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    Corporation Law: Securities Regulation Code

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    The Securities Regulation Code (SRC) regulates the exchange and flow of securities in the Philippines to strengthen capital markets. It sets requirements for lawfully offering, purchasing, trading, and selling securities, including disclosure of information, registration of securities, monitoring of brokers/issuers/exchanges, and prohibiting fraudulent practices. The SRC defines securities broadly as shares, bonds, notes, investment contracts, and other financial instruments. It establishes a five-part framework for regulating securities through the Securities and Exchange Commission (SEC), registration requirements, disclosure obligations, prohibitions on misconduct, and regulation of intermediaries like brokers.

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    Corporation Law: Securities Regulation Code

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    KL
    138 views2 pages
    The Securities Regulation Code (SRC) regulates the exchange and flow of securities in the Philippines to strengthen capital markets. It sets requirements for lawfully offering, purchasing, trading, and selling securities, including disclosure of information, registration of securities, monitoring of brokers/issuers/exchanges, and prohibiting fraudulent practices. The SRC defines securities broadly as shares, bonds, notes, investment contracts, and other financial instruments. It establishes a five-part framework for regulating securities through the Securities and Exchange Commission (SEC), registration requirements, disclosure obligations, prohibitions on misconduct, and regulation of intermediaries like brokers.

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    The Securities Regulation Code (SRC) regulates the exchange and flow of securities in the Philippines to strengthen capital markets. It sets requirements for lawfully offering, purchasing, trading, and selling securities, including disclosure of information, registration of securities, monitoring of brokers/issuers/exchanges, and prohibiting fraudulent practices. The SRC defines securities broadly as shares, bonds, notes, investment contracts, and other financial instruments. It establishes a five-part framework for regulating securities through the Securities and Exchange Commission (SEC), registration requirements, disclosure obligations, prohibitions on misconduct, and regulation of intermediaries like brokers.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    138 views2 pages

    Corporation Law: Securities Regulation Code

    Uploaded by

    KL
    The Securities Regulation Code (SRC) regulates the exchange and flow of securities in the Philippines to strengthen capital markets. It sets requirements for lawfully offering, purchasing, trading, and selling securities, including disclosure of information, registration of securities, monitoring of brokers/issuers/exchanges, and prohibiting fraudulent practices. The SRC defines securities broadly as shares, bonds, notes, investment contracts, and other financial instruments. It establishes a five-part framework for regulating securities through the Securities and Exchange Commission (SEC), registration requirements, disclosure obligations, prohibitions on misconduct, and regulation of intermediaries like brokers.

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    of 2

    CORPORATION LAW

    Securities Regulation Code

    1) What does the SRC Regulate?


    In line with the State’s policy, as taken from Section 2 of the code, the SRC
    seeks to regulate the exchange and flow of the securities to strengthen the
    capital markets. It sets the mandate for the lawful offering, purchase, trade
    and sale by issuer of such securities by providing safeguards such as the
    disclosure of information as to the securities, the registration of securities,
    the close monitoring of securities and the brokers, issuers and even the
    exchange itself. Further, it also prohibits and penalizes fraudulent practices
    and transactions, and provides the SEC with and strengthening its powers
    and functions. It is a mode of protecting the public and the consumers, and
    subsequently the market at large.

    The application of the regulatory character of SRC can be seen in Securities


    and Exchange Commission vs Prosperity.com Inc (G.R. No. 164197.
    January 25, 2012), whereby it was essential to determine of whether or not
    the contract is an investment contract and would thus require registration
    pursuant to RA 8799.

    2) What are securities?


    Securities are shares participation, or interests in a corporation or in a
    commercial enterprise or profit-making venture and evidenced by a
    certificate contract or instrument, whether written or electronic in character.

    Further, securities include those enumerated in section 3.1 of the SRC, such
    as: a) Shares of stock, bonds, debentures, notes, evidences of indebtedness,
    and asset-backed securities; b) Investment contracts, certificates of interest
    or participation in a profit-sharing agreement, certificates if 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, trust certificates, voting trust
    certificates or similar instruments; f) Proprietary or non-proprietary
    membership certificates in corporations; and g) Other instruments as may in
    the future be determined in the SEC.

    As to the inclusion of investment contracts, the case of Securities and Exchange


    Commission vs Prosperity.com Inc (G.R. No. 164197. January 25, 2012), the
    Supreme Court held that:

    “The Securities Regulation Code treats investment contracts as "securities"


    CORPORATION LAW
    Securities Regulation Code
    that have to be registered with the SEC before they can be distributed and
    sold. An investment contract is a contract, transaction, or scheme where a
    person invests his money in a common enterprise and is led to expect profits
    primarily from the efforts of others.”

    3. Breakdown the SRC into the 5 elements of the scheme for Regulation of
    Securities
    a) The SEC (as a regulator)
    -> Chapter II: The Securities and Exchange Commission
    -> Section 4 - Administrative Agency
    -> Section 5 - Powers and Functions of the Commission
    -> Section 6 - Indemnification and Responsibilities of Commissioners
    -> Section 7 – Reorganization

    b) Registration
    -> Chapter III: Registration of securities
    -> chapter IV: Regulation of pre-need plans
    -> chapter XII: General provisions

    C) Disclosure Requirements
    -> Chapter V: Reportorial requirements
    -> Chapter VI: Protection of shareholders interests
    -> Chapter XIII: General provisions

    D) Prohibitions
    -> Chapter VII: Prohibitions and Fraud, Manipulation and Insider Trading
    -> Chapter XIII: General Provisions

    E) Regulation of intermediaries (Securities Market Professionals)


    -> Chapter VIII: Regulation of Securities Market Professionals
    -> Chapter IX: Exchanges and other securities trading markets
    -> Chapter X: Registration, Responsibility and Oversight of Self-Regulatory
    Organizations
    -> Chapter XI: Acquisition and transfer of securities and settlement of
    transaction in securities
    -> Chapter XII: Margin and Credit
    -> Chapter XIII: General Provisions

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