SEC rules on subordination, margin, clearing

Various rules from the 1938 Rules and later circulars were suspended as outdated or irrelevant.
Suspended rules cover trading hours, exchange operations, membership limits, odd lot dealers, specialists, listing and delisting procedures, pricing, broker reports, financial statements, and other miscellaneous regulations.

The new rules took effect 15 days after publication in two newspapers of general circulation.

Credit extended to customers cannot exceed 50% of the current market value at the time of the transaction.
No new or additional credit if the account equity is P50,000 or less.
Maintenance margin requirements: minimum 25% for long securities, 30% for short securities.
Margin calls must be promptly made and met within five business days for initial margins and 24 hours for maintenance margins.
Failure to meet margin calls leads to liquidation of securities to cover margin deficiencies, except if deficiency is under P10,000.
Extension of payment date possible for initial margin calls upon written request and good faith consideration by PSE or SEC.

Subordination agreements include subordinated loan agreements and secured demand note agreements.
Collateral value is market value reduced by 30%, with different deductions for Philippine government securities.
Payment Obligation: broker's duty to repay loans or secured demand notes.
Secured demand notes are promissory notes secured by collateral and may limit lender liability to collateral value.

Written agreements with a minimum one-year term (except temporary agreements).
Agreements must be valid, binding, and enforceable.
Fixed peso amount specified, with reductions only as provided.
Subordination means the lender's payment right is subordinate to all present and future creditors.
Cash from subordinated loans treated as capital and subject to business risks.

Only fully paid securities with a ready market and no restriction on sale or transfer may be pledged.
Broker must notify lender and PSE or SEC if collateral value falls below unsecured note amount.
Lender can pledge additional collateral or the broker must sell securities to cover deficiency.
Broker may not purchase securities in liquidation for own account.
Lender may reduce unpaid principal under strict conditions with regulatory approval.

Brokers can prepay after one year, subject to maintaining capital ratios and regulatory approval.
Payment obligations suspend if capital/test ratios are not met, preventing payment until conditions improve.
If suspension lasts six months, brokers must commence liquidation, subordinating lender claims.

Lenders may accelerate payment with notice after six months, subject to subordination.
Events of acceleration include non-payment, breach of covenants, and misrepresentations.
Events of default leading to immediate maturity include excess indebtedness, SEC registration revocation, PSE suspension or revocation, and insolvency.
Upon default, rapid liquidation commences and all subordination agreements mature.

Agreements cannot be canceled or altered if it violates the rules.
Brokers must notify PSE or SEC of impending maturity affecting capital ratios.
Securities pledged as collateral must be bearer form or properly registered.
Revolving subordinated loan agreements are permitted with regulatory approval under strict conditions.
Two copies of proposed agreements must be filed 30 days prior to execution and approved before effective.

Changes to purchase payment deadlines and annual audited report submission deadlines and contents.

New rules govern clearing agency and transfer agent registration and operations, replacing outdated procedural rules.
Several old rules related to stock certificate issuance and transfer processes were rescinded.
Effective 15 days after newspaper publication.

Brokers must determine beneficial owners and distribute cash dividends within 31 trading days after the record date.
Dividends may be credited to customer's account if account is unpaid with notice.

Brokers must follow precise procedures when using settlement agents, including customer confirmation and affirmation.
All depository eligible trades must settle via registered clearing agencies.
Definitions provided for registered clearing agency, settlement agent, and depository eligible transactions.
Exemptions for trades settled outside the Philippines or different clearing agencies.

Brokers must guarantee customer endorsements on stock certificates or powers, assuring signature genuineness and liability.

Application and amendment procedures for clearing agency registration, including filing fees and annual financial reports.
SEC reviews applications and may grant, condition, or deny registration based on capacity, compliance, and fair administration.
Annual filing of audited financial statements required.

Transfer agents must register with SEC and meet capital, personnel, and agreement requirements.
Grounds for denial, suspension or revocation include insolvency, violations, dishonesty, inadequate performance, and incompleteness of applications.
Transfer agents must maintain Financial Institution Bond insurance.
Restrictions on auditors acting as transfer agents and listing issuers acting as their own transfer agents unless they form subsidiaries.
Joint procedures with clearing agencies for securities issuance and transfer.
Annual renewal of registration and fee payments required.

Annual reports due within 105 days after fiscal year end.
Exception reports required within 7 days for delays, discrepancies, losses, or cessation of transfer functions.
Periodic reporting to issuers upon request.
Complaint logs must be maintained and made available for inspection.

Clearing agencies must notify SEC immediately upon awareness of participant firms breaching rules or experiencing operational or financial difficulties.

Transfer agents must maintain detailed records including rules, insurance policies, reports, logs, and annual filings for 5 years.
Records must be available for SEC inspection; failure results in immediate registration suspension until compliance.