Securities Regulation Code (R.A. No. 8799) 6.

1 STATE POLICY to establish a socially conscious, free market that regulates itself xxx DEFINITION OF TERMS securities: are shares, participation or interests in a cirporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, cintract, instrument, whether written or electronic in character. It includes: xxx issuer: the originator, maker, obligor or crrator of the security broker: a person engaged in the business of buying and selling securities for the account of others dealer: a person who buys and sells securities for his/her own account in fhe ordinary course of business. xxx insider: meqns: a) the issuer; b)a director or officer(or person performing similar functions) of, or a person controlling the issuer; c) a person whose relationship or former relationship to the issuer gives or gace him access to material information about the issuer or the security that is not generally available to the public; d) a government employee, or director, or officer of an exchange, clearing agency and/or self-regulatory organization who has access to material information about an issuer or a securitythatis not generally available to the public; or e) a person who learns such information by a communicwtion from any of the foregoing insiders. xxx promoter: a person who, acting alone ir with others, takes initiative in founding and organizing the business or enterprise of the issuer and receives consideration therefor. xxx uncertificated security: a security evidenced by electronic or similar records underwriter: a person who guarantees on a firm commitment and/or declared best effort basis the distribution and sale of securities of any kind by anothe company.

OVERVIEW: LINES OF DEFENSES TO PROTECT INVESTORS FROM BEING DEFRAUDED OR UNFAIRLY TAKEN ADVANTQGE OF Registration of securities(Sec.8) Registration of securities matket professionals Registration of stock exchanges and other securities trading markets Prohibition against manipulation of security prices Prohibition against insider trading Recovery of short-swing profit SECURITIE REQUIRED TO BE REGISTERED EXEMPT SECURITIES 1. security issued/guaranteed by the Government or any political subdivision 2. xxx by the government of any country with which the aphilippines maintains diplomatic relations, or by any state, province or political subdivision tgereof on the basis or reciprocity: provided, that xxx 3. Certificates issued by a receiver or by a trustee in bankruptcy dhky approved by gheproper adjudicatory bidy.

4. Any securit or its derivatives the sale or transfer of which, by law, is unded the supervision and regukation of the Officevof the Insurance Commission, HLURB, o the BIR. 5. any security issued by a bank except its own shares of stock EXEMPT TRANSACTIONS PROCEDURE FOR THE REGISTRATION OF SECURITIES TENDER OFFERS mandatory tender offers Exemptions from mandatory tender offer requirement PROXY SOLICITATIONS REGULATION OF TRANSACTIONS OF DITECTORS, OFFICERS AND STOCKHOLDERS MANIPULATION OF SECURITY PRICES e.g. painting the tape; marking the close; hype and dump; wash sales; squeezing the float; boiler room sales; etc. SHORT SALES INSIDER TRADING Who is an insider? What is material non-public information? Duty of an insider when trading; when not trading Presumption of insider trading REGISTRATION OF SECURITIES MQRKET PROFESSIONALS REGISTRATION OF EXCHANGES INDEPENDENT DIRECTORS SELF-REGULATORY ORGANIZATIONS UNCERTIFICATED SECURITIES MARGIN TRADING SETTLEMENT OFFERS CIVIL LIABILITIES ON ACCOUNT OF FALSE REGISTRATION STATEMENT CIVIL LIABILITY ON ACCOUNT OF INSIDER TRADING LIMITATION OF ACTIONS DAMAGES THAT MAY BE AWARDED NON-RECOVERY OF CONTRIBUTION TO DAMAGES FROM ISSUER NON-WAIVER OF PROVISIONS PENALTIES CASES:

1. Licensing of brokers 2. Where both parties are equally at fault, neither one could have recourse against the other 3. Complaints for violation of SRC and its implementing rules should be filed first with the SEC 4. Tender offer rules apply to indirect acquisition of shares 5. Sale of unregistered timeshare contracts not retified by subsequent registration therof 6. Investment contracts as securities: The Howey Test 7. Postdated checks could be considered as commercial papers evidencing indebtedness and therefore, classifiable as securities 8. Investigation of insider trading 9. Unlicensed traders and salesmen 10. PVB is a oublic company even though its shares are available only to a limited sector. 11. Scheme not an investment contract.