Registration of Salesmen
- Only natural persons employed by brokers or dealers can be registered salesmen.
- Application via SEC Form 19-S, filed in two copies and verified under oath by employer.
- A filing fee of P1,000 applies.
- First-time applicants must be certified by the Philippine Stock Exchange as Certified Securities Representatives.
- Employment termination requires notification to SEC within 30 days via SEC Form 19-ST with reasons.
- Salesmen registration ceases upon termination of employment.
Renewal of Registration and Fees
- Annual renewal by December 1 with fees:
- Broker: P5,000
- Dealer: P5,000
- Branch Office: P2,500
- Salesman: P500
- Non-payment or non-filing suspends registration; termination if not rectified within 30 days after due date.
Lending and Voting of Customers' Securities
- Brokers/dealers extending credit must obtain written consent before lending customer securities or voting them.
Customer Protection: Reserves and Custody of Securities
- Brokers/dealers must maintain physical possession or control of fully paid and excess margin securities daily.
- Temporary delays allowed if due to normal operations and good faith effort to acquire possession/control.
- Written agreements required for securities borrowed from lenders, including compensation terms and collateral requirements.
Definition of Securities Under Control
- Securities are under control if:
- Held in custody of registered depositories without payment requirement.
- Carried in special omnibus accounts instructed to be free from liens.
- Subject to bona fide transfers with timely confirmation.
- Held in custodian banks or designated foreign entities.
- In transit between broker/dealer offices or approved entities within 5 business days.
- Held by corporate subsidiaries fully controlled by broker/dealer.
- Other adequate locations as approved by the SEC.
Daily Compliance Requirements
- Brokers/dealers must daily determine the quantity of securities in possession or control.
- Immediate steps required to release securities from liens or recover failed-to-receive securities within prescribed periods.
- Maintain and prepare a detailed description of procedures to comply with possession/control requirements.
- Submit quarterly records related to possession/control to the Philippine Stock Exchange or SEC.
Special Reserve Bank Account for Customers
- Brokers/dealers must maintain a separate "Special Reserve Bank Account" for the exclusive benefit of customers.
- Deposits must meet minimum requirements computed weekly or monthly depending on indebtedness and customer funds.
- Withdrawals allowed only if post-withdrawal balance meets reserve requirements.
- Banks holding the reserve funds must acknowledge the special status prohibiting use as loan security or claims.
Securities Delivery and Buy-In Procedures
- Customers have the absolute right to receive securities upon demand.
- Brokers/dealers must buy in securities if customers fail to deliver within 10 business days post settlement of sales.
- Buy-in transactions must be completed within 45 calendar days to address short security differences.
Extensions of Time for Transactions
- Extensions may be granted by Philippine Stock Exchange committees based on good faith and exceptional circumstances.
- Records of extensions must be maintained for at least 3 years.
Key Definitions
- "Customer": persons whose funds or securities are held by brokers/dealers, excluding certain insiders except in omnibus accounts.
- "Fully paid securities": securities paid in full.
- "Margin securities": securities purchased on credit extended by brokers/dealers.
- "Excess margin securities": margin securities with market value exceeding 140% of debit balances.
- "Qualified securities": Philippine government securities.
- Other definitions relating to banks, credit balances, affiliated persons, and omnibus accounts.
Purchases and Sales in Cash Accounts
- Purchase payments due within 3 business days.
- Failure to pay results in transaction cancellation or liquidation within 10 business days, barring justifiable reasons.
- Customers with unsettled transactions may be required to pre-deposit funds for 90 days following a default.
- Exceptions include unissued securities or purchases payable upon delivery.
- Extensions for payment periods require prior approval.
Prohibition on Guarantees Against Loss
- Brokers, dealers, or salesmen cannot guarantee customers against losses in securities transactions or accounts.
Annual Audited Financial Reports
- Brokers/dealers must file annual audited reports within 105 days after fiscal year-end (default Dec 31).
- Reports include financial statements, net capital computations, possession/control information, and reserve computation.
- Supporting documents retained for at least 3 years for examination by SEC and Philippine Stock Exchange.
Quarterly Securities Counts
- Brokers/dealers must quarterly physically examine and verify securities, including those in transit, pledged or on loan.
- Verification includes securities held without physical possession over 30 days.
- Unresolved differences must be recorded within 7 business days.
- Examination supervised by persons independent of securities recordkeeping.
- Exemptions possible upon written request based on special business nature or safeguards.
Rescinded Rules and Effective Date
- Various 1938 Rules rescinded to consolidate and update broker/dealer regulations.
- New rules take effect 15 days after publication in newspapers of general circulation in the Philippines.