Philippine Securities Regulation Code

State policy and objectives

The State establishes a socially conscious, free market that regulates itself by law and regulation.
The State’s framework encourages the widest participation of ownership in enterprises and enhances democratization of wealth.
The system promotes development of the capital market and protects investors.
The framework ensures full and fair disclosure about securities.
The system minimizes if not totally eliminates insider trading and other fraudulent or manipulative devices and practices that create distortions in a free market.
The law is enacted to achieve these ends. Section 2

Key definitions and regulated subjects

“Securities” are shares, participation or interests in a corporation or commercial enterprise or profit-making venture evidenced by a certificate, contract, instrument, whether written or electronic; they include shares of stock, bonds, debentures, notes, evidences of indebtedness, asset-backed securities, derivatives like options and warrants, and other enumerated instruments. Section 3.1
The law includes, within “securities,” fractional undivided interests in oil, gas or other mineral rights, membership certificates, trust certificates, voting trust certificates, and similar instruments. Section 3.1
“Issuer” is the originator, maker, obligor, or creator of the security. Section 3.2
“Broker” is a person engaged in the business of buying and selling securities for the account of others. Section 3.3
“Dealer” buys and sells securities for his/her own account in the ordinary course of business. Section 3.4
“Associated person of a broker or dealer” is an employee who directly exercises control of supervisory authority, excluding salesmen and persons whose functions are solely clerical or ministerial. Section 3.5
“Clearing agency” acts as an intermediary in making deliveries upon payment to effect settlement in securities transactions. Section 3.6
“Exchange” is an organized marketplace or facility that brings together buyers and sellers and executes trades of securities and/or commodities. Section 3.7
“Insider” covers the issuer; directors/officers and persons controlling the issuer; persons whose relationship gives access to material nonpublic information; certain government employees and exchange/clearing/self-regulatory officials with access; and persons who learn such information from those foregoing insiders. Section 3.8
“Pre-need plans” are contracts for future services or future monetary considerations paid at actual need time for stated prices, with or without interest or insurance coverage, including life, pension, education, interment, and other plans approved by the SEC. Section 3.9
“Prospectus” is the document made by or on behalf of an issuer, underwriter or dealer to sell or offer securities through a registration statement filed with the SEC. Section 3.11
“Registration statement” is the application for registration of securities required to be filed with the SEC. Section 3.12
“Underwriter” guarantees distribution and sale of securities on a firm commitment basis and/or declared best efforts basis. Section 3.15

SEC administration and powers

The Securities and Exchange Commission administers the Code as a collegial body of a Chairperson and four (4) Commissioners appointed by the President for seven (7) years each, serving until successors are appointed and qualified; vacancy-fill Commissioners serve only the unexpired portion of the term. Section 4.1
Commissioners must be natural-born citizens, meet age requirements (40 for the Chairperson and 35 for Commissioners), be of good moral character and unquestionable integrity, and have recognized competence in social and economic disciplines; the majority of Commissioners including the Chairperson must be members of the Philippine Bar. Section 4.2
The Chairperson is the chief executive officer, executing and administering policies and supervising the work and operation of the SEC and all its administrative business. Section 4.3
The President fixes compensation of the Chairperson and Commissioners based on an objective classification system, comparable to the members of the Monetary Board, and commensurate with the importance and responsibilities of the position. Section 4.4
The SEC holds meetings at least once a week, with quorum constituted by the presence of three (3) Commissioners; in the absence of the Chairperson, the most senior Commissioner presides. Section 4.5
The SEC may delegate functions for efficiency to departments/offices/Commissioners/staff, except its review or appellate authority and its power to adopt, alter and supplement rules and regulations. Section 4.6
The SEC may review actions of its departments/offices/Commissioners/staff on its own initiative or on petition by any interested party. Section 4.6
The SEC exercises jurisdiction and supervision over corporations/partnerships/associations that are grantees of primary franchises and/or government licenses/permits. Section 5.1
The SEC has authority to approve, reject, suspend, revoke, or require amendments to registration statements and registration/licensing applications. Section 5.1
The SEC regulates, investigates, or supervises activities to ensure compliance; it also supervises/monitors/suspends/takes over exchanges, clearing agencies, and other self-regulatory organizations (SROs). Section 5.1
The SEC may impose sanctions for violations of laws, rules, regulations, and orders issued pursuant to the Code. Section 5.1
The SEC may issue cease and desist orders to prevent fraud or injury to investors. Section 5.1
The SEC may issue subpoenas, summon witnesses, and order examination, search and seizure of documents, papers, files and records, tax returns, and books of accounts of entities or persons under investigation, subject to existing laws. Section 5.1
The SEC may suspend or revoke franchises or certificates of registration after proper notice and hearing on grounds provided by law. Section 5.1
The SEC may compel officers of a registered corporation or association to call stockholders’ or members’ meetings under its supervision. Section 5.1
The SEC may deputize and enlist aid/support of government enforcement agencies and even private institutions/corporations/firms/associations/persons for implementing its powers and functions. Section 5.1
The SEC may punish for contempt in accordance with applicable Rules of Court provisions and penalties. Section 5.1
The SEC’s jurisdiction over cases enumerated under Section 5 of Presidential Decree No. 902-A is transferred to courts of general jurisdiction or the appropriate Regional Trial Court, with Supreme Court designation of branches as applicable; however, the SEC retains jurisdiction over pending intra-corporate disputes submitted for final resolution to be resolved within one (1) year from enactment and retains jurisdiction over pending suspension of payments/rehabilitation cases filed as of 30 June 2000 until finally disposed. Section 5.2

Commissioner liability and reorganization

The SEC must indemnify each Commissioner and other SEC officials/personnel (including those performing supervision and examination functions) for costs and expenses reasonably incurred in civil or criminal actions unless finally adjudged liable for gross negligence or misconduct. Section 6.1
In settlement or compromise, indemnification applies only to matters covered by the settlement where external counsel advises that the persons to be indemnified did not commit gross negligence or misconduct. Section 6.1
The SEC may pay defense costs in advance upon receipt of an undertaking to repay amounts advanced if final determination denies entitlement to indemnification. Section 6.1
Commissioners/officers/employees who willfully violate the Code or are guilty of negligence, abuse, malfeasance, or failure to exercise extraordinary diligence are liable for loss or injury suffered by the SEC or other institutions as a result. Section 6.2
Similar responsibility applies to willful violations involving: (1) disclosure of confidential information/discussions/resolutions or confidential SEC operations without authorization/official function connection; or (2) use of such information for personal gain or to the detriment of government/SEC/third parties. Section 6.2
Any data or information required to be submitted to the President and/or Congress or to be published under the Code is not treated as confidential. Section 6.2
The SEC is authorized to reorganize to streamline structure and operations, upgrade human resources, and perform functions and exercise powers more efficiently and effectively, consistent with Civil Service laws. Section 7.1
All SEC positions are governed by compensation, position classification, and qualification systems approved by the SEC based on job analysis and audit; compensation is comparable with the Bangko Sentral ng Pilipinas and other government financial institutions and is reviewed by the SEC no more than once every two (2) years without prejudice to yearly merit reviews or productivity/efficiency-based increases. Section 7.2
The SEC is exempt from laws, rules, and regulations on compensation, position classification, and qualification standards, while endeavoring to conform as closely as possible to the principles under Republic Act No. 6758 (Compensation and Position Classification Act of 1989). Section 7.2

Securities registration and public disclosure

Securities cannot be sold or offered for sale or distribution within the Philippines without a registration statement duly filed with and approved by the SEC. Section 8.1
Before any sale, the required information must be made available to each prospective purchaser in the form and substance prescribed by the SEC. Section 8.1
The SEC may conditionally approve registration statements on terms the SEC deems necessary. Section 8.2
The SEC may specify terms and conditions under which written communications (including any summary prospectus) will be deemed not to constitute an offer for sale under the registration requirement. Section 8.3
The SEC keeps a Register of Securities recording orders entered by the SEC regarding securities; the register and all related documents/information are open to public inspection at reasonable hours on business days. Section 8.4
The SEC may audit financial statements, assets, and other information of a firm applying for registration whenever necessary to ensure full disclosure or protect investors and the public. Section 8.5

Registration fees, publication, and effectiveness timing

Registration requires filing through the issuer’s main office of a sworn registration statement in SEC-prescribed form, containing SEC-prescribed information and documents. Section 12.1
The registration statement includes any prospectus required or permitted as part of the registration statement for purposes of disclosure. Section 12.1
The SEC may require additional information/documents in registration statements, including written information from experts, based on necessity and applicability. Section 12.2
The SEC requires that registration information include, among others, the effect of the securities issue on ownership, including the mix of foreign and local ownership. Section 12.3
The registration statement must be signed by specified executive officers (executive officer, principal operating officer, principal financial officer, comptroller, principal accounting officer, corporate secretary or similar functions) accompanied by a duly verified board resolution; expert consent must also be filed; selling shareholder share-sales require written certification of accuracy of parts contributed. Section 12.4
Upon filing, the issuer pays an SEC fee of not more than one-tenth (1/10) of one percent (1%) of the maximum aggregate price at which the securities are proposed to be offered; SEC prescribes diminishing fees in inverse proportion to aggregate offering value. Section 12.5(a)
The issuer must publish immediate notice of filing at its own expense in two (2) newspapers of general circulation, once a week for two (2) consecutive weeks, or in other SEC-prescribed manner, stating that a registration statement has been filed and that the statement and attached papers are open to inspection at SEC during business hours, with copies furnished to interested parties at reasonable charges set by the SEC. Section 12.5(b)
Within forty-five (45) days from filing (or later date consented to by the issuer), the SEC must declare the registration statement effective or rejected unless the applicant may amend under Section 14; the SEC declares effective upon facial completeness and compliance with requirements and may impose terms/conditions necessary for investor protection. Section 12.6
Upon effectivity, each prospectus must include an oath stating all registration requirements have been met and all information is true and correct as represented; any untrue statement of fact or omission of a material fact required to avoid misleading constitutes fraud. Section 12.7

Exempt securities and exempt transactions

The general registration requirement does not apply to securities issued or guaranteed by the Government of the Philippines or political subdivisions/agencies, or by persons controlled/supervised by government acting as an instrumentality. Section 9.1(a)
Registration is also not required for securities issued or guaranteed by foreign governments or their states/provinces/political subdivisions on a reciprocal basis; the SEC may require compliance with prescribed disclosure form and content. Section 9.1(b)
Certificates issued by a receiver or trustee in bankruptcy duly approved by the proper adjudicatory body are exempt. Section 9.1(c)
Securities (or derivatives) whose sale or transfer is supervised and regulated by the Office of the Insurance Commission, Housing and Land Use Regulatory Board, or Bureau of Internal Revenue are exempt. Section 9.1(d)
Securities issued by a bank are exempt except the bank’s own shares of stock. Section 9.1(e)
After public hearing, the SEC may add additional classes of securities by rule/regulation when enforcement of the Code for such securities is not necessary in the public interest and for investor protection. Section 9.2
The registration requirement does not apply to specified exempt transactions including:
- Judicial sales and sales by executor/administrator/guardian/receiver/trustee in insolvency or bankruptcy. Section 10.1(a)
- Bona fide liquidation of pledged securities by pledge holders/mortgagees/lien holders selling in ordinary course and not for avoiding the Code. Section 10.1(b)
- Isolated transactions by owners (not underwriters) not made as part of repeated and successive like transactions. Section 10.1(c)
- Distributions by a corporation actively engaged in its authorized business of securities to stockholders or security holders as stock dividends or other distributions out of surplus. Section 10.1(d)
- Sales of capital stock to a corporation’s own stockholders exclusively with no commission or remuneration connected. Section 10.1(e)
- Issuance of mortgage-secured bonds/notes where the entire mortgage and related bonds/notes are sold to a single purchaser at a single sale. Section 10.1(f)
- Exchange of securities for other securities of the same issuer pursuant to a conversion right, subject to conditions regarding registration status and pricing/valuation rules in the conversion. Section 10.1(g)
- Broker transactions executed upon customer orders on a registered Exchange or other trading market. Section 10.1(h)
- Subscriptions for shares before incorporation or in authorized capital increases under the Corporation Code where no expense/commission/remuneration is incurred and the solicitation is solely to comply with subscription percentage requirements. Section 10.1(i)
- Exchange of securities by the issuer with existing security holders exclusively with no commission or remuneration connected with soliciting the exchange. Section 10.1(j)
- Sale by an issuer to fewer than twenty (20) persons in the Philippines during any twelve-month period. Section 10.1(k)
- Sales to specified qualified buyers including banks, registered investment houses, insurance companies, pension funds/retirement plans maintained by government or managed by banks/authorized trustees, investment companies, or other persons the SEC determines qualified based on financial sophistication, net worth, knowledge, experience, or assets under management. Section 10.1(l)
The SEC may exempt other transactions after a finding that registration is not necessary for public interest or investor protection, including by reason of small amount or limited character of public offering. Section 10.2
For any exemption request under the Code, the applicant must file a notice identifying the exemption relied upon in the SEC-prescribed form and at an SEC-prescribed time, and pay a fee equal to one-tenth (1/10) of one percent (1%) of the maximum aggregate price or issued value. Section 10.3

Commodity futures regulation; pre-need plans

No person may offer, sell, or enter into commodity futures contracts except in accordance with SEC rules, regulations, and orders prescribed in the public interest; the SEC must promulgate rules to protect investors and ensure development of a fair and transparent commodities market. Section 11
No person may sell or offer pre-need plans to the public except in accordance with SEC rules and regulations. Section 16
SEC rules on pre-need plans must regulate sale of pre-need plans, including requiring registration of pre-need plans, licensing persons involved in selling, requiring disclosures to prospective plan holders, prescribing advertising guidelines, uniform accounting system, reporting and record keeping, imposing capital/bonding/financial responsibility, and establishing trust funds for payment of benefits. Section 16

Reporting duties for issuers and major holders

Every issuer covered by the reportorial requirements must file with the SEC:
- An annual report within one hundred thirty-five (135) days after the end of its fiscal year (or other time prescribed by the SEC) including a balance sheet, profit and loss statement, and statement of cash flows for the last fiscal year certified by an independent certified public accountant, plus management discussion and analysis. Section 17.1
- Interim period reports and current reports on significant developments as the SEC prescribes as necessary for keeping current information on business and financial condition. Section 17.1
The obligation applies to an issuer that has sold a class of its securities pursuant to registration under Section 12, subject to suspension of reporting for any fiscal year after the year registration became effective if, as of the first day of the fiscal year, it has fewer than one hundred (100) holders or other number set by the SEC and it notifies the SEC. Section 17.2(a)
Reporting applies to issuers with a class listed for trading on an Exchange. Section 17.2(b)
Reporting applies to issuers with assets of at least P50,000,000 or other amount prescribed, and having two hundred (200) or more holders, each holding at least one hundred (100) shares of a class of its equity securities, subject to termination ninety (90) days after issuer notifies the SEC that the count of such holders has fallen to fewer than one hundred (100). Section 17.2(c)
Each issuer listed for trading on an Exchange must file with the Exchange a copy of any report filed with the SEC under Section 17.1. Section 17.3
Reports required under Section 17.1 must be in the SEC-prescribed form, contain prescribed information, and be filed at prescribed times, and they are in lieu of periodical/current reports and financial statements otherwise required under the Corporation Code. Section 17.4
Each issuer with an equity securities class satisfying Section 17.2 must furnish each holder of such equity security an annual report in SEC-prescribed form and containing SEC-prescribed information. Section 17.5
The issuer must transmit the annual report to voting holders within the period the SEC prescribes preceding the annual meeting. Section 17.6
Where an issuer satisfies Section 17.2, a person acquiring beneficial ownership of more than five percent (5%) of the class (or any lesser percent set by the SEC by rule) must submit within ten (10) days after acquisition or within a reasonable time set by the SEC a sworn statement to the issuer, the Exchange where traded, and the SEC containing specified information including identity/background and nature of beneficial ownership, purposes/plans to acquire control, number of shares beneficially owned and rights to acquire including associates, and contracts/arrangements/understandings relating to the issuer’s securities including transfer, joint ventures, loans/options, puts/calls, guarantees or division of losses/profits, and proxies. Section 18.1
Any changes in facts in the statements require amendment transmitted to issuer, Exchange, and SEC. Section 18.2
The SEC may permit filing a notice instead of the full statement where acquisition occurs in the ordinary course of the person’s business, without purpose/effect of changing or influencing control and without connection with transactions having such purpose/effect. Section 18.3

Shareholder protection: tender offers, proxies

A person or group acting in concert intending to acquire at least fifteen percent (15%) of any class of equity security of a listed corporation or any class of equity security of a corporation with assets of at least P50,000,000 and two hundred (200) or more stockholders with at least one hundred (100) shares each, or intending to acquire at least thirty percent (30%) of such equity over twelve (12) months, must make a tender offer to stockholders by filing a declaration with the SEC and furnishing the issuer a statement containing such information required in Section 17 as the SEC prescribes. Section 19.1
Tender offer solicitation requests/invitations/materials must be published by the offeror, and copies of additional solicitation materials after initial solicitation must contain prescribed information and must be filed with the SEC and sent to security holders no later than first publication/sending/giving. Section 19.1
Solicitations or recommendations to holders to accept or reject a tender offer must comply with SEC rules and regulations. Section 19.1
Deposited securities may be withdrawn by or on behalf of the depositor at any time during the tender offer period if not yet accepted for payment, and at any time after sixty (60) days from the original tender offer date, except as otherwise prescribed by the SEC. Section 19.1
Where offered securities exceed what a person or group will take up and pay for, securities must be taken up pro rata, disregarding fractions, according to each depositor’s number of deposited securities. Section 19.1
If tender offer terms are varied before expiration by increasing consideration, the increased consideration must be paid to each security holder whose securities are taken up and paid for, whether or not securities were taken up before the variation. Section 19.1
It is unlawful in connection with tender offers and related solicitations to make any untrue statement of a material fact or omit to state any material fact necessary to make statements not misleading, or to engage in fraudulent, deceptive, or manipulative acts or practices; the SEC shall define and prescribe reasonably designed means to prevent such acts and practices. Section 19.2
Proxies and proxy solicitation must be made according to SEC rules and regulations. Section 20.1
Proxies must be in writing, signed by the stockholder or duly authorized representative, and filed before the scheduled meeting with the corporate secretary. Section 20.2
Unless otherwise provided in the proxy, a proxy is valid only for the meeting for which it is intended and cannot be valid for more than five (5) years at one time. Section 20.3
No broker or dealer may give any proxy/consent/authorization for securities carried for a customer to anyone other than the customer without the customer’s express written authorization. Section 20.4
A broker or dealer that holds or acquires a proxy for at least ten percent (10%) (or such higher/lower percent as the SEC may prescribe) of outstanding shares must submit a report identifying the beneficial owner within ten (10) days after such acquisition to the issuer, the Exchange, and the SEC. Section 20.5
The SEC may require, at the time of filing of a tender offer statement under Section 19, or a proxy/consent solicitation under Section 20, or an issuer repurchase filing under Section 72.2, a fee of not more than one-tenth (1/10) of one percent (1%) of:
- the proposed aggregate purchase price in transactions under Sections 19 or 72.2 or in a transaction under Section 20; or
- the proposed cash payment and the value of transferred securities/property in acquisition/merger/consolidation; or the cash and value of securities proposed to be received upon disposition of assets in an acquisition involving solicitation under Section 20. Section 21
The SEC must prescribe diminishing fees in inverse proportion to offering value. Section 21

Accounting controls and insider/trading restrictions

Every issuer with a class satisfying Section 17.2 must maintain books/records/accounts that in reasonable detail accurately and fairly reflect transactions and dispositions of assets. Section 22.1
Every such issuer must devise and maintain internal accounting controls sufficient to provide reasonable assurances that (a) transactions and access to assets are pursuant to management authorization; (b) financial statements are prepared in conformity with generally accepted accounting principles adopted by the Accounting Standards Council and SEC rules on preparation; and (c) recorded assets are compared with existing assets at reasonable intervals and differences are reconciled. Section 22.2
Persons who are beneficial owners of more than ten percent (10%) of any equity security class satisfying Section 17.2 or who are directors or officers of the issuer must file statements with the SEC (and with the Exchange if the security is listed) at specified times:
- at the time the requirement is first satisfied or within ten (10) days after becoming beneficial owner/director/officer, stating the amount of equity securities beneficially owned; and
- within ten (10) days after the close of each calendar month thereafter if ownership changed during that month, reporting ownership at month-end and changes. Section 23.1
Any profit realized by such beneficial owners/directors/officers from purchases and sales (or sales and purchases) of equity securities of the issuer within less than six (6) months, unless acquired in good faith in connection with a debt previously contracted, inures to and is recoverable by the issuer regardless of intent to hold or repurchase beyond six months; recovery suit may be instituted before the Regional Trial Court by the issuer or by security owners in the name and on behalf of the issuer if the issuer fails to request or prosecute within time limits, but no suit may be brought more than two (2) years after profit is realized. Section 23.2
It is unlawful for such beneficial owners/directors/officers to sell any equity security of the issuer if the seller (a) does not own the security sold; or (b) if owning, fails to deliver it against the sale within **twenty (20