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CHAPTER I
TITLE AND DEFINITIONS
SECTION 1. Title. -
This shall be known as “The Securities Regulation
Code”.
SEC. 2. Declaration of State Policy. -
The State shall establish a socially conscious, free
market that regulates itself, encourage the widest participation of
ownership in enterprises, enhance the democratization of wealth,
promote the development of the capital market, protect investors,
ensure full and fair disclosure about securities, minimize if not
totally eliminate insider trading and other fraudulent or
manipulative devices and practices which create distortions in the
free market.
To achieve these ends, this Securities Regulation Code is hereby
enacted.
SEC. 3. Definition of Terms. - 3.1.
“Securities” are shares, participation or interests in a
corporation or in a commercial enterprise or profit-making venture
and evidenced by a certificate, contract, instrument, whether
written or electronic in character. It includes:
(a) Shares of stock, bonds,
debentures, notes, evidences of indebtedness, asset-backed
securities;
(b) Investment contracts,
certificates of interest or participation in a profit sharing
agreement, certificates of deposit for a future subscription;
(c) Fractional undivided
interests in oil, gas or other mineral rights;
(d) Derivatives like option and
warrants;
(e) Certificates of assignments,
certificates of participation, tru t certificates, voting trust
certificates or similar instruments;
(f) Proprietary or
nonproprietary membership certificates in corporations; and
(g) Other instruments as may in
the future be determined by the Commission.
3.2. “Issuer” is the originator,
maker, obligor, or creator of the security.
3.3. “Broker” is a person
engaged in the business of buying and selling securities for the
account of others.
3.4. “Dealer” means any person
who buys and sells securities for his/her own account in the
ordinary course of business.
3.5. “Associated person of a broker or
dealer” is an employee thereof who, directly exercises
control of supervisory authority, but does not include a salesman,
or an agent or a person whose functions are solely clerical or
ministerial.
3.6. “Clearing agency” is any
person who acts as intermediary in making deliveries upon payment to
effect settlement in securities transactions.
3.7. “Exchange” is an organize
marketplace or facility that brings together buyers and sellers and
executes trades àf securities and/or commodities.
3.8. “Insider” means: (a) the
issuer; (b) a director or officer (or person performing similar
functions) of, or a person controlling the issuer; (c) a person
whose relationship or former relationship to the issuer gives or
gave him access to material information about the issuer or the
security that is not generally available to the public; (d) a
government employee, or director, or officer of an exchange,
clearing agency and/or self-regulatory organization who has access
to material information about an issuer or a security that is not
generally available to the public; or (e) a person who learns such
information by a communication from any of the foregoing insiders.
3.9. “Pre-need plans” are
contracts which provide for the performance of future services or
the payment of future monetary considerations at the time of actual
need, for which plan holders pay in cash or installment at stated
prices, with or without interest or insurance coverage and includes
life, pension, education, interment, and other plans which the
Commission may from time to time approve.
3.10. “Promoter” is a
person who, acting alone or with others, takes initiative in
founding and organizing the business or enterprise of the issuer and
receives consideration therefore.
3.11. “Prospectus” is the
document made by or on behalf of an issuer, underwriter or dealer to
sell or offer securities for sale to the public through a
registration statement filed with the Commission.
3.12. “Registration statement”
is the application for the registration of securities required to be
filed with the Commission.
3.13. “Salesman” is a natural
person, employed as such or as an agent, by a dealer, issuer or
broker to buy and sell securities.
3.14. “Uncertificated security”
is a security evidenced by electronic or similar records.
3.15. “Underwriter” is a person
who guarantees on a firm commitment and/or declared best effort
basis the distribution and sale of securities of any kind by another
company.
CHAPTER II
SECURITIES AND
EXCHANGE COMMISSION
SEC. 4. Administrative Agency. - 4.1.
This Code shall be administered by the Securities and Exchange
Commission (hereinafter referred to as the “Commission’) as a
collegial body, composed of a Chairperson and four (4)
Commissioners, appointed by the President for a term of seven (7)
years each and who shall serve as such until their successor shall
have been appointed and qualified. A Commissioner appointed to fill
a vacancy occurring prior to the expiration of the term for which
his/her predecessor was appointed, shall serve only for the
unexpired portion of such term. The incumbent Chairperson and
Commissioners at the effectively of this Code, shall serve the
unexpired portion of their terms under Presidential Decree No. 902-
A. Unless the context indicates otherwise, the term “Commissioner”
includes the Chairperson.
4.2. The Commissioners must be natural-born citizens of
the Philippines, at least forty (40) years of age for the
Chairperson and at least thirty-five (35) years of age for the
Commissioners, of good moral character, of unquestionable integrity,
of known probity and patriotism, and with recognized competence in
social and economic disciplines:
Provided, That the majority of Commissioners, including the
Chairperson, shall be members of the Philippine Bar.
4.3. The Chairperson is chief
executive officer of the Commission. The Chairperson shall execute
and administer the policies, decisions, orders and resolutions
approved by the Commission and shall have the general executive
direction and supervision of the work and operation of the
Commission and of its members, bodies, boards, offices, personnel
and all its administrative business.
4.4. The salary of the
Chairperson and the Commissioners shall be fixed by the President of
the Philippines based on an objective classification system at a sum
comparable to the members of the Monetary Board and commensurate to
the importance and responsibilities attached to the position.
4.5. The Commission shall
hold meetings at least once a week for the conduct of business or as
often as may be necessary upon call of the Chairperson or upon the
request of three (3) Commissioners. The notice of the meeting shall
be given to all Commissioners and the presence of three (3)
Commissioners shall constitute a quorum. In the absence of the
Chairperson, the most senior Commissioner shall act as presiding
officer of the meeting.
4.6. The Commission may, for
purposes of efficiency, delegate any of its functions to any
department or office of the Commission, an individual Commissioner
or staff member of the Commission except its review or appellate
authority and its power to adopt, alter and supplement any rule or
regulation.
The Commission may review upon its own initiative or upon the
petition of any interested party any action of any department or
office, individual Commissioner, or staff member of the Commission.
SEC. 5. Powers and Functions of the
Commission. - 5.1. The Commission shall act with
transparency and shall have the powers and functions provided by
this Code, Presidential Decree No. 902-A, the Corporation Code, the
Investment Houses Law, the Financing Company Act and other existing
laws. Pursuant thereto the Commission shall have, among others, the
following powers and functions:
(a) Have jurisdiction and
supervision over all corporations, partnerships or associations who
are the grantees of primary franchises and/or a license or permit
issued by the Government.
(b) Formulate policies and
recommendations on issues concerning the securities market, advise
Congress and other government agencies on all aspects of the
securities market and propose legislation and amendments thereto;
(c) Approve, reject, suspend,
revoke or require amendments to registration statements, and
registration and licensing applications;
(d) Regulate, investigate or
supervise the activities of persons to ensure compliance;
(e) Supervise, monitor, suspend
or take over the activities of exchanges, clearing agencies and
other SROs;
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