Securities Guide Questions.

Answer briefly.

(1) Mr. P, the President of JKL, Inc. which shares are listed in the Philippine Stock Exchange, was notified
that the corporation has just been awarded a ₱5,000,000,000.00 construction contract by a reputable
private company. Before this information could be disclosed to the public, Mr. P called his stockbroker
to purchase 20,000 shares of JKL, Inc. He also mentioned the transaction to his brother, Mr. B. Mr. B,
who was not involved at all in the business of JKL, Inc., also bought 50,000 shares of JKL, Inc. because of
the tip disclosed to him by Mr. P.

(a) Is the information disclosed by Mr. P to Mr. B considered as material nonpublic

information for purposes of insider trading? Explain.

(b) Should Mr. P and Mr. B be held liable for insider trading? Explain. 

(2) Securities issued by the Philippine government are "exempt securities" and, therefore, need not be
registered with the Securities and Exchange Commission prior to their sale or offering to the public in
the Philippines. What is the rationale behind this exemption?

(3) Grand Gas Corporation, a publicity listed company, discover after extensive drilling a rich deposit of
natural gas along the coast of Antique. For five (5) months, the company did not disclose the discovery
so that it could quitely and cheaply acquire neighboring land and secure mining information to the
Securities and Exchange Commission, all the directors and key officer of the company bought shares
went up. The directors and officer sold their shares at huge profits. Assuming that the employees of the
establishment handling the printing work of Grand Gas Corporation saw the exploration reports which
were mistakenly sent to their establishment together with other materials to be printed. They too
bought shares in the company at low prices and later sold them at huge profits. Will they be liable for
violation of the Securities Regulation Code? Why?

(4) Andante Realty, a marketing company that promotes and facilitates sales of real property through
leverage marketing, solicits investors who are required to be a Business Center Owner (BCO) by paying
an enrollment fee of $250. The BCO is then entitled to recruit two other investors who pay $250 each.
The BCO receives $90 from the $250 paid by each of his recruits and is credited a certain amount for
payments made by investors through the initial efforts of his Business Center. Once the accumulated
amount reaches $5,000, the same is used as down payment for the real property chosen by the BCO.
Does this multi-level marketing scheme constitute an "investment contract" under the Securities
Regulation Code?