src rev w 2 complete

7/29/2019 Src Rev w 2 Complete

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SecuritiesRegulationR.A. 8799Atty. Justina F. Callangan


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Declaration of State Policy

establish a socially conscious, free

market that regulates itselfencourage the widest participation

of ownership in enterprises

enhance the democratization of

wealth

promote the development of the

capital market


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Declaration of State Policy

protect investors

ensure full and fair disclosure aboutsecurities

minimize if not totally eliminate

insider trading and other fraudulent

or manipulative devices andpractices which create distortions in

the free market


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Powers and Functions of the

SEC

regulatory

adjudicatory

SEC has the incidental power to conductadm. hearings and make decisions in thecourse of the performance of itsregulatory and law enforcement

functions.


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If a case requires decision orresolution of a violation or conflict

brought about in connection with the

performance of a regulatory function,

then it is one for the SEC to decide forthe best interest of the public. But if

the case is adversarial in nature,

which calls for the adjudication of

private rights and obligations, then the

question is for the regular courts to

decide.


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SRC

1. Has jurisdiction and supervision

over all corporations, partnerships

or associations who are grantees

of primary franchises and/or a

license or permit issued by the

govt;


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Validate the transfer of securities by book-

entries rather than the delivery of physical

certificates;

Establish when a person acquires a security

or interest therein and when delivery of asecurity to a purchaser occurs;

Establish which records constitute the best

evidence of a persons interests in a

security and the effect of any errors in

electronic records of ownership;

Sec. 47


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Codify the rights of investors who choose

to hold their securities indirectly thru a

registered clearing agency and/or other

securities intermediaries;

Codify the duties of securitiesintermediaries (including clearing

agencies) who hold securities on behalf of

investors; and

Sec. 47


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Give 1st priority to any claims of a registered

clearing agency against a participant

arising from a failure by the participant to

meet its obligations under the formers rules

in respect of the clearing and settlement oftransactions in securities, in a dissolution of

the participant and any such rules and

regulations shall bind the issuers of securities,

investors in the securities, any third partieswith interests in the securities and the

creditors of a participant of a registered

clearing agency.

Sec. 47


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May audit the FS, assets and otherinfo of a firm applying for registration

of its securities whenever it deemsnecessary to insure full disclosure orto protect the interests of the

investors and the public.

Sec. 8.5


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SRC

2. Formulate policies andrecommendations on issues concerning

the securities market, advise Congressand other govt. agencies on allaspects of the market and proposelegislation and amendments thereto;

3. Approve, reject, suspend, revoke orrequire amendments to RS andregistration and licensing applications;


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SRC

4. Regulate, investigate or supervise theactivities of persons to ensure

compliance;5. Supervise, monitor, suspend or take over

the activities of persons to ensurecompliance;

6. Supervise, monitor, suspend or take overof exchanges, clearing agencies andother SROs;


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SRC

7. Impose sanctions for the violation of lawsand the rules, regulations and orders

issued pursuant thereto;

8. Prepare, approve, amend or repealrules, regulations and orders, and issueopinions and provide guidance on and

supervise compliance with such rules,regulations and orders;


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SRC

9. Enlist the aid and support of and/ordeputize any and all enforcement

agencies of the govt., civil, military aswell as any private institution, corp., firmassociation or person in theimplementation of its powers and

functions under the Code;10. Issue CDO to prevent fraud or injury to

the investing public;


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SRC

11. Punish for contempt of the Commission,both direct and indirect, in accordance

with the pertinent provisions of andpenalties prescribed by the Rule ofCourt;

12. Compel the officers of any registered

corporation or association to callmeetings of stockholders or membersthereof under its supervision


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SRC

13. Issue subpoena duces tecum and summonwitnesses to appear in any proceedings of the

Com. and in appropriate cases, order theexamination, search and seizure of alldocuments, papers, files and records, taxreturns and books of accounts of any entity or

person under investigation as may benecessary for the proper disposition of thecases before it;


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SRC14. Suspend or revoke, after proper notice and

hearing the franchise or certificate of

registrations of corps., partnerships or asso.,upon any of the grounds provided by law;and

15. Such other powers as may be provided bylaw as well those which may be implied from

or which are necessary or incidental to thecarrying out of, the express powers grantedthe Com. to achieve the objectives andpurposes of these laws.


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Securities required to be

registered

1. Exempt securities (Sec. 9, SRC)

a. any security issued or guaranteed bythe

govt of the Phil or by any pol. subd.or agency thereof or by any personcontrolled or supervised by , and

acting as an instrumentality of saidgovt.


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registered

b. Any security issued or guaranteed

by the

govt of any country with which

the Phil. maintains diplomatic

relations or by any state, province

or pol. subd. thereof on the basisof reciprocity


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registered

c. Certificates issued by a receiver or by atrustee in bankruptcy duly approved by

the proper adjudicatory bodyd. Any security or its derivatives the sale or

transfer of which , by law, is undersupervision and regulation of the OIC,HLURB or the BIR

e. Any security issued by a bank except itsown shares of stock


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registered

f. Any evidence of indebtedness

issued by a financial institutionitself that has been licensedby the BSP to engage inbanking/quasi-bankingactivity

Rule 9, SRC


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registered

g. Evidence of indebtedness issued to theff primary institutional lenders:

Banks including their trust accounts whereinthe trustee is granted discretionary powersin the investment disposition of the trustfunds

Investment houses including their trust

accounts wherein the investment house-trustee is given discretionary powers in theinvestment disposition of the trust funds

Rule 9, SRC


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registered

trust companies

financing companies investment companies

pre-need companies

non-stock savings and loanassociations

building and loan associations

Rule 9, SRC


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registered

Rule 9, SRC

venture capital corporations

insurance companies

govt. financial institutions

pawnshops

pension and retirement funds approved by

the BIR

edu. assistance funds established by thenatl. govt

other entities that may be classified as PIL

by the BSP, in consultation with the SEC


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registered

Rule 9, SRC

provided all such evidence ofindebtedness shall only be negotiated or

assigned to any of the above PILs or theDBP with respect to private dev. banks inrelation with their discounting privileges

that in case of non-banks without

underwriting licenses, such negotiation orassignment shall be thru banks or non-banks licensed to be an underwriter or asecurities dealer

R l 9 SRC


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registered

Rule 9, SRC

that in no case shall said instrument benegotiated or assigned to non-qualified

buyersh. Bills of exchange arising from a bona fide

sale of goods and services which are

distributed and/or traded by banks or

investment houses duly licensed by SECand BSP thru an organized market

properly conventioned and governed by

rules approved by the appropriate

regulatory body

R l 9 SRC


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registered

Rule 9, SRC

i. Evidence of indebtedness (short andlong term) meeting the ff. conditions:

issued to not more than 19 non-institutional lenders

payable to a specific person

neither negotiable nor assignable and

shall be held on to maturity

in an amount not more than P50M


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registered

2. Exempt transactions sale of any

security in any of the ff.transactions:

a. At any judicial sale, or sale byan executor, administrator,

guardian or receiver or trusteein insolvency or bankruptcy


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registered

b. By or for the amount of a

Pledge holder or

Mortgagee or

Any similar lien holder

Selling or offering for sale or delivery inthe ordinary course of business andnot for the purpose of avoiding theprovisions of the SRC


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registered

c. Isolated transaction

Sale is made by the owner itself(available to issuer as an owner(thereof))

Not made I the course of repeatedand successive transaction of a like

character The said owner is not the underwriter

of the security


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registered

d. Stock dividend declarations

e. Sale of shares to stockholderswhere no commission or otherremuneration is paid directly orindirectly

f. Issuance of bonds secured bymortgage upon real estate ortangible personal property to asingle purchaser


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registered

g. Transaction pursuant to a right

of conversionh. Brokers transactions

i. Pre-incorporation subscription

or subscription to a capitalincrease


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registered

j. Exchange securities by the

issuer with its existing securityholders where no commissionor other remuneration is paiddirectly or indirectly forsoliciting for such exchange


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registered

k. private placements (not more

than 19 non-qualified (retail)buyers

l. sale to any number of

qualified buyersBank

Registered investment house


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registered

Insurance company

Pension fund or retirement planmaintained by the Govt of the Phil.

or any pol subd. thereof or

managed by a bank or other

persons authorized by the BSP toengage in trust functions

Investment company


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registered

such other persons the SEC may be

rule determine on the basis of

financial sophistication

networth

knowledge and experience in

financial and business matters or

amount under management


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REGISTRATION OF SECURITIES

1. Definition2. Legal Basis Section 8, SRC

3. Public Offer Defined

Via Publication

Presentation in a Public or Commercial place

Radio, TV ads or in any online/email system

Distribution or making available flyers or any offeringmaterials in a public or commercial place or mailing the

same to prospective purchasers


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Issues relative to Public Offers No instruments are issued but deposits are accepted Repackaged (securitized registered instruments)

4. Merit vs. Full Disclosure Regime Approval Rendered Effective

5. When Does disclosure begin and end?Begins at registrationContinues periodically thru periodic reportsMay be suspended when on the 1st day of the

fiscal year, it has less than 100shareholders (SRC Rule 17.1(1)

Does not end once a reporting company, itremains

as such even when registration ofsecurities has been revoked (SRC

Rule13(5) EPD revocation of primary license except

hosp./edu. inst.


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6. Reporting Companiesi. Registered Issuers

ii. Listed Companies

iii. Public Companies

at least P50M total assets

at least 200 shareholders, each holding at least 100shares

PVB Case (SC affirmed CFDs position that it is apublic co. but penalties were ordered to be reckonedfrom the time the bank was first notified of the

violation. Its on appeal with the SC) Hospitals/ educational institutions different scale of

penalties


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SEC Form 17-EX - number of holders is reduced to 100every beginning of the FY stops after

90 days from notice

7. Registration Requirements(Substantive/Procedural)

i. Legal basis of Registration Sec. 8, SRC

ii. Legal basis for Registration Requirements

Sec. 12, SRC, SRC Rule 12 Sec. 68.1

AnnexC

Various SEC Orders/Memo. Circulars


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iii. What to Register?

Shares to be Offered to the Public All issued and outstanding shares if

Registrant is going IPO

Going listing by way of Intro.

Public co. going IPO/LBWI

Sec Cert re: adoption of a Manual of Corp. Governance Manual of Corp. Governance

Others depending on the type of securities being registered, i. e.,

- committed credit line

- rating

- ECC

- TCT- House/membership rules

- Notarized undertaking to refund investments

iv. Shelf-Registration - defined


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8. The Registration Statementi. Contents

Cover Sheet Part I Info required into the Prospectus

Risk Factors Use of Proceeds Risk Disclosure Statement

- General Risk Warning

- Prudence Required- Professional Advice Determination of offer price Dilution Selling security holders Plan of distribution Other distributions

Underwriters compensation Underwriters rep. to the board Designated shares and allocations Brokers/dealers compensation Finders

Interest of named experts and independent counsel


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Info with respect to registrant Business

- Business Development- Business of the Issuer

- major risks involved in each business of the companyand subsidiaries; procedure on how to identify, assess andmanage such risks

- additional requirements

Properties

Legal Proceedings

Market for Issuers common equity and relatedstockholdersmatters

- market info

- holders

- dividends

- recent sales of unregistered or exempt securities,incl. recent issuance of securities constitutingexempt transactions


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MD & A and Plan of Operation

Changes in and disagreements w/ accountant on

acctg. and financial disclosures External audit fees

Directors and Executive Officers- Significant Employee/s

- Family Relationships

- Involvement in certain legal proceedings

Executive compensation

Security Ownership of certain record andbeneficial owners

Security ownership of management Voting trust holders of 5% or more

Certain relationships and related transactions


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ii. Rejection / Forfeiture of Fees

iii. Refund of Fees

Letter-request

CFD endorses it to FMD with recommendation

CFD presents it to en banc

Application to future fees/penalties

Maximum 50% of the fees paid

iv. Disclosures Required after RS is rendered effective (mostneglected) SEC Form 23-A


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Persons required 10% beneficial owner of anyclass of any security or director (even if onlyqualifying share is owned) or officer (even if

he has no security at all) after becoming such

Due date within 10 days after the effective dateof the RS or after he becomes suchsubsequent to the effective date of the RS

whichever is earlier

First SEC Form 17-Q either within 45 days afterthe effective date of the RS or on or before thedate on which such report would have beenrequired to be filed if the issuer had beenrequired previously to file it whichever is later


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Within 3 days from closing of the sale

i. dispositions of secondary shares

number/percentage

ii. disclosure on over-allotment

Wide Dissemination (Sec. 8.3)

i. Each participants (underwriters,brokers)

ii. Main & EOs of the SEC

iii. Exchange if to be listed

iv. 20 or more persons (non QBs)


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v. Amendments when on the face of the RS, it is incomplete,

inaccurate in any material respect, i.e., any event or transaction which increases and creates a risk on the

investments or on the securities covered by it

increase/decrease in the volume of securities

issue price is outside of the range

major change in the primary business

reorganization of the company change in the work program or use of proceeds

loss, deterioration or substitution of the property underlying thesecurities

significant or 10% or more change in the financial condition or resultsof operation of the registrant

classification/declass or reclass of securities which results inderogation of rights


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Requirements

File ARS

Notice for publication (changes and reason for thechanges)

Offer to rescind all transactions

Investors may renounce their purchases within 30 daysfrom notice

Return of investments (w/o any deduction) within 10days from notice (in Subic Bay Golf vs. SEC, the SCdecided that the SEC cannot order a refund ofinvestments. The power belongs to the regular courts)

Filing fee min. of P10K (if volume is increased, 1/10 of

1% of the difference)Deviation from the use of proceedsRequired: Prior notice to SEC and stockholders 30 days from

implementation


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9. Periodic Reportsi. Annual

Due date depends on where it is filed (for 2009 AFS filings)

Extension Office April 14/15

Main Office per MC depends on the last numerical digitof the filers SEC Reg. No.

For 2011 Filings

April 14, 15, 18, 19,20 - 1 & 2

April 25 29 - 3 & 4May 9 13 - 7 & 8

May 16 20 - 9 & 0

Those with FY other than Dec. 31 original filing schedule

Filings of any company may be made before April 18Late filings allowed starting May 23 and shall be subject to penalty

computed from the date of the last day of filing schedule above.

No SEC form 17-L allowed


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POST-REGISTRATION DISCLOSURES

Via Periodic Reports/Other Forms

1. SEC Form 17-A

2. SEC Form 17-Q

3. SEC Form 17-C

4. SEC Form 17-Ex

5. SEC Form 17-L

6. SEC Form 18-A

7. SEC Form 18-AS

8. SEC Form 23-A

9. SEC Form 23-B

10. SEC Form 20-IS

11. SEC Form 19

12. SEC Form 10-1

13. For SOP/SPPs - annual report of optionees/purchasers & shares purchased


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Tender Offer Report

At least 35% acquisition in a single transaction TO to all holders; if

oversubscribed, distributed pro rataAt least 35% acquisition within 12 mos. - to all holders of such class for

the number of shares so acquired within the said period. The lastsale meeting the threshold shall not be consummated until theclosing and completion of the TO.

Less than 35% acquisition but the acquisition will result in ownership ofover 51% of the total outstanding equity shares TO to allremaining shareholders at a price supported by a fairness opinionprovided by an independent financial advisor or equivalent 3rdparty Acquirer is required to accept all securities tendered.

Sale of shares pursuant to a private transaction shall not be completedprior to closing and completion of the TO. (exemptive relief isavailable)


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OTHER OBLIGATIONS

i. Post-IPO issuances

if sold under SRC Rule 10.1 SEC Form 10-1 must befiled as a notice for k (private placement or to 19 orless non-qualified buyers) and l transactions (to anynumber of qualified buyers) or as a request for

confirmation of exemption

sold to shareholders but with cost registrable

if sold anew to the public (more than 19 non-qualified buyers), registrable

Exemption may be obtained pursuant to SRC Rule10.2 for issuances to more than 19 non-qualifiedbuyers (limited offer/small amount)


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Qualified buyers under Sec 10.1(l)

bank registered IH

insurance company

pension fund or retirement plan maintained

by the GOP or any pol. Subdivision thereofor managed by a bank or other personsauthorized by the BSP to engage in trustfunctions

such other persons as the Com. may by rule

determine on the basis of financialsophistication, net worth and experience infinancial and business matters or amount ofassets under mgt.


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Qualified buyers under SEC MC No. 6, s. of 2007

Individualsi.has a min. AGI of P25M for at least 2 yrs prior to regis. or

ii.a total portfolio investment in securities registered with theCom. of at least P10M or

iii.a personal net worth of not less than P30M and

been engaged in securities trading, in his personalcapacity or thru a FM, for a period of 1 yr. or

held for at least 2 yrs. a position of responsibility inany professional or business entity that requires

knowledge or expertise in securities trading, suchas legal consultant, financial adviser, sales personor associated person of broker-dealer or finance,treasury or trust officer of a bank or other executivepositions with related responsibilities.


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Juridical person

i. has a min. AGI of at least P100M for at least 2yrs. prior to regis. Or

ii.a total portfolio investment in securitiesregistered with the Com. of at least P60M or

iii.a net worth of not less than P100M.


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REMEDIES

Request for Opinion P5000.00 fee

Request for Exemptive Relief P20,000.00 fee

Request for confirmation under SRC Rule 9.1 P20,000.00

Request for confidentiality

Company-initiated offer of monetary penalty in lieu ofsuspension


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Some manipulative devices1. Wash sale

when stocks are traded without a genuine

change in actual beneficial ownershipmaking it appear that the stock is activelytraded

2. Improper matched order

when both the buy and sell orders are

entered at the same time with the sameprice and quantity by different butcolluding parties, giving the appearance ofactive trading of the shares


59/95

Some manipulative devices3. Marking the close

placing an order near the close of the trading

day in an effort to close the price higher orlower than the previous price

4. Hyping and dumping the stock

buying activity at increasingly higher (or lower)prices and then selling securities in the market at

the higher (or lower) prices after announcing aglossy picture of a particular issue as a goodinvestment contrived to sustain public interest inthe shares and thus lure investors to trade


60/95

Some manipulative devices5. Squeezing the float

taking advantage of a shortage of securities inthe market by controlling the demand side andexploiting market congestion during suchshortages in a way as to create artificial prices

6. Stop loss order

placed to protect a recognized gain in theprice of securities against potential loss. It

reflects the lowest price that a seller is willing tosell at even though this is lower than the currentmarket price. It is a hedge against marketdecline.


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Some manipulative devices7. Painting the tape

a series of transactions in securities that

are reported publicly to give theimpression of activity or pricemovement in a security

8. Circulating unverified rumor-based

information


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Some manipulative devices9. Short selling

selling stocks which he does not own, in

anticipation that the price will decline andthat he will be able to cover the sale by

purchasing them back at a later date at a

lower price

10. Repurchase(buy back) of outstandingstock by issuers


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Fraudulent transactions1. Churning

situation where a broker-dealer (B/D) is the

sole or dominant market-maker in aparticular security and creates a market in

that security by repeated purchases from

and resells to, its individual retail customers

at steady increasing prices


64/95

Fraudulent transactions2. Scalping

where a B/D or investment banker

recommends the purchase of securities w/odisclosing its practice of purchasing of such

securities before making the

recommendation and then selling them at

a profit when the price rises after the

recommendation is disseminated


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Fraudulent transactions3. Single day trading practice

buying and selling shares in a single trading

session, where the investors settle theiraccounts at the end of the day. Day

traders usually follow a trend of buying

activity on a particular stock and then sell

the same issue on the same day after a

profit has been realized even w/o any cashoutlay.


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Fraudulent transactions4. Front-running

where brokers, also acting as dealers,

prioritize their own dealer accounts byexecuting their own orders on a particular

issue ahead of their clients.

5. use of information obtained in fiduciary

capacity for the purpose of soliciting ormaking purchases, sales or exchanges ofsecurities

6. others under SRC Rule 26.3-2


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Insider Trading

Trading of securities on amaterial non-public information


68/95

Insider Issuer

A director or officer (or person performing

similar functions) of, or person controllingthe issuer

Person whose relationship or formerrelationship to the issuer gives or gave himaccess to material information about the

issuer or the security that is not generallyavailable to the public


69/95

Insider Person whose relationship or former

relationship to the issuer gives or gave himaccess to material information about the

issuer or the security that is not generallyavailable to the public

A government employee or director or officerof an exchange, clearing agency and/or self-regulatory org. (SRO) who has access to

material info about an issuer or a security thatis not generally available to the public

A person who learns each info by acommunication from any of the foregoinginsiders


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Material non-public info Has not been generally disclosed to the

public and would likely affect the marketprice of the security being disseminatedto the public and the lapse of areasonable time for the market to absorbthe info

Would be considered by a reasonable

person important under thecircumstances in determining his courseof action whether to buy, sell or hold asecurity


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Tipee

A person who receives inside infofrom persons such as an officer ordirector. Its unlawful for one to tip

material non-public info to anotherthat trades thereon. However, thereis no violation if it is a legitimatedisclosure to another as part of

performing ones duties to the issuerwith no expectation that the personlearns of the info is likely to trade.


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Short swing

Profits earned within 6 mons.

of a trade including profitsmade from a sale of securityfollowed by their purchase

within 6 mos.


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Rule 23.2Any profit realized by a beneficial owner,

director of officer from any purchase and

sale or any sale and purchase of anyequity security of such issuer within anyperiod of less than 6 mos. shall inure toand be recoverable by the issuer,irrespective of any intention of holding the

security purchased or of not repurchasingthe security sold for a period exceeding 6mos.


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Who may institute suit? By the issuer or

By the owner of any security in the name

and in behalf of the issuer if the issuer shallfail diligently to prosecute the samethereafter


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When?

Within 2 years after the datesuch profit was realized


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Protection to investors Mandatory Tender Offer Rule

TO - is a publicly-announced intention by a purchaser toacquire a certain block of equities of a company thru open

market purchases or private negotiations. Sec. 19, SRC

MTOs - any person or group of persons acting in concertwho intends to acquire 35% or more equity shares in apublic company in one or more transactions within a 12-

mo period or less than 35% which would result in ownershipof over 51% of the total outstanding equity securities of apublic company (at a price supported by a fairness opinionprovided by an independent financial advisor r equivalentthird party.


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tender for the percent sought to

all holders of such class

if TO is oversubscribed, the

aggregate amount of securities to

be acquired at the close of suchTO shall be proportionately

distributed across both selling

shareholder with whom the

acquirer may have been in privatenegotiations and minority

shareholders.


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Exempt from MTO

Requirement

any purchase of shares from the unissuedcapital stock provided that the

acquisition will not result to a 50% or moreownership of shares by the purchaser

any purchase of shares from an increasein authorized capital stock

purchase in connection with privatizationundertaken by the govt. of the Phil.


79/95

Exempt from MTO

Requirement

purchases in connection with corp. rehabunder court supervision

purchase thru an open market at theprevailing market price

merger or consolidation


80/95

UCC - Listed

UCHC 60.51%Non-listed

CEMCO17.03%

BCI21.31%

ACC29.69%

CEMCO 9%


81/95

CEMCO acquired BCI and

ACCs shares (51%) in UCHCCEMCOs total Beneficial Ownership in UCC

Particulars Percentage

Existing ownership in UCHC 9%

Acquisition from BCI and ACC 51%

% of UCHCs ownership in UCC 60%

Indirect ownership of CEMCO inUCC

36%

Direct of CEMCO in UCC 17%Total ownership 53%


82/95

Rules on proxy solicitation Proxy

must be in writing

signed by the stockholder or his authorizedrep. and

filed with the corp. sec. before the meeting

valid only for the meeting for which it is

intended valid for not more than 5 yrs.


83/95

Rules on proxy solicitation Proxy solicitation

any request for proxy or authorization

any request to execute or not toexecute or to revoke a proxy orauthorization or

the furnishing of a form of proxy or other

communication to security holdersunder reasonably calculated to result inthe procurement, withholding orrevocation of a proxy


84/95

Does not apply tothe performance by any person of

ministerial acts on behalf of a

person soliciting proxy or

any solicitation made otherwise

than on behalf of the registrant

where the total number of personssolicited is not more than 19.


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Obligation of a Registrant Proposing to

Hold Stockholders Meeting

Transmit to stockholders at least 15 daysbefore the meeting

An Information StatementA proxy form (in case of proxy

solicitation)

Management report


86/95

Civil LiabilitiesA. On account of false registration statement

Person liable

Issuer and every signatoryA director of or person performing similar

functions, or a partner in, the issuer at the time ofthe filing of the RS or any part, supplement oramendment thereof

Every person who is named in the RS as being or

about to become a director of, or a personperforming similar functions or a partner in, theissuer and whose written consent thereto is filedwith the RS


87/95

every auditor or auditing firm named as havingcertified any financial statements used with the RS or

prospectus

every person, who with his written consent, which shallbe filed with the RS, has been named as havingprepared or certified any part of the RS, or as having

prepared or certified any report or valuation which isused in connection with the RS, with respect to thestatement or valuation, which purports to have beenprepared or certified by him

every selling shareholder who contributed to and

certified as to the accuracy of a portion of the RS, withrespect to that portion of the RS which purports tohave been prepared or certified by him

Every underwriter with respect to such security


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Civil LiabilitiesB. Arising in connection with prospectus, communications

and reports

Who is liable?

Any person who offers to sell or sells a security by means ofa prospectus or other written or oral communicationwhich includes

An untrue statement of a material fact or

Omits to state a material fact necessary in order to

make the statements not misleading (the purchaser notknowing of such untruth or omission) and who shall fail inthe burden of proof that he did not know, and in theexercise of reasonable care could not have known, ofsuch untruth or omission


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To whom is he liable?

To the person purchasing such security fromhim.

How much can he recover?

The consideration paid for such security withinterest thereon less the amount of anyincome received thereon, upon the tenderof such security or for damages if he nolonger owns the security.


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Civil LiabilitiesC. For fraud in connection with securities

transactions

Any person who engages in any act ortransaction in violation of Secs. 19,2, 20 or 26 orany rule or regulation thereunder shall be liableto any person who purchases or sells anysecurity, grants or refuses to grant any proxy,

consent or authorization, or accepts or declinesan invitation for tender of a security, fordamages sustained by such other person as aresult of such act or transaction.


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Civil LiabilitiesD. For manipulation of security prices

For violation of Sec. 24, he shall be liable toany person who shall purchase or sell anysecurity at a price which was affected bysuch act or transaction, and the person soinjured may sue to recover damages

sustained as a result of such act ortransaction.


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Civil LiabilitiesE. On account of insider trading For violation of Subsection 27.1 and Subsection

27.4(a)(i) or any rule thereunder shall be liable in a

suit brought by any investor.

An insider who violates Subsec. 27.3 or any person

in case of a tender offer who violates Subsec.

27.4(a) or any rule thereunder shall be jointly liable

under Subsec. 61.1 with, and to the same extent as,

the insider, or person in the case of a tender offer,to whom the communication was directed and

who is liable under Subsec. 61.1 by reason of his

purchase or sale of a security.


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Civil LiabilitiesF. Amount of damages to be awarded

All suits to recover damages pursuant to

Secs. 56, 57, 58, 59, 60 and 61 shall bebrought before the RTC which canaward not exceeding triple the amountof the transaction plus actual damages.

Exemplary damages may also beawarded in cases of bad faith,malevolence or wantonness in violationof the Code and its IRR.


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Civil Liabilities It can also award attorneys fees

not exceeding 30% of the award.

All persons specified in said sectionsshall be jointly and severally liable

for the payment of damages.


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Civil LiabilitiesAll persons including the issuer shall

contribute equally to the total liability

adjudged therein.No principal shareholder, director or

officer of the issuer or person performingsimilar positions shall recover theircontribution to the liability from the issuer.However, the right of the issuer to recoverfrom the guilty party the amount it hascontributed shall not be prejudiced.

src rev w 2 complete

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