500 900

101 1000 895

110 1500 890

100 500 900

915 10000 123

920 5000 123

905 10 110

g p

XYZBID OFFER


905 1000 121

915 10000 123

920 5000 123

905 10 110145 500 900

101 1000 895

110 1500 890

100 500 900

101 1000 905

XYZBID OFFER


145 500 900

101 1000 895

110 1500 890

100 500 900 915 10000 123

920 5000 123

905 10 110

Trade:

XYZ 1000 @PhP 905 B101 S121

The trade value for this transaction will be P905,000.

Scenario 1:

Trading

Matching will be at the limit price or better.


166/181

166

120

SELL

Stock: XYZ

Price : 895

Vol : 2500

g p

XYZBID OFFER


145 500 900

101 1000 895

110 1500 890

100 500 900 915 10000 123

920 5000 123

905 10 110

Following are the trade values:

#1 500 @ P900 = P450,000 #3 1000 @ P895 = P895,000

#2 500 @ P900 = P450,000

Scenario 2:

XYZBID OFFER


145 500 900

101 1000 895

110 1500 890

100 500 900

915 10000 123

920 5000 123

905 10 110

895 2500 120

XYZBID OFFER


123 700 890

110 1500 890

100 530 885 915 10000 123

920 5000 123

905 10 110

895 500 120

1 XYZ 500 @P 900 B145 S120

2 XYZ 500 @P 900 B100 S120

3 XYZ 1000 @ P 895 B101 S120


Suspicious Transactions


167/181

Suspicious Transaction - transaction with a covered institution,regardless of the amount involved, where any of the following

circumstances exist:

1.no underlying legal or trade obligation, purpose or economic

justification;

2. client is not properly identified;

3. amount involved is not commensurate with the business or

financial capacity of the client;


Suspicious Transactions


168/181

4. taking into account all known circumstances, it may be perceived that

the client's transaction is structured in order to avoid being the subject of

reporting requirements under the AMLA;

5. any circumstances relating to the transaction which is observed todeviate from the profile of the client and/or the client's past transactions

with the covered institution;

6. the transactions is in a way related to an unlawful activity or offense

under the AMLA that is about to be, is being or has been committed; and

7. any transaction similar or analogous to any of the foregoing.


Obligations of Broker Dealers


169/181

Duties of Broker Dealers under the AMLA

Customer identification

Record-keeping

Existing accounts - 5 years from the dates of transactions

closed accounts - 5 years from closing of the account.

Reporting of Covered and Suspicious Transactions

Report to the AMLC all covered and suspicious transactions

within 5 working days from occurrence

Formulate Anti-Money Laundering Operating Manual

Comply with a freeze order issued by the CA


Freeze Order


170/181

Freezing of Monetary Instrument or Property

Issued by the CA upon verified ex parte petition by AMLC

Only when there is probable cause that any monetary

instrument or property is related to an unlawful activity shallnot exceed 6 months

Ipso facto lifted if no case is filed within the freeze order

period

Only the SC may issue a TRO or injunction against the freezeorder

Content & Coverage


171/181








Exchanges and Other Trading Markets

Prohibition on Use of Unregistered Exchanges


172/181

Prohibited Acts

1. Making use of any facility of an unregisteredExchange to effect any transaction in a security,or to report such transaction.

2. Creation or operation of any trading market for

the buying and selling of any security, other thanon a registered Exchange.


Registration of Exchanges


173/181


Organized as a stock corporation

Engaged solely in the business of operating anexchange

No person beneficially owns or controls, directly orindirectly, more than 5% of the voting rights of theExchange

No industry or business group beneficially owns or

controls, directly or indirectly, more than 20% of thevoting rights of the Exchange




174/181

Brokers in the board of the Exchange comprises of notmore than 49% of such board

At least 51% of the remaining members of the board iscomprised of 3 independent directors and personsrepresenting the interests of issuers, investors, and

other market participants not associated with anybroker or dealer for 2 years prior to his/herappointment

The President and other management of the Exchangeconsists only of persons who are not brokers and are

not associated in any capacity, directly or indirectly,with any broker or dealer or listed company of theExchange




175/181

Procedure for expulsion, suspension, or

disciplining of a member and persons associatedwith a member for conduct or proceeding

inconsistent with just and equitable principles offair trade

Transparent, prompt and accurate clearance andsettlement of transactions effected on theExchange


Power of SEC over Exchanges


176/181

Powers of SEC

1. Summarily suspend trading in any listed securityfor a period not exceeding 30 days

1. With the approval of the President of thePhilippines, summarily suspend all trading onany securities Exchange or other trading market

for a period of more than 30 but not exceeding90 days


Powers of an SRO


177/181

Self-Regulatory Organizations

An organized Exchange, registered clearing

agency

securities specialist course lecture

Documents