IMPLEMENTING RULES AND REGULATIONS OF THE SECURITIES REGULATION CODE

 

SRC Rule 1 -  Title of Rules

These Rules shall be referred to as the “Implementing Rules and Regulations of the Securities Regulation Code”, or SRC Rules.

 

SRC Rule 2 -  Interpretation of Rules

Any doubt in the interpretation of these Rules shall be resolved by the Commission in a manner which would establish a socially conscious free market that regulates itself, encourage the widest participation of ownership in an enterprise, enhance the democratization of wealth, promote the development of the capital market, protect investors, ensure full and timely disclosure of material information, and/or minimize if not eliminate insider trading and other fraudulent or manipulative devices and practices which create distortions in the free market.

 

SRC Rule 3 - Definitions of Terms Used in the Rules and Regulations.

1.   As used in the rules and regulations adopted by the Commission under the Code, unless the context otherwise requires:

a.   Commission means the Securities and Exchange Commission.

b.   Code means the Securities Regulation Code.

c.   Section refers to a section of the Code.

d.   Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: voting power, which includes the power to vote, or to direct the voting of, such security; and/or investment returns or power, which includes the power to dispose of, or to direct, the disposition of such security; provided, however, that a person shall be deemed to have an indirect beneficial ownership interest in any security which is:

i.    held by members of  his immediate family sharing the same household;

ii.   held by a partnership in which he is a general partner;

iii.  held by a corporation of which he is a controlling shareholder; or

iv.   subject to any contract, arrangement or understanding which gives him voting power or investment power with respect to such securities; provided however, the following persons or institutions shall not be deemed to be beneficial owners of securities held by them for the benefit of third parties or in customer or fiduciary accounts in the ordinary course of business, so long as such shares were acquired by such persons or institutions without the purpose or effect of changing or influencing control of the issuer:

A.   A Broker Dealer;

B.   An investment house registered under the Investment Houses Law;

C.   A bank authorized to operate as such by the Bangko Sentral ng Pilipinas;

D.   An insurance company subject to the supervision of the Office of the Insurance  Commission;

E.   An investment company registered under the Investment Company Act;

F.   A pension plan subject to regulation and supervision by the Bureau of Internal Revenue and/or the Office of the Insurance Commission; and

G.   A group in which all of the members are persons specified above.

All securities of the same class beneficially owned by a person, regardless of the form such beneficial ownership takes, shall be aggregated in calculating the number of shares beneficially owned by such person.

A person shall be deemed to be the beneficial owner of a security if that person has the right to acquire beneficial ownership within thirty (30) days, including, but not limited to, any right to acquire:  through the exercise of any option, warrant or right; through the conversion of any security; pursuant to the power to revoke a trust, discretionary account or similar arrangement; or pursuant to automatic termination of a trust, discretionary account or similar arrangement.

 

e.   Material information means information which a reasonable investor would consider important in determining whether to buy, sell or hold securities, or in connection with the exercise of related voting rights.

f.    Control, controlling, controlled by, and under common control with, means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.

g.   Member of an Exchange means any Broker Dealer who has the right, pursuant to Exchange rules, to trade on that Exchange.

h.   Transfer agent means any person who engages on behalf of an issuer of securities, or itself as an issuer of securities, in:

i.    countersigning such securities upon issuance;

ii.    monitoring the issuance of such securities with a view toward preventing unauthorized issuance, a function commonly performed by a person called a registrar;

iii.   registering the transfer of such securities;

iv.   exchange or converting such securities; and/or

v.    transferring record ownership of securities by bookkeeping entry without physical issuance of securities certificates.

i.    Public company means any corporation with a class of equity securities listed on an Exchange or with assets in excess of Fifty Million Pesos (P50,000,000.00) and having two hundred (200) or more holders, at least two hundred (200) of which are holding at least one hundred (100) shares of a class of its equity securities.

j.    Self Regulatory Organization or SRO means an organized Exchange, registered clearing agency and any organization or association registered as an SRO under Section 39 of the Code to enforce compliance with relevant provisions of the Code and rules and regulations adopted thereunder, and mandated to make and enforce its own rules, which have been approved by the Commission, by their  members and/or participants.

k.   Rules and regulations refers to all rules and regulations adopted by the Commission pursuant to the Code, including the forms for registration and reports and accompanying instructions thereto.

2.   Unless otherwise specifically stated, the terms used in the rules and regulations shall have the meanings defined in the Code.

3.   A rule or regulation which defines a term without express reference to the Code or to the rules and regulations, or to a portion thereof, defines such term for all purposes as used in both the Code and in the rules and regulations, unless the context otherwise specifically requires.

 

SRC Rule 3.1-1 -  Definition of Investment Contract and Derivative

1.   An investment contract means a contract, transaction or scheme (collectively “contract”) whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others.

a.    A presumption that a contract is an investment contract arises whenever a person seeks to use the money of others on the promise of profits.

b.    When two or more investors “pool” their resources, there is a common enterprise, even if the promoter does not do more than receive a broker’s commission.

2.   Derivative with respect to equity securities, means a financial instrument, including options and warrants, whose value depends on the interest in or performance of an underlying security, but which does not require any investment of principal in the underlying security.

a.   Options are contracts that give the buyer the right, but not the obligation, to buy or sell an underlying security at a predetermined price, called the exercise or strike price, on or before a predetermined date, called the expiry date, which can only be extended in accordance with Exchange rules.

b.   Call options are rights to buy and put options are rights to sell.

c.   Warrants are rights to subscribe or purchase new shares or existing shares in a company, on or before a predetermined date, called the expiry date, which can only be extended in accordance with Exchange rules. Warrants generally have a longer exercise period than options.

 

SRC Rule 3.3-1 - Definition of Broker Dealer

Broker Dealer means any broker and/or dealer registered under Section 28 of the Code to engage in broker and/or dealer activities.

 

SRC Rule 3.6 – Definition of Clearing Agency

1.   Clearing agency means any person that provides a facility to a Broker Dealer, salesman, associated person of a Broker Dealer or another clearing agency and whose facility performs any or all of the following activities:

a.   makes deliveries in connection with transactions in securities;

b.   reduces the number of settlements of securities transactions or to allocate securities settlement responsibilities;

c.   provides for the central handling of securities so that transfers, loans, and pledges and similar transactions can be made by bookkeeping entry or otherwise to facilitate the settlement of securities transactions without physical delivery of securities certificates.

2.   As used in this Rule, “facility” includes a clearing agency’s systems, processes or services and all the tangible or intangible properties necessary to operate such system, processes or services, whether within or without its specific physical location, for purposes of performing any or all of the activities set forth in paragraph 1 of this Rule.

3.   A registered clearing agency may perform only the activity or activities that the Commission has previously approved.

 

SRC Rule 3.7.1   - Definition of Facility of an Exchange

Facility of an Exchange includes systems, processes or services, tangible or intangible property, whether or not in a specific physical location or in an Exchange, for the purpose of effecting transactions between buyers and sellers in a securities trading market, and conveying any information required by the participants to effect such transactions.

 

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