THE SECURITIES AND REGULATION CODE

I. Definition of terms:

Securities
 Shares, participation, or interests
o in a corporation
o in a commercial enterprise
o in a profit-making venture

 evidenced by a certificate, contract, instrument

o whether written or electronic in character

 including
o shares of stock, bonds, debentures, notes, evidence of indebtedness, asset-backed
securities
o investment contracts, certificates of interest or participation in a profit sharing
agreement, certificates of deposit for a future subscription
o fractional undivided interests in oil, gas, or other mineral rights
o derivatives like options and warrants,
o certificates of assignments, certificates of participation, trust certificates, voting trust
certificates, or similar instruments
o propriety or non-propriety membership certificates in corporations
o other instruments as may in the future be determined by the SEC

Issuer – the originator, maker, obligor, or creator of the security.

Broker – is a person engaged in the business of buying and selling securities for the account of others

Martinez vs Yek Tong Lin; 67 Phil. 436 (1939)

There is no question that C. B. Co., Inc., purchased the 11,000 shares of the B. G. M. Co. upon
its own account, and thereafter sold them also upon its own account, a part to H. I. Co., Inc.,
and a part to A. E., in violation of its obligations as a broker, for as such broker it could
neither purchase nor sell shares upon its own account. The compliance with this obligation
was guaranteed by the surety under paragraph (c) of the bond transcribed in the decision.

Dealer – any person who buys and sells securities for his/her own account in the ordinary course of
business.

Associated person of a broker or dealer – an employee thereof who, directly exercises control or
supervisory authority, but does not include a salesman, or an agent or a person whose functions are
solely clerical or ministerial.

Clearing Agency – any person who acts as intermediary in making deliveries upon payments to effect
settlement in securities transactions.

Exchange – an organized marketplace or facility that brings together buyers and sellers and executes
trades of securities and/or transactions.

Insider
 the issuer
 a director or officer (or any person performing similar functions) of, or a person controlling the
issuer
 a person whose relationship or former relationship to the issuer gives or gave him access to
material information about the issuer or the security that is not generally available to the public
 A government employee, director, or officer of an exchange, clearing agency and/or self-
regulatory organization who has access to material information about an issuer or a security
that is not generally available to the public
 a person who learns such information by a communication from any forgoing insiders

Pre-need Plans - are contracts which provide for the performance of future services of or the payment
of future monetary considerations at the time actual need, for which plan holders pay in cash or
installment at stated prices, with or without interest or insurance coverage and includes life, pension,
education, interment, and other plans which the Commission may from time to time approve.

Promoter - a person who, acting alone or with others, takes initiative in founding and organizing the
business or enterprise of the issuer and receives consideration therefor.

Prospectus - the document made by or on behalf of an issuer, underwriter or dealer to sell or offer
securities for sale to the public through registration statement filed with the Commission.

 Preliminary Prospectus – part of Registration Statement.

 Final Prospectus – sales brochure.

Registration Statement - the application for the registration of securities required to be filed with the
Commission.

Salesman - a natural person, employed as such as an agent, by a dealer, issuer or broker to buy and sell
securities.

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 another company.

II. REGISTRATION REQUIREMENT:

GR: All securities that are to be sold or offered for sale or distribution within the Philippines are
required to be registered with SEC.

Exceptions:
 Exempt Securities – those that may be sold or offered to the public without the required
registration.
 Securities covered by exempt transactions – those whose sale need not be registered.

Note: Securities not exempt or securities, the sale of which, is not an exempt transaction cannot be
offered for sale unless registered or permitted to be sold.

Exempt Securities:
 Reasons:
o Issuer trusted not to deceive the investor
o Issuer already regulated, supervised and monitored by another government entity
expected to protect the interest of investors

 The requirement of registration shall not, as a general rule, apply to any of the following cases of
securities:
o Any security issued or guaranteed by:
 the Government of the Philippines
 any political subdivision or agency thereof
 any person controlled or supervised by, and acting as an instrumentality of said
Government

Araneta vs Gatmatian; 101 Phil. 328 (1957)

An action against the government officials sued in their official capacity, is
essentially one against the government, and to require these officials to file a
bond would be indirectly a requirement against the government, for as regards
the bond or damages that may be proved, if any, the real party in interest would
be the Republic of the Philippines. The reason for this pronouncement is
understandable; the State undoubtedly is always solvent.

o Any security issued or guaranteed by:

 the government of any country with which the Philippines maintains diplomatic
relations
 any state, province or political subdivision thereof on the basis of reciprocity:
Provided, That the Commission may require compliance with the form and
content for disclosures the Commission may prescribe
 o Certificates issued by a receiver or by a trustee in bankruptcy duly approved by the
proper adjudicatory body.

o Any security or its derivatives the sale or transfer of which, by law, is under the
supervision and regulation of the Office of the Insurance Commission, Housing and Land
Use Rule Regulatory Board, or the Bureau of Internal Revenue.

o Any security issued by a bank except its own shares of stock.

o Any class of securities added by the SEC by rule or regulation after public hearing, add to
the foregoing any class of securities if it finds that the enforcement of this Code with
respect to such securities is not necessary in the public interest and for the protection of
investors.

Exempt Transactions:
 Reasons:
o Small amount involved
o Limited character of public offering

Note: The security itself may or may not be exempt.

 The requirement of registration under SEC shall not apply to the sale of any security in any of
the following transactions:
o At any judicial sale, or sale by an executor, administrator, guardian or receiver or trustee
in insolvency or bankruptcy.

o By or for the account of a pledge holder, or mortgagee or any of a pledge lien holder
selling of offering for sale or delivery in the ordinary course of business and not for the
purpose of avoiding the provision of this Code, to liquidate a bona fide debt, a security
pledged in good faith as security for such debt.

o An isolated transaction in which any security is sold, offered for sale, subscription or
delivery by the owner therefore, or by his representative for the owner’s account, such
sale or offer for sale or offer for sale, subscription or delivery not being made in the
course of repeated and successive transaction of a like character by such owner, or on
his account by such representative and such owner or representative not being the
underwriter of such security

o The distribution by a corporation actively engaged in the business authorized by its

articles of incorporation, of securities to its stockholders or other security holders as a
stock dividend or other distribution out of surplus.

o The sale of capital stock of a corporation to its own stockholders exclusively, where no
commission or other remuneration is paid or given directly or indirectly in connection
with the sale of such capital stock.

o The issuance of bonds or notes secured by mortgage upon real estate or tangible
personal property, when the entire mortgage together with all the bonds or notes
secured thereby are sold to a single purchaser at a single sale.

o The issue and delivery of any security in exchange for any other security of the same
issuer pursuant to a right of conversion entitling the holder of the security surrendered
in exchange to make such conversion: Provided, That the security so surrendered has
been registered under this Code or was, when sold, exempt from the provision of this
Code, and that the security issued and delivered in exchange, if sold at the conversion
price, would at the time of such conversion fall within the class of securities entitled to
registration under this Code. Upon such conversion the par value of the security
surrendered in such exchange shall be deemed the price at which the securities issued
and delivered in such exchange are sold.
 o Broker’s transaction, executed upon customer’s orders, on any registered Exchange or
other trading market.

o Subscriptions for shares of the capitals stocks of a corporation prior to the incorporation
thereof or in pursuance of an increase in its authorized capital stocks under the
Corporation Code, when no expense is incurred, or no commission, compensation or
remuneration is paid or given in connection with the sale or disposition of such
securities, and only when the purpose for soliciting, giving or taking of such subscription
is to comply with the requirements of such law as to the percentage of the capital stock
of a corporation which should be subscribed before it can be registered and duly
incorporated, or its authorized, capital increase.

o The exchange of securities by the issuer with the existing security holders exclusively,
where no commission or other remuneration is paid or given directly or indirectly for
soliciting such exchange.

o The sale of securities by an issuer to fewer than twenty (20) persons in the Philippines
during any twelve-month period.

o The sale of securities to any number of the following qualified buyers:

 Bank
 Registered investment house
 Insurance company
 Pension fund or retirement plan maintained by the Government of the
Philippines or any political subdivision thereof or manage by a bank or other
persons authorized by the Bangko Sentral to engage in trust functions
 Investment company
 Such other person as the Commission may rule by determine as qualified
buyers, on the basis of such factors as financial sophistication, net worth,
knowledge, and experience in financial and business matters, or amount of
assets under management.

o Other transactions that the SEC may exempt if it finds that the requirements of
registration under this Code is not necessary in the public interest or for the protection
of the investors such as by the reason of the small amount involved or the limited
character of the public offering.

POHIBITION ON FRAUD, MANIPULATION, AND INSIDER TRADING:

 Unlawful acts connected with manipulation of security prices – it shall be unlawful for any
person acting for himself or through a broker or dealer, directly or indirectly:
o To create a false or misleading appearance of active trading in any listed security traded
in an Exchange of any other trading market:
 By effecting any transaction in such security which involves no change in the
beneficial ownership thereof
 Wash Sale – a term applied to the operation of simultaneously buying
and selling the same stock. There is no real exchange in beneficial
ownership in a wash sale.

 By entering an order or orders for the purchase or sale of such security with the
knowledge that a simultaneous order or orders of substantially the same size,
time and price, for the sale or purchase of any such security, has or will be
entered by or for the same or different parties
 Matched orders

 By performing similar act where there is no change in beneficial ownership.

o To affect, alone or with others, a securities or transactions in securities that:

 Raises their price to induce the purchase of a security, whether of the same or a
different class of the same issuer or of controlling, controlled, or commonly
controlled company by others
  Depresses their price to induce the sale of a security, whether of the same or a
different class, of the same issuer or of a controlling, controlled, or commonly
controlled company by others
 Creates active trading to induce such a purchase or sale through manipulative
devices such as:
 Marketing the Close – the buying and selling of securities at the close of
the market in an effort to alter the closing price of such securities.

 Painting the tape – involves a series of transactions in securities that

are reported publicly to give the impression of activity or price
movement in a security

 Squeezing the float – is taking advantage of a shortage of securities in

the market by controlling the demand side and exploiting market
congestion during such shortages in a way as to create artificial prices.

 Hype and dump – is engaging in buying activity at increasingly higher

prices and then selling securities in the market at the higher prices.

 Boiler room operations – refer to activities out of low-rent offices and

which use high-pressure tactics (e.g. direct mail offers and telephone
follow-ups) typically involving misrepresentations concerning the
securities being sold.

 Such other similar devices (e.g. creation of temporary funds for the
purpose of engaging in other manipulative devices)

o To circulate or disseminate information that the price of any security listed in an

Exchange will or is likely to rise or fall because of manipulative market operations of any
one or more persons conducted for the purpose of raising or depressing the price of the
security for the purpose of inducing the purpose of sale of such security.

o To make false or misleading statement with respect to any material fact, which he knew
or had reasonable ground to believe was so false or misleading, for the purpose of
inducing the purchase or sale of any security listed or traded in an Exchange.

o To effect, either alone or others, any series of transactions for the purchase and/or sale
of any security traded in an Exchange for the purpose of pegging, fixing or stabilizing the
price of such security; unless otherwise allowed by this Code or by rules of the
Commission.

 Other prohibitive acts constituting Manipulative or Deceptive Devices:

o No person shall use or employ, in connection with the purchase or sale of any security
any manipulative or deceptive device or contrivance.

o Neither shall any short sale be effected nor any stop-loss order be executed in
connection with the purchase or sale of any security except in accordance with such
rules and regulations as the Commission may prescribe as necessary or appropriate in
the public interest for the protection of investors.
 Short Sale – is a contract for sale of shares of stock which the seller does not
own, or certificates which are not within his control, so as to be available for
delivery at the time when delivery must be made.

 Stop-loss Order – is the instruction by a customer to his broker that if they

commodity reaches the price named, the broker shall close the trade at the best
available price, thus minimizing his losses.

 Rules for the regulation of Option Trading:

o Options – are contracts giving their holders the right to buy or sell a stated number of
shares of a particular security issued at a fixed price within a pre-determined time
period.
 He may or may not exercise the option depending on what is advantageous to
him.
  If he does not exercise his option, he simply loses the price he paid for his
option.

o No member of an Exchange shall, directly or indirectly endorse or guarantee the

performance of any put, call, straddle, option or privilege in relation to any security
registered on a securities exchange.

o The terms "put", "call", "straddle", "option", or "privilege" shall not include any
registered warrant, right or convertible security.
 Put – is a contract by which one of the parties thereto purchases at a fixed sum
the privilege to sell a certain stock within a definite period of time. It gives the
purchaser of the right the privilege to make the seller (of the option) buy from
him a given number of shares of a named stock within a given time at a
stipulated price.

 Call – is an option or right to buy a certain amount of securities at a fixed price

at or within a certain time agreed on. It entitles the buyer the right to compel
the seller (of the option) to deliver to him a certain number of shares within a
given time at a stipulated price.

 Straddle – means the double privilege of a put and a call, and secures to the
holder the right to demand of the seller (of the option) to buy a certain price
within a certain time a certain number of specified stock, or to require him to
take (i.e. sell), at the same price within the same time, the same shares of stock.
It is not per se a gaming contract, unless intended as a mere cover for a bet or
wager on the future price of the stock commodity.

 Fraudulent Transactions:
o It shall be unlawful for any person, directly or indirectly, in connection with the
purchase or sale of any securities to:
 Employ any device, scheme, or artifice to defraud
 Obtain money or property by means of any untrue statement of a material fact
of any omission to state a material fact necessary in order to make the
statements made, in the light of the circumstances under which they were
made, not misleading
 Engage in any act, transaction, practice or course of business which operates or
would operate as a fraud or deceit upon any person

 Unlawful acts of an insider

o It shall be unlawful for an insider to sell or buy a security of the issuer, while in
possession of material information with respect to the issuer or the security that is not
generally available to the public, unless:
 The insider proves that the information was not gained from such relationship
 If the other party selling to or buying from the insider (or his agent) is identified,
the insider proves:
 that he disclosed the information to the other party
 that he had reason to believe that the other party otherwise is also in
possession of the information

 Prohibited acts of an insider when trading:

o Insiders should not take advantage of their positions in their own companies about
developments which might influence the price of their company’s shares.
o It shall be unlawful for any insider to communicate material nonpublic information
about the issuer or the security to any person who, by virtue of the communication,
becomes an insider as defined in Subsection 3.8, where the insider communicating the
information knows or has reason to believe that such person will likely buy or sell a
security of the issuer whole in possession of such information.
 Information is “material nonpublic” if:
 It has not been generally disclosed to the public
o and would likely affect the market price of the security after
being disseminated to the public and the lapse of a reasonable
time for the market to absorb the information
 o or would be considered by a reasonable person important
under the circumstances in determining his course of action
whether to buy, sell or hold a security.

SEC vs Interport Resources; 567 SCRA 354 (2008)

The provision explains in simple terms that the insider’s misuse of nonpublic and
undisclosed information is the gravamen of illegal conduct. The intent of the law is
protection of investors against fraud, committed when an insider, using secret
information, takes advantage of an uninformed investor.

PROVISIONS FOR THE PROTECTION OF SHAREHOLDER’S INTERESTS

 Tender Offer – a publicly announced offer by a person acting alone or in concert with others to
buy the shares of a public company at the terms specified in the offer.
o It is classified as MANDATORY TENDER OFFER whenever any person or group of persons
intends to acquire:
 15% or more of the equity of
 a listed corporation
 one with assets of at least P50 million with 200 or more shareholders,
200 of whom own at least 100 shares each
 30% or more of the equity of such corporation over a period of 12 months
(“creeping acquisitions”) as the case may be
 An acquisition that will result in ownership of more than 50% of such
corporation.
 Under the circumstances specified above, he shall make a tender offer
to stockholders under terms specified in the offer by filing with the SEC
a declaration to this effect.
Note:
 The limits of 15% and 30% have been increased to 35% (SEC Memorandum Circular No.
12, series of 2003)
 If the security is oversubscribed, the seller of the securities share pro-rata.
 Purpose of Tender Offer Rules: protection of the interests particularly of the minority
stockholders of a target company.

Osmeña III vs SSS; 533 SCRA 313 (2007)

Tender offer is in place to protect the interests of minority stockholders of the target company
against any scheme that dilutes the share value of their investments. It affords such minority
shareholders the opportunity to withdraw or exit from the company under reasonable terms, a
change to sell their shares at the same price as those of the majority stockholders.

o A person will be making a VOLUNTARY TENDER OFFER where some or all of the
following factors are present:
 Active and widespread solicitation of public shareholders for the shares of a
public company
 Solicitation made for a substantial percentage of the issuer’s stock
 Offer to purchase is made at a premium over the prevailing market price, at firm
rather than negotiable terms
 An offer is contingent on the tender of a fixed number of shares
 Offer is only open for a limited period of time
 Restriction on proxy solicitations
 Requirements for internal record keeping and accounting controls
 Filing requirements of directors, officers, or principal stockholder’s transactions,
with respect to public company where they obtain more than 10% of stock

 Limitations of Proxy Solicitations

o Proxies must be issued and proxy solicitation must be made in accordance with rules
and regulations to be issued by the Commission
o Proxies must be in writing, signed by the stockholder or his duly authorized
representative and file before the scheduled meeting with the corporate secretary
o Unless otherwise provided in the proxy, it shall be valid only for the meeting for which it
is intended. No proxy shall be valid only for the meeting for which it is intended. No
proxy shall be valid and effective for a period longer than five (5) years at one time
 o No broker or dealer shall give any proxy, consent or any authorization, in respect of any
security carried for the account of the customer, to a person other than the customer,
without written authorization of such customer
o A broker or dealer who holds or acquire the proxies for at least ten percent (10%) or
such percentage as the Commission may prescribe of the outstanding share of such
issuer, shall submit a report identifying the beneficial owner within ten (10) days after
such acquisition, for its own account or customer,
 to the issuer of the security
 to the Exchange where the security is traded
 to the SEC

 Disclosure Rule – All companies, listed or applying for listing, are required to divulge truthfully
and accurately, all material information about themselves and the securities they sell for
protection of the investing public, and under pain of administrative, criminal, and civil sanctions.
(Philippine Stock Exchange v. Securities and Exchange Commission, et. al., G.R. No.125469,
October 27, 1998)

QUESTIONS & ANSWERS:

1. What is a tender offer?
 It is a publicly announced intention by a person acting alone or in concert with other persons to
acquire equity securities of a public company.

2. What is the disclosure rule?

 All companies, listed or applying for listing, are required to divulge truthfully and accurately, all
material information about themselves and the securities they sell for protection of the
investing public, and under pain of administrative, criminal, and civil sanctions.

3. Corporation A sold securities to B in Cagayan de Oro. The said transaction was not registered. Is the
sale of the said securities valid?
 No. Section 8.1. of Security Regulation Code provides that securities shall not be sold or offered
for sale or distribution within the Philippines, without a registration statement duly filed with
and approved by the SEC.

4. In the preceding situation, will the said transaction contravene SRC if it happened in China?
 No. The prohibition can only be applied if the sale, offer, or distribution of unregistered
securities took place in the Philippines.

5. A sold his shares of stock in corporation A to B, one of the stock holders. The said transaction was not
registered to SEC. C contested and asserted that said transaction was not valid because the same was
not registered. Is C correct?
 No. Section 10(e) of SRC provides that the sale of capital stock of a corporation to its own
stockholders exclusively is not required to be registered in SEC. Provided, that no commission or
other remuneration is paid or given directly or indirectly in connection with the sale of such
capital stock.

6. Is a proxy made verbally, valid?

 No. Proxies must be in writing, signed by the stockholder or his duly authorized representative
and file before the scheduled meeting with the corporate secretary.

7. What are the fraudulent transactions, in connection with the purchase of securities?
 It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale
of any securities to:
o Employ any device, scheme, or artifice to defraud;
o Obtain money or property by means of any untrue statement of a material fact of any
omission to state a material fact necessary in order to make the statements made, in
the light of the circumstances under which they were made, not misleading; or
o Engage in any act, transaction, practice or course of business which operates or would
operate as a fraud or deceit upon any person.
8. Atty. B advised and persuaded A to sell the latter’s securities without registering the transaction to
SEC. A sold the said securities to C. Is B liable under SRC?
 Yes. Under the SRC, it shall be unlawful for any person to aid, abet, counsel, command, induce
or procure any violation of this Code, or any rule, regulation or order of the Commission
thereunder.

9. Give a case where a person who is not an issuing corporation, director or officer thereof, or a person
controlling, controlled by or under common control with the issuing corporation, is also considered an
insider.
 It may be a case where a person, whose relationship or former relationship to the issuer gives
or gave him access to a fact of special significance about the issuer or the security that is not
generally available, or a person, who learns such a fact from any of the insiders, with knowledge
that the person from whom he learns the fact, is such an insider.

10. In insider trading, what is a fact of special significance?

 In insider trading, a fact of special significance is, in addition to being material, such fact as
would likely, on being made generally available, to affect the market price of a security to a
significant extent, or which a reasonable person would consider as especially important under
the circumstances in determining his course of action in the light of such factors as the degree
of its specificity, the extent of its difference from information generally available previously,
and its nature and reliability.

11. What is the principal purpose of laws and regulations governing securities in the Philippines?
 The principal purpose of laws and regulations governing securities in the Philippines is to protect
the public against the nefarious practices of unscrupulous brokers and salesmen in selling
securities.

12. What procedure must be followed under the SRC to authorize the sale or offer for sale or
distribution of an investment contract?
 Before the investment contract is sold or offered for sale or distribution to the public in the
Philippines, it should be registered with the SEC in accordance with Section 8 of the SRC.

13. What are the legal consequences of failure to follow this procedure?
 The failure to follow this procedure has criminal consequences. It carries also civil liabilities in
that the purchaser can recover from the seller the consideration paid with interest thereon, less
the amount of any income received on the purchased securities, upon the tender of such
securities, or damages if the purchaser no longer owns such securities. Furthermore, the SEC
may issue a cease and desist order.

14. What are the requisites for valid proxy solicitation?

 1. It must be in writing.
 2. It must be signed by the stockholder or his duly authorized representative.
 3. It must be filed before the scheduled meeting with the corporate secretary

15. Can a stock broker without license from the SEC, recover management fees allegedly earned from
handling the securities transactions of a client?
 NO. An unlicensed person may not recover compensation for services as a broker where a
statute or ordinance is applicable and such is of a regulatory nature.

16. Define Securities.

 Securities are shares, participation or interests in a corporation or in a commercial enterprise or
profit-making venture and evidenced by a certificate, contract, instruments, whether written or
electronic in character.

17. What is material non-public information?

 It is an information about the issuer or the security which has not been generally disclosed to
the public and would likely affect the market price of the security after being disseminated to
the public and the lapse of a reasonable time for the market to absorb the information; or
would be considered by a reasonable person important under circumstances in determining his
course of action whether to buy, sell or hold a security.

18. What are Options?

  Options are contracts that give the buyer the right, but not the obligation, to buy or sell an
underlying security at a predetermined price, called the exercise or strike price, on or before a
predetermined date, called the expiry date, which can only be extended in accordance with
Exchange rules.

19. Give 5 at least kinds of Securities:

 shares of stock, bonds, debentures, notes, evidence of indebtedness, asset-backed securities,
investment contracts, certificates of interest or participation in a profit sharing agreement,
certificates of deposit for a future subscription, fractional undivided interests in oil, gas, or other
mineral rights, derivatives like options and warrants, certificates of assignments, certificates of
participation, trust certificates, voting trust certificates, propriety or non-propriety membership
certificates in corporations

20. What are the exceptions to the general rule that all securities sold or offered for sale or distribution
in the Philippines must be registered with the SEC?
 Exempt Securities and Securities Covered by Exempt Transactions

21. Differentiate Exempt Securities and Securities Covered by Exempt Transactions.

 Exempt Securities – those that may be sold or offered to the public without the required
registration.
 Securities covered by exempt transactions – those whose sale need not be registered.

22. Define Marketing the Close.

 The buying and selling of securities at the close of the market in an effort to alter the closing
price of such securities.

23. Define Painting the Tape.

 Involves a series of transactions in securities that are reported publicly to give the impression of
activity or price movement in a security.

24. Define Boiler Room Operations.

 Refer to activities out of low-rent offices and which use high-pressure tactics (e.g. direct mail
offers and telephone follow-ups) typically involving misrepresentations concerning the
securities being sold.

25. What is an Issuer?

 The originator, maker, obligor, or creator of the security.

26. What is a Broker?

 A person engaged in the business of buying and selling securities for the account of others.

27. What is an Exchange?

 An organized marketplace or facility that brings together buyers and sellers and executes trades
of securities and/or transactions.

28. What is a Wash Sale?

 The operation of simultaneously buying and selling the same stock.

29. Why is Wash Sale prohibited?

 There is no real exchange in beneficial ownership.

30. What is a Short Sale?

 A contract for sale of shares of stock which the seller does not own, or certificates which are not
within his control, so as to be available for delivery at the time when delivery must be made.

31. What is a Stop-loss Order?

 The instruction by a customer to his broker that if the commodity reaches the price named, the
broker shall close the trade at the best available price, thus minimizing his losses.

32. Enumerate the different kinds of OPTION and define each.

 Put – is a contract by which one of the parties thereto purchases at a fixed sum the privilege to
sell a certain stock within a definite period of time. It gives the purchaser of the right the
 privilege to make the seller (of the option) buy from him a given number of shares of a named
stock within a given time at a stipulated price.
 Call – is an option or right to buy a certain amount of securities at a fixed price at or within a
certain time agreed on. It entitles the buyer the right to compel the seller (of the option) to
deliver to him a certain number of shares within a given time at a stipulated price.
 Straddle – means the double privilege of a put and a call, and secures to the holder the right to
demand of the seller (of the option) to buy a certain price within a certain time a certain number
of specified stock, or to require him to take (i.e. sell), at the same price within the same time,
the same shares of stock. It is not per se a gaming contract, unless intended as a mere cover for
a bet or wager on the future price of the stock commodity.

34. What happens if the holder of an option does not exercise the same?
 If he does not exercise his option, he simply loses the price he paid for his option.

35. TRUE or FALSE. It shall be unlawful for an insider to sell or buy a security of the issuer, while in
possession of material information with respect to the issuer or the security that is generally available to
the public.
 FALSE

GROUP II:
ABECIA
AMPONG
BOLLOZOS
GAPUTAN
LEE
OLAPE
RABUYA
TOCALO