Requirement of registration of securities.
SEC. 4. Requirement of registration of securities. —
(a) No securities, except of a class exempt under any of the provisions of Section five hereof or unless sold in any transaction exempt under any of the provisions of Section six hereof, shall be sold or offered for sale or distribution to the public within the Philippines unless such securities shall have been registered and permitted to be sold as hereinafter provided.
(b) Notwithstanding the provisions of paragraph (a) of this Section and of the succeeding Sections regarding exemptions, no commercial paper as defined in Section two hereof shall be issued, endorsed, sold, transferred or in any other manner conveyed to the public, unless registered in accordance with the rules and regulations that shall be promulgated in the public interest and for the protection of investors by the Commission. The Commission, however, with due regard to the public interest and the protection of investors, may, by rules and regulations, exempt from registration any commercial paper that may otherwise be covered by this paragraph. In either case, the rules and regulations promulgated by the Commission shall be subject to the approval of the Monetary Board of the Central Bank of the Philippines . The Monetary Board shall, however, have the power to promulgate its own rules on the monetary and credit aspects of commercial paper issues, which may include the imposition of ceilings on issues by any single borrower, and the authority to supervise the enforcement of such rules and to require issues of commercial papers to submit their financial statements and such periodic reports as may be necessary for such enforcement. As far as practicable, such financial statements and periodic reports, when required by both the Commission and the Monetary Board, shall be uniform.
(c) A record of the registration of securities shall be kept in a Register of Securities in which shall be recorded orders entered by the Commission with respect to such securities. Such register and all documents or information with respect to the securities registered therein shall be open to public inspection at reasonable hours on business days. (4a)
Exempt securities.
SEC. 5. Exempt securities.— (a) Except as expressly provided, the requirement of registration under subsection (a) of Section four of this Act shall not apply to any of the following classes of securities:
Any security issued or guaranteed by the Government of the Philippines, or by any political subdivision or agency thereof or by any of its public instrumentalities, or by any person controlled or supervised by, and acting as an instrumentality of said Government, or any certificate of deposit for any of the foregoing.
Any security issued or guaranteed by the government of any country with which the Philippines is, at the time of the sale or offer of sale thereof, maintaining diplomatic relations, or by any state, province or political subdivision thereof having the power of taxation or assessment, which security is recognized at the time of the sale or the offer to sell in the Philippines as a valid obligation by such foreign government or by such state, province or political subdivision thereof using the same.
Any security issued or guaranteed by any banking institution authorized to do business in the Philippines the business of which is substantially confined to banking or a financial institution licensed to engage in quasi-banking, and is supervised by the Central Bank.
Any security issued by a building and loan association, non-stock savings and loan institution, substantially all the business of which is confined to the making of loans to members but does not include any such security where the issuer takes from the total amount paid or deposited by the purchaser, by way of any fee, cash value or other device whatsoever, either upon termination of the investment at maturity or before maturity an aggregate amount in excess of three per centum of the face value of such security; or any security issued by rural credit associations or by cooperative marketing association; which are subject to regulation and supervision by the proper government agency.
Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the court.
Any insurance or endowment policy or annuity contract, or optional annuity contract, issued by a corporation subject to the supervision of the Insurance Commission,
Any security covering any right or interest in real property, including a subdivision lot or a condominium unit, where the sale or transfer of such security is subject to the supervision and regulation of the Ministry of Human Settlements or any of its authorized constituent or attached agencies.
Pension plans subject to regulation and supervision by the Bureau of Internal Revenue and/or the Insurance Commission.
(b) The Commission may, from time to time and subject to such terms and conditions as may be prescribed after public hearing, add to the foregoing any class of securities similar to these above-enumerated if it finds that the enforcement of this Act with respect to such securities is not necessary in the public interest and for the protection of investors. (5a)
Exempt transactions.
SEC. 6. Exempt transactions. —(a) The requirement of registration under subsection (a) of Section four of this Act shall not apply to the sale of any security in any of the following transactions:
At any judicial sale, or sale by an executor administrator, guardian or receiver or trustee in insolvency or bankruptcy.
By or for the account of a pledge holder, or mortgagee, or any other similar lienholder selling or offering for sale or delivery in the ordinary course of business and not for the purpose of avoiding the provisions of this Act, to liquidate a bona fide debt, a security pledged in good faith as security for such debt.
An isolated transaction in which any security is sold, offered for sale, subscription or delivery by the owner thereof, or by his representative for the owner's account, such sale or offer for sale, subscription or delivery not being made in the course of repeated and successive transactions of a like character by such owner, or on his account by such representative and such owner or representative not being the underwriter of such security.
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; or the issuance of securities to the security holder or other creditors of a corporation in the process of a bona fide reorganization of such corporation made in good faith and not for the purpose of avoiding the provisions of this Act, either in exchange for the securities of such security holders or claims of such creditors or partly for cash and partly in exchange for the securities or claims of such security holders or creditors; or the issuance of additional capital stock of a corporation sold or distributed by it among its own stockholders exclusively, where no commission or other remuneration is paid or given directly or indirectly in connection with the sale or distribution of such increased capital stock.
The transfer or exchange by one corporation to another corporation of their own securities in connection with a consolidation or merger of such corporations.
The issuance of bonds or notes secured by mortgage upon real estate or tangible personal property, where the entire mortgage together with all the bonds or notes secured thereby are sold to a single purchaser at a single sale.
The issue and delivery of any security in exchange for any other security of the same issuer pursuant to 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 and permitted to be sold under this Act or was, when sold, exempt from the provisions of this Act, 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 Act. 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.
Broker's transactions, executed upon customer's orders on any exchange or in the over-the-counter market but not those made upon the solicitation by brokers of such orders.
Subscriptions for shares of the capital stock of a corporation prior to the incorporation thereof under the Corporation Code, when no expense is incurred, or no commission, compensation or remuneration is paid or given in connection with the sale or disposition of such securities, and only when the purpose for soliciting, giving or taking, of such subscriptions is to comply with the requirements of such law as to the percentage of the capital stock of a proposed corporation which should be subscribed before it can be registered and duly incorporated.
The exchange of securities by the issuer with its existing security holders exclusively, where no commission or other remuneration is paid or given directly or indirectly for soliciting such exchange.
Any issuance of any security by a public utility or service corporation which, in compliance with or pursuant to law, regulation or decree, is intended to broaden its equity base as well as to finance a part of the capital investment thereof through the issuance and sale of stocks.
(b) The Commission may, from time to time and subject to such terms and conditions as it may prescribe, exempt transactions other than those provided in the preceding paragraph, if it finds that the enforcement of the requirements of registration under this Act with respect to such transactions is not necessary in the public interest and for the protection of the investors by reason of the small amount involved or the limited character of the public offering.
(c) A free equivalent to one-tenth of one per centum of the maximum aggregate price or issued value of the securities shall be collected by the Commission for granting a general or particular exemption from the registration requirements of this Act. (6a)
Commodity futures contracts.
SEC. 7. Commodity futures contracts. —Notwithstanding the provisions of paragraph (a) of Section 4 and of Section 5 and 6 regarding exemptions, commodity futures contracts may be registered or otherwise regulated, and futures commission merchants, future brokers, floor brokers, pool operators and advisors licensed and supervised in accordance with the rules and regulations that shall be promulgated in the public interest and for the protection of investors by the Commission, with the approval of the Monetary Board of the Central Bank of the Philippines. Such rules and regulations may, among other things, provide for the establishment and maintenance by futures commission merchants, futures brokers, floor brokers, pool operators and advisor of bank accounts exclusively for margin deposit of and/or other receipts from customers, the monitoring of withdrawals from such account through periodic reports and/or examination, the requirement that at least one of the signatories to fund withdrawals from such account must be a Filipino citizen and a resident of the Philippines, the posting by futures commission merchants, future brokers, floor brokers, poll operators and advisors of a bond in an amount sufficient to meet possible claims against them, taking into account the volume of margin deposits held by them, the establishment of a common compensation fund to be contributed by all futures commission merchants, futures brokers, floor brokers tool operators and advisors and subject to the control and super vision of the Commission, and the registration and use by futures commission merchants, futures brokers, floor brokers, pool operators and advisors of official receipts to evidence commissions received by them from customers. However, the Commission shall, after proper notice and opportunity for hearing, prohibit transactions with respect to all or specified commodity futures contracts if it shall find that such transactions will be inimical to the economic interest of the country or may cause grave or irreparable injury or prejudice to the investing public. (n)
Procedure for registration.
SEC. 8. Procedure for registration.— (a) All securities required to be registered under subsection (a) of Section four of this Act shall be registered through the filing by the issuer or by any dealer or underwriter interested in the sale thereof, in the office of the Commission, of a sworn registration statement with respect to such securities, containing or having attached thereto, the following:
Name of issuer and, if incorporated, place of incorporation.
The location of the issuer's principal business office, and if such issuer is a non-resident or its place of office is outside of the Philippines, the name and address of its agent in the Philippines authorized to receive notice.
The names and addresses of the directors or persons performing similar functions, and the chief executive, financial and accounting officers, chosen or to be chosen, if the issuer be a corporation, association, trust, or other entity; of all the partners, if the issuer be a partnership; and of the issuer, if the issuer be an individual; and of the promoters in the case of a business to be formed.
The names and addresses of the underwriters.
The general character of the business actually transacted or to be transacted by, and the organization and financial structure of, the issuer including identities of all companies controlling, controlled by or commonly controlled with the issuer.
The names and addresses of all persons, if any, owning of record or beneficially, if known, more than ten (10%) per centum in the aggregate of the outstanding stock of the issuer as of a date within twenty days prior to the filing of the registration statement.
The amount of securities of the issuer held by any person specified in subparagraph (3), (4), and (6) of this subsection, as of a date within twenty days prior to the filing of the registration statement, and, if possible, as of one year prior thereto, and the amount of the securities, for which the registration statement is filed, to which such persons have indicated their intention to subscribe.
A statement of the capitalization of the issuer and of all companies controlling, controlled by or commonly controlled with the issuer, including the authorized and outstanding amounts of its capital stock and the proportion thereof paid up; the number and classes of shares in which such capital stock is divided; par value thereof, or if it has no par value, the stated or assigned value thereof; a description of the respective voting rights, preferences, conversion and exchange rights, rights to dividends, profits, or capital of each class, with respect to each other class, including the retirement and liquidation rights or values thereof.
A copy of the security for the registration of which application is made.
A copy of any circular, prospectus, advertisement, letter, or communication to be used for the public offering of the security.
A statement of the securities, if any, covered by options outstanding or to be created in connection with the security to be offered together with the names and addresses of all persons, if any, to be allotted more than ten (10%) per centum in the aggregate of such options.
The amount of capital stock of each class issued or included in the shares of stock to be offered.
The amount of the funded indebtedness outstanding and to be created by the security to be offered, with a brief statement of the date, maturity, and character of such debt, rate of interest, character or amortization provisions, other terms and conditions thereof and the security, if any, therefore. If substitution is permissible, a summarized statement of the conditions under which such substitution is permitted. If substitution is permissible without notice, a specific statement to that effect.
The specific purposes in detail and the approximate amounts to be devoted to such purposes, so far as determinate, for which the security to be offered is to supply funds, and if the funds are to be raised in part from other sources, the amounts and the sources thereof.
The remuneration, paid or estimated to be paid, by the issuer or its predecessor, directly or indirectly, during the past year and the ensuing year to (a) the directors or persons performing similar functions, and (b) its officers and other persons, naming them whenever such remuneration exceed sixty thousand (P60,000.00) pesos during any such year.
The amount of issue of the security to be offered.
The estimated net proceeds to be derived from the security to be offered.
The price at which the security is proposed to be offered to the public or the method by which such price is computed and any variation therefrom at which any portion of such security is proposed to be offered to persons or classes of persons, other than the underwriters, naming them or specifying the class. A variation in price maybe proposed prior to the date of the public offering of the security by filing an amended registration statement.
All commissions or discounts paid or to be paid, directly or indirectly, by the issuer to the underwriters in respect of the sale of the security to be offered. Commissions shall include all cash, securities, contracts, or anything of value, paid, to be set aside, or disposed of, or understandings with or for the benefit of any other person in which any underwriter is interested, made in connection with the sale of such security. A commission paid or to be paid in connection with the sale of such security by a person in which the issuer has an interest or which is controlled by, or under common control with, the issuer shall be deemed to have been paid by the issuer. Where any such commission is paid, the amount of such commission paid to each underwriter shall be stated.
The amount or estimated or estimated amounts, itemized in reasonable detail, of expenses, other than commission specified in the next preceding paragraph, incurred or to be incurred by or for the account of the issuer in connection with the sale of the security to be offered or properly chargeable thereto, including legal, engineering, certification authentication, and other charges.
The net proceeds derived from any security sold by the issuer during two years preceding the filing of the registration statement, the price at which such security was offered to the public, and the names of the principal underwriters of such security.
Any amount paid within two years preceding the filing of the registration statement or intended to be paid to any promoter and the consideration for any such payment.
The names and addresses of the vendors and the purchase price of any property or goodwill, acquired or to be acquired, not in the ordinary course of business, which is to be defrayed in whole or in part from the proceeds of the security to be offered, the amount of any commission payable to any person in connection with such acquisition, and the name or names of such person or persons, together with any expenses incurred or to be incurred in connection with such acquisition, including the cost of borrowing money to finance such acquisition.
Full particulars of the nature and extent of the interest, if any, of every director, principal executive officer, and of every stockholder holding more than ten (10%) per centum in the aggregate of the stock of the issuer, in any property acquired, not in the ordinary course of business of the issuer, within two years preceding the filing of the registration statement or proposed to be acquired at such date.
The names and addresses of independent counsel who have passed on the legality of the issue.
Dates of and parties to, and the general effect concisely stated of every material contract made, not in the ordinary course of business, which contract is to be executed in whole or in part at or after the filing of the registration statement or which has been executed not more than two years before such filing. Any management contract or contract providing for special bonuses or profit-sharing arrangements, and every material patent or contract for a material patent right, and every contract by or with a public utility company or an affiliate thereof, providing for the giving or receiving of technical or financial advice or service shall be deemed a material contract.
Any contract, whether or not made in the ordinary course of business with any stockholder, whether a natural or juridical person, owning more than ten (10%) per centum of the shares of the issuer shall be deemed a material contract for the purpose of this Act.
A balance sheet as of a date not more than ninety days prior to the date of the filing of the registration statement showing all of the assets of the issuer, the nature and cost thereof, whenever determinable with intangible items segregated, including any loan to or from any officer, director, stockholder or person directly or indirectly controlling or controlled by the issuer, or person under direct or indirect common control with the issuer. In the event any such assets consist of shares of stock in other companies, the balance sheet and profit and loss statements of such companies for the past three years shall likewise be enclosed. All the liabilities of the issuer, including surplus of the issuer, showing how and from what sources such surplus was created, all as of a date not more than ninety days prior to the filing of the registration statement. If such statement is not certified by an independent certified public accountant, in addition to the balance sheet required to be submitted under this schedule, a similar detailed balance sheet of the assets and liabilities of the issuer, certified by an independent certified public accountant, of a date not more than one year prior to the filing of the registration statement, shall be submitted.
A profit and loss statement of the issuer showing earnings and income, the nature and source thereof, and the expenses and fixed charges in such detail and such form as the Commission shall prescribe for the latest fiscal year for which such statement is available and for the two preceding fiscal years, year by year, or, if such issuer has been in actual business for less than three years, then for such time as the issuer has been in actual business, year by year. If the date of the filing of the registration statement is more than six months after the close of the last fiscal year, a statement from such closing date to the latest practicable date. Such statement shall show what the practice of the issuer has been during the three years or lesser period as to the character of the charges, dividends or other distributions made against its various surplus accounts, and as to depreciation, depletion, and maintenance charges, and if stock dividends or avails from the sale of rights have been credited to income, they shall be shown separately with statement of the basis upon which credit is computed. Such statement shall also differentiate between recurring and nonrecurring income and between any investment and operating income. Such statement shall be certified by an independent certified public accountant.
Any liabilities of the issuer to companies controlling or controlled by the issuer shall be disclosed in full detail as to use of the proceeds thereof, the maturity and repayment schedule, nature of security thereof, the rate of interest and other terms and conditions thereof, If the proceeds, or any part of the proceeds, of the security to be issued is to be applied directly or indirectly to the purchase of any business, a profit and loss statement of such business, certified by an independent certified public accountant, meeting the requirements of subparagraph (28) of this subsection, for the three preceding fiscal years, together with a balance sheet, similarly certified, of such business, meeting1 the requirements of subparagraph (27) hereof of a date not more than ninety days prior to the filing of the registration statement or at the date such business was acquired by the issuer more than ninety days prior to the filing of the registration statement,
A copy of any agreement or agreements or, if identical agreements are used, the forms thereof made with any underwriter, including all contracts and agreements referred to in subparagraph (19) hereof.
A copy of the opinion or opinions of independent counsel in respect to the legality of the issue.
A copy of all material contracts referred to in subparagraph (26) hereof, but no disclosure shall be required by the Commission of any portion of any such contract if the disclosure of such portion would impair the value of the contract and would not be necessary for the protection of the investors.
A detailed statement showing the items of cash, property, services, patents, goodwill, and any other consideration for which securities have been or are to be issued in payment.
The amount of cash to be paid as promotion fees, or of capital stock which is to be set aside and disposed of as promotion stock, and a statement of all stock issued
from time to time as promotion stock.
In connection with securities issued by a person engaged in the business of developing, exploiting or operating mineral claims, a sworn statement of a mining engineer stating the ore possibilities of the mine and such other information in connection therewith as will show the quality of the ore in such claims, and the unit cost of extracting it.
Unless previously filed and registered with the Commission and brought up to date:
(a) A copy of its articles of incorporation with all amendments thereof and its existing by-laws or instruments corresponding thereto, whatever the name, if the issuer be a corporation;
(b) A copy of all instruments by which the trust is created or declared and in which it is accepted and acknowledged, if the issuer is a trust;
(c) A copy of its articles of partnership or association and all the papers pertaining to its organization, if the issuer is a partnership, unincorporated association, joint-stock company, syndicate, or any other form of organization.
A copy of the underlying agreements or indentures affecting any stock, bonds, or debentures offered or to be offered by the issuer and outstanding on the part of companies controlling or controlled by the issuer
Where the issuer or registrant is not formed, organized and existing under the laws of the Philippines or is not domiciled in the Philippines a written power of attorney, certified and authenticated in accordance with law, designating some individual person, who must be a resident of the Philippines, on whom any summons and other legal processes may be served in all actions or other legal proceedings against him and consenting that service and upon such resident agent shall be admitted as valid and proper service upon the issuer or registrant, and if at any time that service cannot be made upon such resident agent, service shall be made upon the Commission.
Additional information or documents including written information from an expert, may be required, or anyone of the above requirements may be dispensed with, depending on the necessity thereof for the protection of the public investors, or their applicability to the class of securities sought to be registered, as the case may be.
The registration statement shall be signed by the issuer its principal executive officer, its principal operating officer its principal financial officer, its comptroller or principal accounting officer or persons performing similar functions, 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.
Upon filing of the registration statement, the registrant shall pay to the Commission a fee of not more than one-tenth of one per centum of the maximum aggregate price at which such securities are proposed to be offered and the fact of such filing shall be immediately published by the Commission, at the expense of the registrant, in two newspapers of general circulation in the Philippines, once a week for two consecutive weeks, reciting that a registration statement for the sale of such security has been filed with it, and that the aforesaid registration statement, as well as the papers attached thereto, are open to inspection during business hours, by interested parties, and copies thereof, photostatic or otherwise, shall be furnished to every applicant at such reasonable charge as the Commission may prescribe.
Any interested party may file an opposition to the registration within ten days from the publication.
If after the completion of the aforesaid publication, the Commission finds that the registration statement together with all the other papers and documents attached thereto, is on its face complete and that the requirements and conditions for the protection of the investors have been complied with, and unless there are grounds to reject a registration statement as herein provided, it shall as soon as feasible enter an order making the registration effective, and issue to the registrant a permit reciting that such person, its brokers or agents, are entitled to offer the securities named in said certificate, with such terms and conditions as it may impose in the public interest and for the protection of investors.
The Commission shall, however, advise the public that the issuance of such permit shall not be deemed a finding by the Commission that the registration statement is true and accurate on its face or that it does not contain an untrue statement of fact or omit to state a material fact, or be held to mean that the Commission has in any way given approval to the security included in the registration statement. Every permit and any other statement, printed or otherwise, for public consumption, that makes reference to such permit shall clearly and distinctively state that the issuance thereof is only permissive and does not constitute a recommendation or endorsement of the securities permitted to be offered for sale. It shall be unlawful to make, or cause to be made, to any prospective purchaser any representation contrary to the foregoing.
Notwithstanding the foregoing, the Commission, for the guidance of investors, may require issuers to submit their securities to rating by securities rating agencies accredited by the Commission, to provide all information necessary therefore, and to report such rating in the registration statement and prospectus, if any, offering the securities.
If any change occurs in the facts set forth in the registration statement, it shall be the obligation of the issuer, dealer or underwriter who filed the original registration statement to submit to the Commission for approval an amended registration statement.
The Commission, in its order, may fix the maximum amount of commission or other form of remuneration to be paid in cash or otherwise, directly or indirectly, for or in connection with the sale or offering for sale of such securities in the Philippines and the maximum amount of compensation which the issuer shall pay for mining claims and mineral rights for which provision is made by the issuer for payment in cash or securities. The amount of compensation which shall be paid the owner or holder of such mining claims or mineral rights shall be fair valuation thereof, as may be fixed by the Commission, after consultation with the Bureau of Mines, and after or receiving such technical information as the issuer or dealer or the owner or owners of such claims may care to in the premises.
A copy of the order of the Commission making the registration effective, together with the registration statement, shall be transmitted to the exchange wherein the security may be listed and shall be available for inspection by any interested party during reasonable hours on any business day.
The order shall likewise be published, at the expense of the registrant, once in a newspaper of general circulation within ten days from its promulgation.
The same rules shall apply to any amendment to the registration statement. (7a)
SEC. 9. Grounds for the rejection of registration.--The Commission may reject a registration statement and refuse to issue a permit to sell the securities included in such registration statement if it finds that—
(1) The registration statement is on its face incomplete or inaccurate in any material respect or includes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading; or
(2) The issuer or registrant—
(i) is not solvent or not in sound financial condition;
(ii) has violated or has not complied with the provisions of this Act, or the rules promulgated pursuant thereto, or any order of the Commission;
(iii) has failed to comply with any of the applicable requirements and conditions that the Commission may, in the public interest and for the protection of investors, impose before the security can be registered;
(iv) has been engaged or is engaged or is about to engage in fraudulent transactions;
(v) is in any other way dishonest or is not of good repute; or
(vi) does not conduct its business in accordance with law or is engaged in a business that is illegal or contrary to government rules and regulations.
(3) The enterprise or the lousiness of the issuer is not shown to be sound or to be based on sound business principles;
(4) An officer, member of the board of directors, or principal stockholder of the issuer is disqualified to be such officer, director, or principal stockholder; or
(5) The issuer or registrant has not shown to the satisfaction of the Commission that the sale of its security would not work to the prejudice of the public interest or as a fraud upon the purchasers or investors, (n)
Amendments to the registration statement.
SEC. 10. Amendments to the registration statement.—
(a) If a registration statement is on its face incomplete or inaccurate in any material respect, the Commission may, after notice by personal service or by sending a confirmed telegraphic notice to the registrant, issue an order denying action on the registration statement until it has been amended in accordance with such order. When such statement has been amended in accordance with such order the Commission shall act on the amended registration in accordance with the procedure mentioned in Section eight hereof.
(b) An amendment filed after the effective date of the registration statement, shall become effective upon its approval by the Commission.
(c) If the registration statement includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, the Commission may, after notice by personal service or by sending a confirmed telegraphic notice and after opportunity for hearing has been granted, issue an order suspending the effectivity of the registration statement. If the statement is amended in accordance with requirements, the suspension order shall be lifted.
(d) The Commission may conduct an examination in any case in order to determine whether an order should issue under subsection (c) hereof. In making such examination the Commission or any officer or officers designated by it shall have access to, and may demand the product of, any books and records of, and may administer oaths and affirmations to and examine, the issuer, underwrite, or any other person, in respect of any matter relevant b the examination, and may in its discretion, require the production of the corporate books and records, among others, its assets and liabilities and income statement of the issuer, certified to by a certified public accountant. Failure of the issuer or underwriter to cooperate, his obstruction or refusal to undergo an examination, shall be a ground for the issuance of a suspension order. (n)
Periodic and other reports.
SEC. 11. Periodic and other reports.— (a) Every issuer of a security registered pursuant to this Act shall file with the Commission—
Such information and documents as shall keep reasonably current the information and documents required to be included in or filed with an application or registration statement filed;
Such annual reports and such periodicals and other reports as may be necessary to update information on the operation of the business of the issuer or registrant; and
Such copies of all circulars, prospectuses, and other advertising matter, before or at the time of their issuance for publication, as the issuer or any person acting for him may issue from time to time, which shall in all cases fully set forth the amount and nature of the fees or expenses, payable in cash or securities, for goodwill, organization or promotion and such other matters as may be necessary for the protection of investors.
Every issuer of a security registered with an exchange shall file a duplicate original of such information, documents, and reports with the exchange.
(b) The Commission may prescribe, in regard to reports made pursuant to this Act, the form or forms in which the required information shall be set forth, and the items or details to be shown therein.
(c) If any report required under subsection (a) inapplicable to any specified class or classes of issuers such reports of comparable character as may be applicable to such class or classes of issuers shall be submitted in lieu thereof. (11a)
Civil liabilities on account of false registration statement.
SEC. 12. Civil liabilities on account of false registration statement.— (a) Any person acquiring a security, the registration statement of which or any part thereof contains on its effectivity an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make such statements not misleading, and who suffers damage, unless it is proved that at the time of such acquisition he knew of such untrue statement or omission, may sue in a court of competent jurisdiction:
Every person who signed the registration statement;
Every person who was a director of, or any other person performing similar functions, or a partner in, the issuer at the time of the filing of the registration statement or any part, supplement or amendment thereof with respect to which his liability is asserted;
Every person who is named in the registration statement as being or about to become a director of, or a person performing similar functions, or a partner in, the issuer and whose written consent thereto is filed with the registration statement;
Every person whose profession gives authority to a statement made by him, who, with his written consent, which shall be filed with the registration statement, has been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement in such registration statement, report, or valuation, which purports to have been prepared or certified by him.
Every underwriter with respect to such security.
(b) Notwithstanding the provisions of subsection (a) no person, other than the issuer, shall be liable as provided therein if he proves—
That before the effective date of the part of the registration statement with respect to which his liability is asserted (A) he had resigned from or had taken such steps as are permitted by law to resign from, or ceased or refused to act in, every office, capacity, or relationship in which he was described in the registration statement as acting or agreeing to act, and (B) he had advised the Commission and the issuer in writing that he had taken such action and that he would not be responsible for such part of the registration statement; or
That (A) as regards any part of the registration statement not purporting to be a copy of or extract from a report or valuation of an expert, and not purporting to be made on the authority of a public official document or statement, he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (B) as regards any part of the registration statement purporting to be made upon his authority as an expert or purporting to be a copy of or extract from a report or valuation of himself as an expert, (i) he had, after reasonable investigation, reasonable ground to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or (ii) such part of the registration statement did not fairly represent his statement as an expert or was not fair copy of or extract from his report or valuation as an expert; and (C) as regards any part of the registration statement purporting to be made on the authority of an expert (other than himself) or purporting to be a copy of or extract from a report or valuation of an expert (other than himself), he had no reasonable ground to believe and did not believe, at the time such part of the registration statement became effective, that the statements therein were untrue or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the registration statement did not fairly represent the statement of the expert or was not a fair copy of or extract from the report or valuation of the expert; and (D) as regards any part of the registration statement purporting to be a statement made by a public official or purporting to be a copy of or extract from a public official document, he had no reasonable ground to believe and did not believe, at the time such part of the registration statement became effective, that the statements therein were untrue, or that there was an omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, or that such part of the registration statement did not fairly represent the statement made by the public official or was not a fair copy of or extract from the public official document.
(c) In determining, for the purpose of paragraph (2) of subsection (b) of this Section, what constitutes reasonable investigation and reasonable ground for belief, the standard of reasonableness shall be that required of a prudent man in the management of his own property.
(d) The suit authorized under subsection (a) may be filed to recover such damages as shall represent double the difference between the amount paid and committed to be paid for the security, not exceeding the price at which the security was offered to the public, and (1) the value thereof as of the time such suit was brought, or in case the security has been disposed of, (2) the price at which such security shall have been disposed of in the market before the suit, or (3) the price at which such security shall have been disposed of after the filing of the suit but before judgment. No underwriter shall be liable in any suit or as a consequence of suits authorized under subsection (a) hereof for damages in excess of the total price at which the securities underwritten by him and distributed to the public were offered to the public.
In any suit under this or any other section of this Act, the court may, in its discretion, require an undertaking for the payment of the costs of such suit, including reasonable attorney's fees. Costs may be allowed by the Court to the prevailing party litigant in accordance with Rule 142 of the Rules of Court.
Exemplary damages may also be awarded in cases of bad faith, fraud, malevolence or wantonness in the violation of this Act or the rules and regulations promulgated thereunder.
(e) The persons specified in subsection (a) hereof shall be jointly and severally liable for the payment of damages, However, any person who becomes liable for the payment of such damages may recover contribution from any other person who, if sued separately, would have been liable to make the same payment, unless the former was guilty of fraudulent representation and the latter was not.
(f) In no case shall the amount recoverable under this Section exceed double the price at which the security was offered to the public and such exemplary damages as may be awarded by the court.
(g) Notwithstanding any provision of law to the contrary, all persons, including the issuer, held liable under this Section, shall contribute equally to the total liability adjudged herein. In no case shall the principal stockholders, directors and other officers of the issuer or persons occupying similar positions therein, recover their contribution to the liability from the issuer. However, the right of the issuer to recover from the guilty parties the amount it has contributed under this Section shall not be prejudiced. (n)
Civil liabilities arising in connection with prospectuses, communications and reports.
SEC. 13. Civil liabilities arising in connection with prospectuses, communications and reports.— (a) Any person who—
offers to sell or sells a security in violation of Chapter II, or
offers to sell or sells a security, whether or not exempted by the provisions of this Act, by the use of any means or instruments of transportation or communication, by means of a prospectus or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading, the purchaser not knowing of such untruth or omission, and who shall fail in the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him, who may sue, in any court of competent jurisdiction, to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security.
Exemplary damages may likewise be awarded in cases of bad faith, fraud, malevolence or wantonness.
(b) Any person who shall make or cause to be made any statement in any report, or document filed pursuant to this Chapter or any rule or regulation thereunder, which statement was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, shall be liable to any person who, not knowing that such statement was false or misleading, and relying upon such statement, shall have purchased or sold a security at a price which was affected by such statement, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading. In any such suit the court may discretion, require an undertaking for the payment of the costs of such suit, and assess reasonable costs, including reasonable attorney's fees against either party litigant.
Every person who becomes liable to make payment under this subsection may recover contribution as in cases of contract from any person who, if joined in the original suit, would have been liable to make the same payment. (n)
Limitation of action.
SEC 14. Limitation of action. —(a) No action shall be maintained to enforce any liability created under Section 12 or Section 13of this Act unless brought within two years after the discovery of the untrue statement or the omission, or, if the action is to enforce a liability created under Section 13 (a) (1), unless brought within two years after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under Section 12 or 13(a) (1) more than five years after the security was bona fide offered to the public, or under Section 13 (a) (2) more than five years after the sale.
(b) No action shall be maintained to enforce any liability created under Section 13 (b) or any other provision of this Act unless brought within two years after the discovery of the facts constituting the cause of action and within five years after such cause of action accrued. (n)
Suspension of registration.
SEC. 15. Suspension of registration. —If, at any time, the information contained in the statement filed is or has become misleading, incorrect, inadequate or incomplete, or the sale or offering for sale of the security may work or tend to work a fraud, the Commission may require from the person filing such statement such further information as may in its judgment be necessary to enable the Commission to ascertain whether the registration of such security should be revoked on any ground specified in this Act, and the Commission may also suspend the right to sell such security pending further investigation, by entering an order specifying the grounds for such action, and by notifying by mail or personally or by telephone confirmed in writing, or by telegraph, the person filing such statement and every dealer and broker who shall have notified the Commission of an intention to sell such security. The refusal to furnish information required by the Commission, within a reasonable time to be fixed by the Commission, may be a proper ground for the entry of such order of suspension. Upon the entry of any such order of suspension, no further sales of such security shall be made until the Commission orders otherwise. Any such sale shall be void.
In the event of such entry of such order of suspension, the Commission shall give prompt hearing to the parties interested. If upon such hearing, the Commission shall determine that the sale of any such security should be revoked on any ground specified in this Act, it shall make the necessary findings and enter a final order prohibiting sales of such security. Until the entry of such final order, the suspension of the right to sell, though binding upon the persons notified thereof, shall be deemed confidential, and shall not be published, unless it shall appear that the order of suspension has been violated after notice. If, however, upon such hearing the Commission finds that the sale of the security will neither be fraudulent nor result in fraud, it shall forthwith enter an order revoking such order of suspension, and such security shall be restored to its status as a security registered under this Act, as of the date of such order of suspension. (n)
Revocation of registration of securities.
SEC. 16. Revocation of registration of securities. —(a) The Commission may, after due notice and hearing, revoke the registration of any security and the permit to sell such security by issuing an order to this effect, setting: forth its findings in respect thereto, if upon examination it shall appear that the issuer:
Is insolvent;
Has violated any of the provisions of this Act, or the rules promulgated pursuant thereto, or any order of the Commission of which the issuer has notice;
Has been or is engaged or is about to engage in fraudulent transactions;
Is in any other way dishonest or has made any fraudulent representation in any prospectus or in any circular or other literature that has been distributed concerning the issuer of its securities; or
Does not conduct its business in accordance with law.
The Commission may compel the production of all the books and papers of such issuer, and may administer oaths to, and examine the officers of such issuer or any other person connected therewith as to its business and affairs, and may also require a balance sheet exhibiting the assets and liabilities of any such issuer or his income statement or both to be certified to by an independent certified public accountant.
Whenever the Commission may deem it necessary, it may also require the submission of such balance sheet or income or profit statement, or both, with such particulars as the Commission shall point out or brought down to the latest practicable date.
If any issuer shall refuse to permit an examination to be made by the Commission, its refusal shall be proper ground for the revocation of the registration of and permission to sell its securities.
If the Commission deems it necessary, it may issue an order suspending the right to sell securities pending any investigation. The order shall state the grounds for taking such action, but such order of suspension, although binding upon the persons notified thereof, shall be deemed confidential, and shall not be published. Upon the issuance of the suspension order, no further sale of such security shall be made until the same is lifted or set aside by the Commission. Any such sale shall be void.
Notice of issuance of such order shall be given by mail, or personally, or by telephone, confirmed in writing, or by telegram, to the issuer and every dealer and broker who shall have notified the Commission of an intention to sell such security.
(b) A registration statement may be revoked by the Commission upon petition made for its withdrawal by the issuer only with the consent of the Commission and in accordance with such rules and regulations which the Commission may prescribe: Provided, That no party stands to suffer damage thereby. (12a)
Promotion fees.
SEC. 17. Promotion fees.—If the statement containing information as to securities to be registered, as provided for in Section eight of this Act, shall disclose that any such securities or any securities senior thereto shall have been or shall be intended to be issued for goodwill, or for organization or promotion fees or expenses, or that payment in cash shall have been or will be made for organization or promotion fees or expenses or for goodwill, the amount and nature thereof shall be fully set forth in the notification published by the Commission as required in Section 8 of this Act, and in all prospectuses, circulars, or other advertisements of the issuer, and should also appear upon the face or on the back of the security itself. (13)
Substituted service upon the Commission.
SEC. 18. Substituted service upon the Commission. —Whenever service of summons or other process shall be made upon the Commission in actions or legal proceedings against an issuer or any person liable under this Act who is not domiciled in the Philippines or is not formed, organized and existing under the laws of the Philippines, the Commission shall within ten (10) days thereafter, transmit by registered mail a copy of such summons and the complaint or other legal process to such issuer or person at his last known address or principal office. The sending thereof by the Commission, the expenses for which shall be advanced by the party at whose instance it is made, shall complete such service. (10a)
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
