Use of facilities of unregistered exchange prohibited.
SEC. 21. Use of facilities of unregistered exchange prohibited.—It shall be unlawful for any broker, dealer, salesman or exchange, directly or indirectly, to make use of any facility of an exchange in the Philippines to effect any transaction in a security or to report such transaction, unless a registration is effective as to such security or such security is exempted from registration under the provisions of this Act and such exchange is registered as a securities exchange under this Act, or is exempted from such registration upon application by the exchange because, in the opinion of the Commission, by reason of the limited volume of transactions effected on the exchange, it is not practicable and not necessary or appropriate in the public interest or for the protection of investors to require such registration. (16a)
Registration of exchange.
SEC. 22. Registration of exchange. —(a) Any exchange may be registered with the Commission as an exchange under the terms and conditions hereinafter provided in this Section, by filing a registration statement in such form as the Commission may prescribe, setting forth the information and accompanied by the following supporting documents below specified:
An undertaking to comply and enforce compliance by its members with the provisions of this Act, and any amendment thereto, and the implementing rules or regulations made or to be made thereunder;
Such data as to its organization, rules of procedure, and membership, and such other information as the Commission may, by rules and regulations, require as being necessary or appropriate for the public interest or for the protection of investors;
Copies of its constitution, articles of incorporation with all amendments thereto, and of its existing by-laws or rules or instruments corresponding thereto whatever be the name, which are hereinafter collectively referred to as the “rules of the exchange”;
An undertaking to furnish to the Commission copies of any amendments to the rules of the exchange forthwith upon their adoption; and
An undertaking that in the event a member firm becomes insolvent or when the exchange shall have found that the financial condition of its member firm has so deteriorated that it cannot readily meet the demands of its customers for the delivery of securities and/or payment of sales proceeds, the exchange shall, upon order of the Commission, take over the operation of the insolvent member firm and immediately proceed to settle the member firm’s liabilities to its customers: Provided, That stock exchanges in operation upon the effectivity of this Act shall have one year within which to submit the undertaking;
(b) No registration of an exchange shall be granted or remain in force unless the rules thereof include provision for the expulsion, suspension, or disciplining of a member for conduct or proceeding inconsistent with just and equitable principles of fair trade.
(c) Nothing in this Act shall be construed to prevent any exchange from adopting and enforcing any rule not inconsistent with this Act and with the rules and regulations thereunder, or with any other law.
(d) If it appears to the Commission that the exchange applying for registration is so organized as to be able to comply with the provisions of this Act and the rules and regulations thereunder, and the rules of the exchange are just and adequate to insure fair dealing and to protect investors, the Commission shall cause such exchange to be registered as a securities exchange.
(e) Within ninety days after the filing of the application the Commission may issue an order either granting or, after appropriate notice and opportunity for hearing, denying registration as a securities exchange, unless the exchange applying for registration shall withdraw its application or shall consent to the Commission’s deferring action on its application for a stated longer period after the date of filing. The filing with the Commission of an application for registration by an exchange shall be deemed to have taken place upon the receipt thereof. Amendments to an application may be made upon such terms as the Commission may prescribe.
(f) Upon the registration of a securities exchange pursuant to the provisions of this Act, it shall pay within twelve (12) months such reasonable fee as the Commission may fix.
(g) Upon appropriate application in accordance with the rules and regulations of the Commission and upon such terms as the Commission may deem necessary for the protection of investors, an exchange may withdraw it registration or suspend its operations or resume the same. (17a)
Margin Requirements.
SEC. 23. Margin Requirements. —(a) For the purpose of preventing the excessive use of credit for the puchase or carrying of securities, the Commission, in accordance with the credit and monetary policies that may be promulgated from time to time by the Monetary Board, shall prescribe rules and regulations with respect to the amount of credit that may be extended on any security other than an exempted security. For the extension of credit, such rules and regulations shall be based upon the following standard:
An amount not greater than whichever is the higher of—
Sixty-five (65%) per centum of the current market price of the security, or
One hundred (100%) per centum of the lowest market price of the security during the preceding thirty-six calendar months, but not more than seventy-five (75%) per centum of the current market price.
However, the Monetary Board, by an affirmative vote of five (5) of its members, may increase or decrease the above percentages, in order to achieve the objectives of the Central Bank during an economic crisis or national emergency.
Such rules and regulations may make appropriate provision with respect to the carrying of undermargined accounts for limited periods and under specified conditions; the withdrawal of funds or securities; the transfer of accounts from one lender to another; special or different margin requirements for delayed deliveries, short sales, arbitrage transactions, and securities to which number 2 of the second paragraph of this subsection does not apply; the bases and methods to be used in calculating loans, and margins and market prices; and similar administrative adjustments and details.
(b) It shall be unlawful for any member of an exchange or any broker or dealer, directly or indirectly, to extend or maintain credit or arrange for the extension or maintenance of credit to or for any customer—
On any security other than an exempted security, in contravention of the rules and regulations which the Commission shall prescribe under subsection (a) of this Section;
Without collateral or on any collateral other than securities, except (i) to maintain any credit initially extended in conformity with the rules and regulations which the Commission and (ii) in cases where the extension or maintenance of credit is not for the purpose of purchasing or carrying securities or of evading or circumventing the provisions of subparagraph (1) of this subsection.
(c) It shall be unlawful for any person not subject to subsection (b) hereof to extend or maintain credit or to arrange for the extension or maintenance of credit for the purpose of purchasing or carrying any security, in contravention of such rules and regulations as the Commission shall prescribe to prevent the excessive use of credit for the purchasing or carrying of or trading in securities in circumvention of the other provisions of this Section. Such rules and regulations may imposed upon all loans made for the purpose of purchasing or carrying securities limitations similar to those imposed upon members, brokers, or dealers by subsection (b) of this Section and the rules and regulations thereunder. This subsection and the rules and regulations thereunder shall not apply (i) to a credit extension made by a person not in the ordinary course of business, (ii) to a credit extension on an exempted security, (iii) to a loan to a dealer to aid in the financing of the distribution of securities to customers not through the medium of a securities exchange (iv) to a credit extension by a bank on a collateral other than an equity security, or (v) to such other credit extension as the Commission shall, by such rules and regulations as it may deem necessary or appropriate in the public interest, or for the protection of investors exempt, either unconditionally or upon specified terms and conditions or for stated periods, from the operation of this subsection and the rules and regulations thereunder. (18a)
Restrictions on borrowings by members, brokers, and dealers.
SEC. 24. Restrictions on borrowings by members, brokers, and dealers.—It shall be unlawful for any registered broker or dealer, member of a securities exchange, or any broker or dealer who transacts a business in securities through the medium of any member of a securities exchange, directly or indirectly—
To permit in the ordinary course of business as a broker his aggregate indebtedness to all persons including customers’ credit balances (but excluding indebtedness by exempted securities), to exceed such percentage of the net capital (exclusive of fixed assets and value of exchange membership) employed in the business, but not exceeding in any case two thousand (2,000%) per centum, as the Commission may by rules and regulations prescribe as necessary or appropriate in the public interest or for the protection of investors.
To pledge, mortgage or otherwise encumber or arrange for the pledge, mortgage or encumbrance of any security carried for the account of any customer under circumstances—(1) that will permit the commingling of his securities, without his written consent, with the securities of any customer; (2) that will permit such securities to be commingled with the securities of any person other than a bona fide customer; or (3) that will permit such securities to be pledged, mortgaged or encumbered, or subjected to any lien or claim of the pledgee, for a sum in excess of the aggregate indebtedness of such customers in respect of such securities. However, the Commission, having due regard to the protection of investors, may, by rules and regulations, allow certain transactions that may otherwise be prohibited under this subsection.
To lend or arrange for the lending of any security carried for the account of any customer without the written consent of such customer or in contravention of such rules and regulations as the Commission shall prescribe for the protection of investors. (19a)
Enforcement of margin requirements and restrictions on borrowings.
SEC. 25. Enforcement of margin requirements and restrictions on borrowings.—To prevent indirect violations of the margin requirements under Section 23 hereof, the broker or dealer shall require the customer in nonmargin transactions to pay the price of the security purchased for his account within such period as the Commission may prescribe, which shall in no case exceed three trading days; otherwise, the broker shall sell the security purchased starting on the next trading day but not beyond ten trading days following the last day for the customer to pay such purchase price, unless such sale cannot be effected within said period for justifiable reasons. The sale shall be without prejudice to the right of the broker or dealer to recover any deficiency from the customer, To prevent indirect violation of the restrictions on borrowings under Section 24 of this Act, the broker shall, unless otherwise directed by the customer, pay the net sales price of the securities sold for a customer within the same period as above prescribed by the Commission: Provided, That the customer shall be required to deliver the instruments evidencing the securities as a condition for such payment upon demand by the broker. (n)
Manipulation of security prices.
SEC. 26. Manipulation of security prices. —(a) It shall be unlawful for any person, directly or indirectly—
(1) For the purpose of creating a false or misleading appearance of active trading in any security registered on a securities exchange, or a false or misleading appearance with respect to the market for any such security:
(i) To effect any transaction in such security which involves no change in the beneficial ownership thereof, or
(ii) To enter an order or orders for the purchase of such security with the knowledge that an order or orders of substantially the same size, time and price, for the sale of any such security, has or have been or will be entered by or for the same or different parties, or
(iii) To enter any order or orders for the sale of any such security with the knowledge that an order or orders of substantially the same size, time and price for the purchase of any such security, has or have been or will be entered by or for the same or different parties.
(2) To effect, alone or with one or more other persons, a series of transactions in securities that (i) raises their price for the purpose of inducing the purchase of a security, whether of the same or a different class, of the same issuer or of a controlling, controlled, or commonly controlled company by others, (ii) depresses their price for the purpose of inducing the sale of a security, whether of the same or a different class, of the same issuer or of a controlling, controlled, or commonly controlled company by others, or (iii) creates active trading, actual or apparent, for the purpose of inducing such a purchase for sale.
(3) If a dealer or broker, or other person selling or offering for sale, or purchasing or offering to purchase, the security, to induce the purchase or sale of any security registered on a securities exchange by the circulation or dissemination in the ordinary course of business of information to the effect that the price of any such security will or is likely to rise or fall because of market operations of anyone or more persons conducted for the purpose of raising or depressing the price of such security.
(4) If a dealer or broker or other person selling or offering for sale or purchasing or offering to purchase the security, to make, regarding any such security registered on a securities exchange, for the purpose of inducing the purchase or sale of such security, any statement which 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, and which he knew or had reasonable ground to believe was so false or misleading.
(5) For a consideration received directly or indirectly from a dealer or broker or other person selling or offering for sale or purchasing or offering to purchase the security, to induce the purchase or sale of any security registered on a securities exchange by the circulation or dissemination of information to the effect that the price of any such security will or is likely to rise or fall because of the market operations of anyone or more persons conducted for the purpose of raising or depressing the price of such security.
(6) To effect, either alone or with one or more other persons, any series of transactions for the purchase and/or sale of any security registered in a securities exchange for the purpose of pegging, fixing or stabilizing the price of such security.
(b) It shall be unlawful for any person to effect, by the use of any facility of a securities exchange —
Any transaction in connection with any security whereby any party to such transaction acquires any put, call, straddle, or other option or privilege of buying the security from or selling the security to another without being bound to do so; or
Any transaction in connection with any security with relation to which he has, directly or indirectly, any interest in any such put, call, straddle, option or privilege;
Any transaction in any security for the account of any person who has reason to believe has, and who actually has, directly or indirectly, any interest in any such put, call, straddle, option or privilege with relation to such security.
(c) it shall be unlawful for any member of a securities exchange, directly or indirectly, to endorse or guarantee the performance of any put, put, call, straddle, option or privilege in relation to any security registered on a securities exchange.
(d) The terms "put”, “call”, “straddle”, “option” or "privilege" as used in this Section shall not include any registered warrant, right or convertible security.
(e)Any person who wilfully participates in any act or transaction in violation of subsection (a), (b) or (c) of this Section shall be liable to any person who shall purchase or sell any security at price which was affected by such act or transaction, and the person so injured may sue in any court of competent jurisdiction to recover the damages sustained as a result of any such act or transaction The court may, in its discretion, require an undertaking for the payment of the costs of any 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. No action shall be maintained to enforce any liability created under this Section, unless brought within two (2) years after the discovery of the facts constituting the violation and within five (5) years after such violation.
(f) The provisions of this Section shall apply to an exempted security.
(g) The foregoing provisions notwithstanding, the Commission, having due regard to the public interest and the protection of investors, may, by rules and regulations, allow certain acts or transactions that may otherwise be prohibited under Section. (20a)
Manipulative and deceptive devices.
SEC. 27. Manipulative and deceptive devices. — It shall be unlawful for any person, directly or indirectly, by the use of any facility of any exchange —
To effect a short sale, or to use or employ any stop-loss order in connection with the purchase or sale of any security registered on a securities exchange, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
To use or employ, in connection with the purchase or sale of any security, any manipulative or deceptive device or contrivance. (21a)
Artificial measures of price control.
SEC. 28. Artificial measures of price control. — It shall be unlawful for any exchange to adopt and enforce artificial measures of price control of any nature whatsoever without the prior approval of the Commission which may be given only if it serves public interest and benefits the investors. (21-Aa)
Fraudulent transaction.
SEC. 29. Fraudulent transaction.—(a) It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securities —
To employ any device, scheme, or artifice to defraud, or
To obtain money or property by means of any untrue statement of a material fact or any omission to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
To engage in any act, transaction, practice, or course of business which operates or would operate as a fraud or deceit upon any person.
(b) It shall be unlawful for any person to describe a security to a second person, without purporting to offer it for a consideration received or to be received directly or indirectly from the issuer, any other person interested in buying or selling the security, an underwriter, broker, dealer, or investment adviser, or a controlling, controlled, or commonly controlled person of any such person, unless he concurrently discloses the source of the consideration or the nature of or reason for his employment or if the second person or his agent in the transaction is identified, that information is known to the second person.
The above paragraph does not apply to the usual remuneration received by (1) a newspaper, periodical, or radio or television station for publishing in good faith advertisement that clearly appears to be the statement of another person published at his expense, or (2) an employee or other person who prepares an advertisement or other description that appears over the name of the person for whom it is prepared rather than the person preparing it.
The Commission shall promulgate rules that it may deem necessary or appropriate in the public interest or for the protection of investors to implement this Section.
(c) This Section shall also apply to exempt securities and exempt transactions. (n)
Insider's duty to disclose when trading.
SEC. 30. Insider's duty to disclose when trading. — It shall be unlawful for an insider to sell or buy a security of the issuer, if he knows a fact of special significance with respect to the issuer or the security that is not generally available, unless (1) the insider proves that the fact is generally available or (2) if the other party to the transaction (or his agent) is identified, (a) the insider proves that the other party knows it, or (b) that other party in fact knows it from the insider or otherwise.
(b) "Insider" means (1) the issuer, (2) a director or officer of, or a person controlling, controlled by, or under common control with, the issuer, (3) a person whose relationship or former relationship to the issuer gives or gave him access to a fact of special significance about the issuer or the security that is not generally available, or (4) a person who learns such a fact from any of the foregoing insiders as defined in this subsection, with knowledge that the person from whom he learns the fact is such an insider.
(c) A fact is “of special significance” if (a) in addition to being material it would be likely, on being made generally available, to affect the market price of security to a significant extent, or (b) a reasonable person would consider it especially important under the circumstances in determining his course of action in the light of such factors as the degree of its specificity, the extent of its difference from information generally available previously, and its nature and reliability.
(d) This section shall apply to an insider as defined in subsection (b) (3) hereof only to the extent that he knows a fact of special significance by virtue of his being an insider. (n)
Segregation and limitation of functions of members, brokers, and dealers.
SEC. 31. Segregation and limitation of functions of members, brokers, and dealers. — (a) The Commission shall prescribe such rules and regulations as it deems necessary or appropriate in the public interest or for the protection of investors (1) to regulate floor trading by members of securities exchanges, directly or indirectly, for their own account or for discretionary accounts, (2) to prevent such excessive trading on the exchange but off the floor by members, directly or indirectly, for their own account, as the Commission may deem detrimental to the maintenance of a fair and orderly market, and (3) to restrict a broker from directly or indirectly dealing in securities or otherwise segregate and limit the function of a broker and dealer. It shall be unlawful for a member to effect any transaction in a security in contravention of such rules and regulations, but such rules and regulations may make such exemptions for arbitrage transactions, for transactions in exempted securities, and, within the limitations subsection (b) of this Section, for transactions by odd-lot dealers and specialists, as the Commission may deem necessary or appropriate in the public interest or for the protection of investors.
(b) Unless otherwise prohibited by such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, the rules of a securities exchange may permit —
a member to be registered as an odd-lot dealer and as such to buy and sell for his own account so far as may be reasonably necessary to carry on such odd-lot transactions, or
a member to be registered as a specialist. If under the rules and regulations of the Commission, a specialist is permitted to act as a dealer, or is limited to acting as a dealer, such rules and regulations shall restrict his dealing so far as practicable to those, reasonably necessary to permit him to maintain a fair and orderly market, and/or to those necessary to permit him to act as an odd-lot dealer. It shall be unlawful for a specialist or an official of the exchange to disclose information in regard to orders placed with such specialist which is not available to all members of the exchange, to any person other than an official of the exchange, a representative of the Commission or a specialist who may be acting for such specialist; but the Commission shall have power to require disclosure to all members of the exchange of all orders placed with specialists, under such rules and regulations as the Commission may prescribe as necessary or appropriate m the public interest or for the protection of investors. It shall also be unlawful for a specialist acting as a broker to effect on the exchange any transaction except upon a market or limited price order.
(c) If because of the limited volume of transactions effected on an exchange, it is impracticable and not necessary or appropriate in the public interest or for the protection of investors to apply any of the foregoing provisions of this Section or to the rules and regulations thereunder, the Commission shall have the power, upon application of the exchange and on a showing that the rules of such exchange are otherwise adequate for the protection of investors, to exempt such exchange and its members from any such provision or rules and regulations.
(d) It shall be unlawful for a member of a securities exchange who is both a dealer and a broker, or for any person who both as a broker and a dealer transacts a business in securities through the medium of a member or otherwise, to effect through the use of any facility of a securities exchange, or otherwise in the case of a member —
Any transaction in connection with which, directly or indirectly, he extends or maintains or arranges for the extension or maintenance of credit to or for a customer on any security other than an exempted security which was a part of a new issue in the distribution of which he participated as a member of a selling syndicate or group within six months prior to such transaction: Provided, That credit shall not be deemed extended by reason of a bona fide delayed delivery of any such security against full payment of the entire purchase price thereof upon such delivery within thirty-five days after such purchase, or
Any transaction with respect to any security other than exempted security unless, if the transaction is with a customer, he discloses to such customer in writing at or before the completion of the transaction whether he is acting as a dealer for his own account as a broker for such customer, or as a broker for some other person. (22a)
Reports.
SEC. 32. Reports. — (a) (1) Any person who, after acquiring directly or indirectly the beneficial ownership of any equity security of a class which is registered pursuant to this Act, is directly or indirectly the beneficial owner of more than ten (10%) per centum of such class shall, within ten days after such acquisition or such reasonable time as fixed by the Commission, submit to the issuer of the security, to the stock exchanges the security is traded, and to the Commission a sworn statement containing the following information and such other information, as the Commission may require in the public interest or for the protection of investors:
(i) The background, identity, residence, and citizenship of and the nature of such beneficial ownership by such person and all other persons by whom or on whose behalf the purchases are effected; in the event the beneficial owner is a juridical person, the lines of business of the beneficial owner shall also be reported.
(ii) If the purpose of the purchases or prospective purchases is to acquire control of the business of the issuer of the securities, any plans or proposals which such persons may have that will effect a major change in its business or corporate structure;
(iii) The number of shares of such security which are beneficially owned, and the number of shares concerning which there is a right to acquire, directly or indirectly, by (i) such person, and (ii) by each associate of such person, giving the background, identity, residence, and citizenship of each such associate; and
(iv) Information as to any contracts, arrangements, or understanding with any person with respect to any securities of the issuer, including but not limited to transfers, joint ventures, loan or option arrangements, puts or calls, guarantees or division of losses or proms,: or proxies naming the persons with whom such contracts, arrangements, or understanding have been entered into, and giving the details thereof.
(2) If any material change occurs in the facts; set forth in the statements, an amendment shall be transmitted to the issuer, the exchange and the Commission in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(3) The Commission, by rule or regulation or by order, may permit any person to file in lieu of the statement required by paragraph (1) of this subsection, a notice stating the name of such person, the shares of any equity securities subject to paragraph (1) which are owned by him, the date of their acquisition and such other information as the Commission may specify, if it appears to the Commission that such securities were acquired by such person in the ordinary course of his business and were not acquired for the purpose of and do not have the effect of changing or influencing the control of the issuer nor in connection with any transaction having such purpose or effect.
(b) (1) It shall be unlawful for an issuer which has a class of equity securities registered pursuant to this Act, to purchase any equity security issued by it if such purchase is in contravention of such rules and regulations as the Commission, in the public interest or for the protection of investors, may adopt (a) to define acts and practices which are fraudulent, deceptive, or manipulative, and (b) to prescribe means reasonably designed to prevent such acts and practices. Such rules and regulations may require such issuer to provide holders of equity securities of such class with such information relating to the reasons for such purchase, the source of funds, the numbers of shares to be purchased, the price to be paid for such securities, the method of purchase, and such additional information as the Commission deems necessary or appropriate in the public interest or for the protection of investors, or which the Commission deems to be material to a determination whether such security should be purchased.
(2) For the purpose of this subsection, a purchase by or for the issuer or any person controlling, controlled by, or under common control with the issuer, or a purchase subject to the control of the issuer or any such person, shall be deemed to be purchase by the issuer. The Commission shall have the power to make rules and regulations implementing this paragraph in the public interest and for the protection of investors, including exemptive rules and regulations covering situations in which the Commission deems it unnecessary or inappropriate that a purchase of the type described in this paragraph shall be deemed to be a purchase by the issuer for the purpose of some or all of the provisions of paragraph (1) of this subsection. (n)
Tender offers.
SEC. 33. Tender offers. — (a) (1) It shall be unlawful for any person directly or indirectly, to make a tender offer for, or a request or invitation for tenders of, any class of any equity security which is registered pursuant this Act if, after consummation thereof, such person would directly or indirectly, be the beneficial owner of more than ten (10%) per centum of such class, or such reasonable percentage as fixed by the Commission, unless, at the time copies of the offer or request or invitation are first Published or sent or given to security holders, such person has filed with the Commission and furnished the issuer a statement containing such of the information required in Section 32 of this Act as the Commission may prescribe. All requests or invitations for tender, or advertisements making a tender offer or requesting or inviting tenders of such a security, shall be filed as a part of such statement and shall contain such of the information contained in such statement as the Commission may prescribe. Copies of any additional material soliciting or requesting such tender offers subsequent to the initial solicitation or request shall contain such information as the Commission may prescribe as necessary or appropriate, in the public interest or for the protection of investors, and shall be filed with the Commission and sent to the issuer not later than the time copies of such materials are first published or sent or given to security holders.
(2) Any solicitation or recommendation to the holders of such a security to accept or reject a tender offer or request or invitation for tenders shall be made in accordance with such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors.
(3) Securities deposited pursuant to a tender offer or request or invitation for tenders may be withdrawn by or on behalf of the depositor at any time until the expiration of seven days after the time definitive copies of the offer or request or invitation are first published or sent or given to security holders, and at any time after sixty days from the date of the original tender offer or request or invitation, except as the Commission may otherwise prescribe by rules, regulations, or order as necessary or appropriate the public interest or for the protection of investors.
(4) Where any person makes a tender offer, or request or invitation for tenders, for less than all the outstanding equity securities of a class, and where a greater number of securities is deposited pursuant thereto within ten days after copies of the offer or request or invitation are first published or sent or given to security holders than such person is bound or willing to take up and pay for, the securities taken up shall be taken up as nearly as maybe pro rata disregarding fractions, according to the number of securities deposited by each depositor. The provisions of this subsection shall also apply to securities deposited within ten days after notice of an increase in the consideration offered to security holders, as described in sub-paragraph (5) of this subsection, is first published or sent or given to security holders.
(5) Where any person varies the terms of a tender offer or request or invitation for tenders before the expiration thereof by increasing the consideration offered to holders of such securities, such person shall pay the increased consideration to each security holder whose securities are taken up and paid for whether or not such securities have been taken up by such person before the variation of the tender offer or request or invitation.
(b) The provisions of subsection (a) of Section 32 and subsection (a) of this Section shall not apply to any offer for, or request or invitation for tenders of, any security—
(i) If the acquisition of such security, together with all other acquisition by the same person of securities of the same class during the preceding twelve months, would not exceed two (2% ) per centum of that class; or
(ii) Which the Commission, by rules or regulations or by order, shall exempt as not entered into for the purpose of, not having the effect of, changing or influencing the control of the issuer or otherwise as not comprehended within the purpose of said Sections.
(c) When two or more persons act as a partnership, limited partnership, syndicate, or other group for the purpose of acquiring, holding, or disposing securities of an issuer, such syndicate or group shall be deemed a “person” for the purposes of Section 32 and subsection (a) of Section.
(d) In determining, for purposes of Section 32 and subsection (a) of this Section, any percentage of a class of any security, such class shall be deemed to consist of the amount of the outstanding securities of such class, exclusive of any securities of such class held by or for the account of the issuer or a subsidiary of the issuer.
(e) It shall be unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practices, in connection with any tender offer or request or invitation for tenders, or any solicitation of security holders in opposition to or in favor of any such offer, request, or invitation, The Commission shall, for the purposes of this subsection, by rules and regulations define, and prescribe means reasonably designed to prevent, such acts and practices as are fraudulent, deceptive, or manipulative, (n)
Proxies.
SEC. 34. Proxies. — (a) It shall be unlawful for any person, in contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate the public interest or for the protection of investors, to solicit or to permit the use of his name to solicit any proxy or consent or authorization in respect of any security registered pursuant to this Act.
(b) It shall be unlawful for any member of a securities exchange, or any broker or dealer, contravention of such rules and regulations as the Commission may prescribe as necessary or appropriate in the public interest or for the protection of investors, to give, refrain from giving a proxy, consent, or authorization in respect of any security registered pursuant to this Act and carried for the account of a customer.
(c) Unless proxies, consents, or authorizations in respect of a security registered pursuant to this Act are solicited by or on behalf of the management of the issuer from the holders of record of such security in accordance with the rules and regulations prescribed under subsection (a) of this Section, such issuer shall, prior to any annual or other meeting of the holders of such security and in accordance with rules and regulations prescribed by the Commission, file with the Commission and transmit to all holders of record of such security information substantially equivalent to the information which would be required to be transmitted if a solicitation were made. (24a)
Over-the-counter markets.
SEC. 35. Over-the-counter markets.— It shall be unlawful, in contravention of such rules and regulations as the Commission may prescribe as necessary and appropriate in the public interest or to insure to investors protection comparable to that provided by and under authority of this Act in the case of securities exchanges—
For any broker or dealer, singly or with any other person, to make or create, or enable another to make or create, a market, otherwise than en a securities exchange, for both the purchase and sale of any security, other than an exempted security or commercial paper, bankers' acceptances, or commercial bills, or securities which have not previously been registered or listed with an exchange, or
For any broker or dealer to use any facility of any such market.
Such rules and regulations may provide for the regulation of all transactions by brokers and dealers on any such market, for the registration with the Commission of dealers or brokers making or creating such a market, and for the registration of the securities for which they make or create a market, and may make special provision with respect to securities or specified classes thereof listed, or entitled to unlisted trading privileges, upon any exchange on the effective date of this Act, which securities are not registered under the provisions hereof. (25a)
Directors, officers and principal stockholders.
SEC. 36. Directors, officers and principal stockholders. — (a) Every person who is directly or indirectly the beneficial owner of more than ten per centum of any class of any equity security which is registered pursuant to this Act, or who is a director or an officer of the issuer of such security, shall file, at the time of registration of such security on a securities exchange of by effective date of a registration statement or within ten days after he becomes such a beneficial owner, director, or officer, a statement with the Commission and, if such security registered on a securities exchange, also with the exchange, of the amount of all equity securities of such issuer of which he is the beneficial owner, and within ten days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file with the Commission, and if such security is registered on a securities exchange, shall also file with the exchange, a statement indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.
(b) For the purpose of preventing the unfair-use of information which may have been obtained by-such beneficial owner, director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer, irrespective of any intention of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. Suit to recover such profit may be instituted in any court of competent jurisdiction by the issuer, or by the owner of any security of the issuer in the name and in behalf of the issuer if the issuer if the issuer shall fail or refuse to bring such suit within sixty days after request or shall fail diligently to prosecute the same thereafter; but no such suit shall be brought more than two years after the date such profit was realized. This subsection shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale, or the sale and purchase, of the security involved, or any transaction or transactions which the Commission by rules and regulations may exempt as not comprehended within the purpose of this subsection.
(c) It shall be unlawful for any such beneficial owner, director, or officer, directly or indirectly, to sell any equity security of such issuer if the person selling the security or his principal (1) does not own the security sold, or (2) if owning the security, does not deliver it against such sale within twenty days thereafter, or does not within five days after such sale deposit it in the mails or other usual channels of transportation; but no person shall be deemed to have violated this subsection if he proves that notwithstanding the exercise of good faith he was unable to make such delivery or deposit within such time, or that to do so would cause undue inconvenience or expense.
(d) The provisions of subsection (b) of this Section shall not apply to any purchase and sale, or sale and purchase and the provisions of subsection (c) of this Section shall not apply to any sale, of an equity security not then or thereafter held by him in an investment account, by a dealer in the ordinary course of his business and incident to the establishment or maintenance by him of a primary or secondary market, otherwise than on an exchange, such security. The Commission may, by such rules and regulations as it deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transaction made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market. (26a)
Account and records, reports, examination of exchanges, members, and other.
SEC. 37. Account and records, reports, examination of exchanges, members, and other. — (a) Every exchange, every member thereof, every broker or dealer who transacts a business in securities through the medium of any such member, shall make, keep and preserve for such periods, such accounts, correspondence, memoranda, papers books, and other records, and make such reports, as the Commission by its rules and regulations may prescribe as necessary or appropriate in the public interest or for the protection of investors. Such accounts, correspondence, memoranda, papers books, and other records shall be subject at any time from time to time to such reasonable periodic, special or other examinations by examiner or other representatives of the Commission as the Commission may deem necessary or appropriate in the public interest or for the protection of investors, provided that the Commission give notice of the purpose of such examination, and if such examination is for the purpose of investigating any complaint filed with the Commission, or any information received by the Commission, that a copy of such complaint or a statement of such information be furnished by the Commission to such exchange, member, broker or dealer at least five days prior to the commencement of such examination.
(b) Any broker, dealer or other person pending credit who is subject to the rules and regulations prescribed by the Commission pursuant to this Act, shall make such reports to the Commission as may be necessary or appropriate to enable it to perform the functions conferred upon it by this Act. (27a)
Powers with respect to exchanges and securities.
SEC. 38. Powers with respect to exchanges and securities.—(a) The Commission is authorized, if in its opinion such action is necessary or appropriate for the protection of investors:
After appropriate notice .and opportunity for hearing, to suspend for a period not exceeding twelve months, or to withdraw the registration of a securities exchange, if such exchange has violated any provision of this Act or of the rules and regulations thereunder, or has failed to enforce compliance therewith by a member or by an issuer of a security registered thereon.
After appropriate notice and opportunity for hearing, to suspend for a period not exceeding twelve months or to expel from a securities exchange any member or officer thereof who has violated any provision of this Act or the rules and regulations thereunder, or has effected, directly or indirectly, any transaction for any person who is violating in respect of such transaction any provision of this Act or the rules and regulations thereunder.
And if the public interest so requires, summarily to suspend trading in any registered security on any securities exchange for a period not exceeding thirty days or, with the approval of the President of the Philippines, summarily to suspend all trading on any securities exchange for a period of more than thirty days but not exceeding ninety days.
(b) The Commission is further authorized, if after making appropriate request in writing to a securities exchange that such exchange effect on its own behalf specified changes in its rules and practices and, after appropriate notice and opportunity for hearing, it determines that such exchange has not made the changes so requested, and that such changes are necessary or appropriate for the protection of investors or to insure fair dealing in securities traded upon such exchange or to insure fair administration of such exchange, by rules or regulations or by order, to alter or supplement the rules of such exchange (insofar as necessary or appropriate to effect such changes) in respect of such matters as —
Safeguards in respect of the financial responsibility of members and adequate provisions against the evasion of financial responsibility through the use of corporate forms or special partnership;
The limitation or prohibition of the registration or trading in any security within a specified period after the issuance or primary distribution thereof;
The listing or striking from listing of any security;
Hours of trading;
The manner, method, and place of soliciting business;
Fictitious accounts;
The time and method of making settlements, payments, and deliveries, and of closing accounts;
The reporting of transactions on the exchange upon tickets maintained by or with the consent of the exchange, including the method of reporting short sales, stopped sales, sales of securities of issuers in default, bankruptcy or receivership, and sales involving other special circumstances;
The fixing of reasonable rates of commission, interest, listing, and other charges;
Minimum units of trading;
Odd-lot purchases and sales; and
Minimum deposits on margin accounts.
(c) Wherever two or more exchanges exist, the Commission may require and enforce uniformity of trading regulations in and/or between or among said exchanges.
(d) The Commission shall have the authority to determine the number, size and location of stock exchanges and commodity exchanges and other similar organizations in the light of national or regional requirements for such activities with the view to promote, enhance, protect, conserve or rationalize investment. (28a)
Clearance and settlement of securities transactions.
SEC. 39. Clearance and settlement of securities transactions.— The Commission, having due regard to the public interest, the protection of investors, the safeguarding of securities and funds, and maintenance of fair competition among brokers, dealers, clearing agencies, and transfer agents, shall promulgate rules and regulations for the prompt and accurate clearance and settlement of securities transactions, (n)
Power of the Commission with respect to securities related organizations.
SEC. 40. Power of the Commission with respect to securities related organizations.—The Commission shall have the power to grant license as a condition for, and to regulate, supervise, examine, suspend or otherwise discontinue, the operation of organizations whose operations are related to or connected with the securities market such as but not limited to clearing houses, securities depositories, transfer agents, registrars, fiscal and paying agents, computer services, news disseminating services, proxy solicitors, statistical agencies, securities rating agencies, and securities information processors which are engaged in the business of: (1) collecting, processing, or preparing for distribution or publication, or assisting, participating in, or coordinating the distribution or publication of, information with respect to transactions in or quotations for any security or (2) distributing or publishing, whether by means of a ticker tape, a communications network, a terminal display device, or otherwise, on a current and continuing basis, information with respect to such transactions or quotations, (n)
Securities investors protection funds.
SEC. 41. Securities investors protection funds.—The Commission may establish or facilitate the establishment of trust funds which .shall be contributed by exchanges, brokers, dealers, underwriters, transfer agents, salesmen and other persons transacting in securities, as the Commission may require, for the purpose of compensating investors for the extraordinary losses or damage they may suffer due to business failure or fraud or mismanagement of the persona with whom they transact, under such rules and regulations as the Commission may from time to time prescribe or approve in the public interest. The Commission may, having due regard to the public interest or the protection of investors, regulate, supervise, examine, suspend or otherwise discontinue such and other similar funds under .such rules and regulations which the Commission may promulgate, and which may include taking custody and management of the fund itself as well as investments in and disbursements from the fund under such forms of control and supervision by the Commission as it may from time to time require. The authority granted to the Commission under this Section shall also apply to all funds established for the protection of investors, whether established by the Commission or otherwise. (n)
Association of Securities brokers, dealers, underwriters, transfer agents and salesmen.
SEC. 42. Association of Securities brokers, dealers, underwriters, transfer agents and salesmen. —The Commission may prescribe rules and regulations which are necessary or appropriate in the public interest or for the protection of investors to govern associations of brokers, dealers, underwriters, transfer agents and/or salesmen. (n)
Certificates.
SEC. 43. Certificates. —The Commission may, having regard to the public interest and the protection of investors, require the printing by the Central Bank Security Printing Plant, at the issuer’s expense, of the instruments evidencing securities, and regulate the issuance and release thereof. (n)
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
