Use of facilities of unregistered exchanges prohibited.
SEC. 16. Use of facilities of unregistered exchanges 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 such exchange is registered as a securities exchange under section seventeen of 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 such exchange, it is not practicable and not necessary or appropriate in the public interest or for the protection of investors to require such registration.
Registration of exchanges.
SEC. 17. Registration of exchanges.—
Any exchange may be registered with the Commission as a securities exchange under the terms and conditions hereinafter provided in this section, by filing a registration statement in such form as the Commission may prescribe, containing the agreements, setting forth the information, and accompanied by the documents below specified:
An agreement (which shall not be construed as a waiver of any constitutional right or any right to contest the validity of any rule or regulation) to comply, and to enforce, so far as is within its powers, compliance by its members, with the provisions of this Act, and any amendment thereto, and any rule or regulation 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 in 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 the name, which are hereinafter collectively referred to as the "rules of the exchange"; and
An agreement to furnish to the Commission copies of any amendments to the rules of the exchange forthwith upon their adoption.
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, and declare that the willful violation of any provision of this Act or any rule or regulation thereunder shall be considered conduct or proceeding inconsistent with just and equitable principles of fair trade.
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.
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 that 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.
Within thirty days after the filing of the application, the Commission shall enter 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.
Upon the registration of a securities exchange pursuant to the provisions of this Act, it shall pay a registration fee of one thousand pesos.
An exchange may, 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, withdraw its registration.
Margin requirements.
Sec. 18. Margin requirements.—
For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Commission shall prescribe rules and regulations with respect to the amount of credit that may be initially extended and subsequently maintained on any security (other than an exempted security) registered on a securities exchange. For the initial extension of credit, such rules and regulations shall be based upon the following standard:
An amount not greater than whichever is the higher of—
Fifty per centum of the current market price of the security, or
One hundred per centum of the lowest market price of the security during the preceding thirty-six calendar months, but not more than sixty-five per centum of the current market price.
It shall be unlawful for any member of a securities exchange or any broker or dealer who transacts a business in securities through the medium of any such member, 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) registered on a securities exchange, in contravention of the rules and regulations which the Commission shall prescribe under the provisions of this section.
This section and the rules and regulations thereunder shall not apply (A) to a loan made by a person not in the ordinary course of his business, (B) to a loan on an exempted security, (C) 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, (D) to a loan by a bank on a security, or (E) to such other loans 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 section and the rules and regulations thereunder.
The provisions of this section or the rules and regulations thereunder shall not apply to any loan or extension of credit made prior to the effective date of this Act
Restriction on borrowing by members, brokers, and dealers.
SEC. 19. Restriction on borrowing by members, brokers, and dealers.—It shall be unlawful for any member of a securities exchange, or any broker or dealer who transacts a business in securities through the medium of any such member, 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 secured 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 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.
In contravention of such rules and regulations as the Commission shall prescribe for the protection of investors, to hypothecate or arrange for the hypothecation of any security carried for the account of any customer under circumstances—
That will permit the commingling of his securities, without his written consent, with the securities of any other customer;
That will permit such securities to be commingled with the securities of any person other than a bona fide customer; or
That will permit such securities to be hypothecated or subjected to any lien or claim of the pledge, or for a sum in excess of the aggregate indebtedness of such customers in respect of such securities.
To lend or arrange for the lending of any security carried for the account of any customer without the written consent of such customer.
Manipulation of security prices.
SEC. 20. Manipulation of security prices.—
It shall be unlawful for any person, directly or indirectly—
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:
To effect any transaction in such security which involves no change in the beneficial ownership thereof, or
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, at substantially the same time, and at substantially the same price, for the sale of any such security, has been or will be entered by or for the same or different parties, or
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, at substantially the same time, and at substantially the same price, for the purchase of such security, has been or will be entered by or for the same or different parties.
To effect, alone or with one or more other persons, a series of transactions in any security registered on a securities exchange creating actual or apparent active trading in such security or raising or depressing the price of such security, for the purpose of inducing the purchase or sale of such security by others.
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 any one or more persons, conducted for the purpose of raising or depressing the prices of such security.
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, for the purpose of inducing the purchase or sale thereof, 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.
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 such security 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 any one or more persons conducted for the purpose of raising or depressing the price of such security.
To effect, either alone or with one or more other persons, any series of transactions for the purchase or sale of any security registered on a securities exchange for the purpose of pegging, fixing or stabilizing the price of such security 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.
It shall be unlawful for any person to effect, by the use of any facility of 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—
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; or
Any transaction in any security for the account of any person who he 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.
It shall be unlawful for any member of a securities exchange, directly or indirectly, to endorse or guarantee the performance of any put, call, straddle, option or privilege in relation to 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.
The terms "put," "call," "straddle," "option," or "privilege" as used in this section shall not include any registered warrant, right or convertible security.
Any person who willfully 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 a 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. In any such suit, the court may 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 one year after the discovery of the facts constituting the violation and within three years after such violation.
The provisions of this section shall not apply to an exempted security.
Manipulative and deceptive devices.
SEC. 21. Manipulative and deceptive devices.—It shall be unlawful for any person, directly or indirectly, by the use of any facility of any securities 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, 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.
Segregation and limitation of functions of members, brokers, and dealers.
SEC. 22. Segregation and limitation of functions of members, brokers, and dealers.—
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, and (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. 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 of 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.
When not in contravention of 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, and (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. 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 of 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.
When not 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, 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 dealings so far as practicable to those reasonably necessary to permit him to maintain a fair and orderly market, 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 in 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.
If, because of the limited volume of transactions effected on an exchange, it is, in the opinion of the Commission, 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 the rules and regulations thereunder, the Commission shall have 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.
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 an 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.
Transactions in unregistered securities on securities exchange prohibited.
SEC. 23. Transactions in unregistered securities on securities exchange prohibited.—It shall be unlawful for any member, broker or dealer to effect any transaction in any security (other than an exempted security) on a securities exchange unless a registration is effective as to such security in accordance with the provisions of this Act and the rules and regulations thereunder.
Proxies.
SEC. 24. Proxies.—It shall be unlawful for any member of a securities exchange or any broker or dealer who transacts a business in securities through the medium of any such member, to give a proxy, consent or authorization in respect of any security carried for the account of a customer 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.
Over-the-counter markets.
SEC. 25. Over-the-counter markets.—It shall be unlawful, in contravention of such rules and regulations as the Commission may prescribe as necessary or 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 or persons, to make or create, or enable another to make or create, a market, otherwise than on 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.
Directors, officers, and -principal stockholders.
SEC. 26. Directors, officers, and -principal stockholders.—
Every person who is directly or indirectly the beneficial owner of more than ten per centum of any class of security (other than an exempted security), or who is a director or an officer of the issuer of such security, shall file, at the time of the registration of such security or within ten days after he becomes such beneficial owner, director, or officer, a statement with the exchange (and a duplicate original thereof with the Commission) of the amount of all 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 any change in such ownership during such month, shall file with the exchange a statement (and a duplicate original thereof with the Commission) indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.
Any profit realized by a beneficial owner, director, or officer, through the unfair use of information received as such, from any purchase and sale, or any sale and purchase, of any security of such Issuer (other than an exempted security), within any period of less than six months of the issue thereof, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer.
Account and records, reports, examinations of exchanges, members, and others.
SEC. 27. Account and records, reports, examinations of exchanges, members, and others.—
Every securities exchange 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 or from time to time to such reasonable, periodic, special or other examinations by examiners 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.
Any broker, dealer or other person extending 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.
Powers with respect to exchanges and securities.
SEC. 28. Powers with respect to exchanges and securities.—
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, by order, to suspend for a period not exceeding twelve months or to withdraw the registration of a securities exchange, if the Commission finds that such exchange has willfully violated any provision of this Act or of the rules and regulations thereunder, or has willfully failed to enforce, so far as is within its power, compliance therewith by a member or by an issuer of a security registered thereon.
After appropriate notice and opportunity for hearing, by order, to suspend for a period not exceeding twelve months or to expel from a securities exchange any member or officer thereof whom the Commission finds has willfully violated any provision of this Act or the rules and regulations thereunder, or has effected any transaction for any person who, he has reason to believe, is violating in respect of such transaction any provision of this Act or the rules and regulations thereunder.
And if in its opinion the public interest so requires, summarily to suspend trading in any registered security on any securities exchange for a period not exceeding ten days or, with the approval of the President, summarily to suspend all trading on any securities exchange for a period not exceeding ninety days.
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, the Commission 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 in 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 provision against the evasion of financial responsibility through the use of corporate forms or special partnerships;
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 and upon tickers 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.
Source: Supreme Court E-Library, Republic of the Philippines. Philippine laws are public documents (works of the government).
