Sale and registration of securities.
SEC. 4. Sale and registration of securities.—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 within the Philippines unless such securities shall have been registered and/or licensed as hereinafter provided. Registration of stock shall be deemed to include the registration of rights to subscribe to such stock if the registration statement filed pursuant to section seven of this Act includes a statement that such rights are to be issued. A record of the registration of securities shall be kept in a Register of Securities to be kept in the office of the Commission, in which Register of Securities shall also be recorded any orders entered by the Commission with respect to such securities. Such register, and all information with respect to the securities registered therein, shall be open to public inspection.
Exempt securities.
SEC. 5. Exempt securities.—
Except as hereinafter expressly provided, the provisions of this Act shall not apply to any of the following classes of securities:
Any security which, prior to the taking effect of this Act, has been sold or disposed of by the issuer or bona fide offered to the public.
Any security issued or guaranteed by the Government of the Philippines, or by the United States or any territory thereof, or by any political subdivision or agency of said Government, or by any of their public instrumentalities, or by any person controlled or supervised by, and acting as an instrumentality of, those Governments, or any certificate of deposit for any of the foregoing; or 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, and is supervised by the Bureau of Banking.
Any security issued or guaranteed by any foreign government with which the United States 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 it is offered for sale in the Philippines as a valid obligation by such foreign government or by such state, province or political subdivision thereof issuing the same.
Any security issued or guaranteed either as to principal, interest or dividend by a corporation owning or operating public service, whose financial transactions, including the issue and guaranteeing of securities, are subject to regulation and supervision by the Public Service Commission or by a board or officer of the Government of the Philippines.
Any security issued by a building and loan association, savings and loan association, or similar institution, substantially all the business of which is confined to the making of loans to members (but the foregoing exemption shall not apply with respect to 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 3 per centum of the face value of such security), or any security issued by rural credit associations or by cooperative marketing associations.
Certificates issued by a receiver or by a trustee in bankruptcy, with the approval of 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 Commissioner.
Any security exchanged 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.
The Commission may, from time to time, by its rules and regulations and subject to such terms and conditions as may be prescribed therein, add any class of securities to the securities exempted as provided in this section, 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 by reason of the small amount involved or the limited character of the public offering; but no issue of securities shall be exempted under this subsection where the aggregate amount at which such issue is offered to the public exceeds two hundred thousand pesos.
Exempt transactions.
SEC. 6. Exempt transactions.—The provisions of this Act shall not apply to the sale of any security in any of the following transactions:
At any judicial, executor's, administrator's, guardian's, or at any sale by a receiver or trustee in insolvency, or bankruptcy.
By or for the account of a pledge holder or mortgagee, 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 charter, of securities to its stockholders or other security holders as a stock dividend or other distribution out of earnings or surplus; or the issuance of securities to the security holders 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.
Bonds or notes secured by mortgage upon real estate or tangible personal property, where the entire mortgage together with all of 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 a right of conversion entitling the holder of the security surrendered in exchange to make such conversion, provided that the security so surrendered has been registered or its sale licensed 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 and licensing 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.
The sale, transfer or delivery of any securities to any bank, savings institution, trust company, insurance company or to any corporation or to any broker or dealer; provided, that such broker or dealer is actually engaged in buying and selling securities as a business.
Brokers' transactions, executed upon customers' orders on any exchange or in the open or counter market, but not the solicitation of such orders.
Subscriptions for shares of the capital stock of a corporation prior to the incorporation thereof under the general Corporation Law, 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, and only to such extent.
Procedure for registration.
SEC. 7. Procedure for registration.—
All securities shall be registered through the filing by the issuer or by any dealer 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 nonresident 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 the issuer.
A statement of the capitalization of 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.
The specific purposes in detail and the approximate amounts to be devoted to such purposes, so far as determinable, 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 thereof and the sources thereof shall be stated.
A statement of the amount of the issuer's income, expenses, and fix charges during the last fiscal year, or if in actual business less than one year, then for such time as the issuer has been in actual business.
A balance sheet showing the amount and general character of its assets and liabilities on a day not more than sixty days prior to the date of such balance sheet.
The remuneration, paid or estimated to be paid, by the issuer or its predecessor, directly or indirectly, during the past year and ensuing year to (a) the directors or persons performing similar functions, and (b) its officers and other persons, naming them wherever such remuneration exceeded six thousand 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.
A statement showing the price at which such security is proposed to be sold, together with 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 security.
The amount or estimated amounts, itemized in reasonable detail, of expenses, other than commissions specified in the next preceding paragraph, incurred or to be borne 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.
A detailed statement showing the items of cash, property, services, patents, good-will, 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 speculative 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 the Commission may, by regulations, require, which will show the quality of the ore in such claim, and the unit cost of extracting it.
Unless previously filed and registered under the provisions of this Act, 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) 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.
In case of the certificates of deposit, voting trust certificates, collateral trust certificates of interest or shares in unincorporated investment trusts, equipment trust certificates, interim or other receipts for certificates, and like securities, the Commission shall establish rules and regulations requiring the submission of information of a like character applicable to such cases, together with such other information as it may deem appropriate and necessary regarding the character, financial or otherwise, of the actual issuer of the securities and/or the person performing the acts and assuming the duties of depositor or manager.
However, the Commission may by rules or regulations provide that any of the above information or document need not be included in respect of any class of issuer of securities, if it finds that the requirement of such information or document is inapplicable to such class and that disclosure fully adequate for the protection of investors is otherwise included in a registration statement filed in accordance with such rules.
Upon filing of such registration statement, the issuer or dealer shall pay to the Treasury of the Philippines a fee of one-tenth of one per centum of the maximum aggregate price at which such securities are proposed to be offered, but in no case shall such fee be less than fifty pesos or more than one thousand pesos; and the fact of such filing shall be immediately published by the Commission, at the expense of the issuer or dealer, in two newspapers of general circulation in the Philippines, one published in English and another, in Spanish, 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, under such regulations as the Commission may prescribe; and copies thereof, photostatic or otherwise, shall be furnished to every applicant at such reasonable charge as the Commission may prescribe.
The filing of such statement in the office of the Commission, the payment of the fee hereinabove prescribed, and the publication made as above stated, shall constitute the registration of such security, and seven days after the expiration of the period for publication above referred to, the registration shall take effect, and the security, if not a speculative security, may be sold in the Philippines, subject, however, to the further orders of the Commission as hereinafter provided. The Commission shall, upon the filing of the registration statement above referred to, determine, by order, whether or not the security sought to be registered is speculative within the meaning of this Act, and shall forthwith advise the issuer or dealer.
Suspension of registration.
SEC. 8. Suspension of registration.—If, at any time, in the opinion of the Commission, 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 section twelve, 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 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 further order of the Commission.
In the event of the entry of such order of suspension, the Commission shall give a 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 section twelve, it shall enter a final order prohibiting sales of such security, with its findings with respect thereto. 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.
Appeals from such final order may be taken to the President of the Philippines, within the period of thirty days from the date of notification of such order. If, however, upon such hearing, the Commission shall find 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.
License to sell speculative securities.
SEC. 9. License to sell speculative securities.—With respect to speculative securities, if the Commission shall find after an examination of the registration statement filed by the issuer or dealer, together with all the other papers and documents attached thereto, that the issuer is of good repute, and that the sale of the security would not be fraudulent and would not work or tend, to work a fraud upon the purchaser, and that the enterprise or business of the issuer is not based upon unsound business principles, it shall record the registration of such security in the Register of Securities, and, after the effective date of such registration as above stated, it shall issue to the issuer or dealer a license to sell those securities in the Philippines, and shall issue to such issuer a certificate of permit reciting that such person, its brokers or agents, are entitled to offer the securities named in said certificate for sale in the Philippines. Every permit shall recite in bold type that the issuance thereof is permissive only and does not constitute a recommendation or endorsement of the securities permitted to be issued.
With respect to speculative securities, the Commission shall, by order duly recorded, fix the 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 in no case to exceed ten per centum of the value of the securities sold; and shall fix the maximum amount of compensation which the issuer shall pay for mining claims and/or mineral rights for which provision is made by the issuer for payment in cash or securities. It may issue the permit subject to other conditions, to the end that this power may become effective. The amount of compensation which shall be paid the owner and/or holder of such mining claims and/or mineral rights shall be a fair valuation thereof, as may be fixed by the Commission, after consultation with the Bureau of Mines, and after receiving such technical information as the issuer or dealer and/or the owner or owners of such claims may care to submit in the premises.
Consent to service.
SEC. 10. Consent to service.—Upon any application for dealer, registration, whether made by an issuer or registered dealer, where the issuer is not domiciled in the Philippines, there shall be filed with such application the irrevocable written consent of the issuer that in suits, proceedings and actions growing out of the violation of any provision of this Act, the service on the Commission of any notice, process, or pleading therein, authorized by the laws of the Philippines, shall be as valid and binding as if due service had been made on the issuer. Any such action shall be brought either in the province of the plaintiff's residence or in the City of Manila. Said written consent shall be authenticated by the seal of issuer, if it has a seal, and by the acknowledged signature of a member of the copartnership or company, or by the acknowledged signature of any officer of the incorporated or unincorporated association, if it be an incorporated or unincorporated association, duly authorized by resolution of the board of directors, trustees or managers of the corporation or association, and shall in such case be accompanied by a duly certified copy of the resolution of the board of directors, trustees or managers of the corporation or association, authorizing the officers to execute the same. In case any process or pleadings mentioned in this Act are served upon the Commission, it shall be duplicate copies, one of which shall be filed in the office of the Commission and another immediately forwarded by the Commission by registered mail to the principal office of the issuer against which said process or pleadings are directed.
Financial statements, circulars, and so forth, filing of.
SEC. 11. Financial statements, circulars, and so forth, filing of.—While any person, whose securities have been sold pursuant to registration and/or permit issued hereunder, is engaged in business in the Philippines, such person shall file with the Commission not later than February fifteen of each year, a statement under oath of assets and liabilities as of December thirty-first of the last previous year. Provided, That at the request of such person or his duly authorized agent or of a member or duly authorized officer or agent of such person, the Commission may grant an extension of time not to exceed thirty days within which such statement shall be submitted to it. Such person shall also file with the Commission, before or at the time of their issuance for publication, copies of all circulars, prospectuses and other advertising matter to be issued from time to time by or on behalf of such person.
Revocation of registration of securities and of license to sell.
SEC. 12. Revocation of registration of securities and of license to sell.—The Commission may revoke the registration of any security and the license to sell a speculative security by entering an order to this effect, with its findings in respect thereto, if upon examination into the affairs of the issuer of such security, it shall appear that the issuer:
Is insolvent; or
Has violated any of the provisions of this Act or any order of the Commission of which the issuer has notice; or
Has been or is engaged or is about to engage in fraudulent transactions; or
Is in any other way dishonest or has made any fraudulent representations in any prospectus or in any circular or other literature that has been distributed concerning the issuer or its securities; or
Is of bad business repute; or
Does not conduct its business in accordance with law; or
Has its affairs in an unsound condition; or
Has his enterprise or business based upon unsound business principles.
In making such examination, the Commission shall have access to and 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 a certified public accountant.
Whenever the Commission may deem it necessary, it may also require such balance sheet or income statement, or both, to be made more specific in such particulars as the Commission shall point out or to be brought down to the latest practicable date.
If any issuer shall refuse to permit an examination to be made by the Commission, it shall be proper ground for revocation of registration and license.
If the Commission shall deem it necessary, it may enter an order suspending the right to sell securities pending any investigation, provided that 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 entry of such order of suspension, no further sale of such security shall be made until further order of the Commission.
Notice of the entry of such order shall be given by mail, or personally, or by telephone, confirmed in writing, or by telegraph, to the issuer and every dealer who shall have notified the Commission of an intention to sell such security.
Before such order is made final, the issuer or dealer shall be entitled to a hearing; and such order may, within thirty days after notification thereof to the issuer and/or dealer, be appealed to the President of the Philippines.
Promotion fees.
SEC. 13. Promotion fees.—If the statement containing information as to securities to be registered, as provided for in section seven 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 good-will, 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 good-will, the amount and nature thereof shall be fully set forth in the notification published by the Commission as required in section seven 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.
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
