The Securities Regulation Code and its Implementing Rules and Regulations

Rule 36

1-3 Powers with Respect to Exchanges and Other Trading Market 36.1. The Commission is authorized, if in its opinion such action is necessary or appropriate for the protection of investors and the public interest so requires, summarily to suspend trading in any listed security on any Exchange or other trading market for a period not exceeding thirty (30) days or, with the approval of the President of the Philippines, summarily to suspend all trading on any securities Exchange or other trading market for a period of more than thirty (30) but not exceeding ninety (90) days: Provided, however, That the Commission, promptly following the issuance of the order of suspension, shall notify the affected issuer of the reasons for such suspension and provide such issuer with an opportunity for hearing to determine whether the suspension should be lifted. 36.2. Wherever two or more Exchanges or other trading markets exist, the Commission may require and enforce uniformity of trading regulations in and/or between or among said Exchanges or other trading markets. 36.3. In addition to the existing Philippine Stock Exchange, the Commission shall have the authority to determine the number, size and location of stock Exchanges, other trading markets and commodity Exchanges and other similar organizations in the light of national or regional requirements for such activities with the view to promote, enhance, protect, conserve or rationalize investment.

Rule 36

4 Registration of Transfer Agents and Clearing & Settlement 36.4.1. Registration of Transfer Agents 36.4.1.1. No person shall act as a transfer agent for a security which is listed or traded on an Exchange, over-the-counter, or any other trading market without being registered with the Commission in accordance with the provisions of this Rule. The Commission may, for the protection of investors, require Issuers to engage the services of transfer agents that are neither affiliated nor in a conflict-of-interest situation with the Issuer. 36.4.1.2. To apply for registration under this Rule, a transfer agent shall: 36.4.1.2.1. Be a corporation; 36.4.1.2.2. Have unimpaired paid-up capital of at least One Million Pesos (PhP1,000,000.00) or such amount as the Commission may determine; 36.4.1.2.3. Have an officer who is a certified public accountant; 36.4.1.2.4. Submit an undertaking that it shall comply with the Rules, orders, memorandum circulars and policies promulgated by the Commission, and of other rules, procedures, standards and policies set by other market participants and duly approved by the Commission, and its own internal rules and procedures; 36.4.1.2.5. Submit schedule of fees and charges for approval of the Commission. Such schedule shall not be effective until and unless approved by the Commission; and 36.4.1.2.6. The Commission may require transfer agents to subject their information technology, business continuity and disaster recovery, and risk management systems to a regular review and audit by an independent firm at least once every three (3) years and such other frequency that the Commission may deem necessary. The Commission may also require that the results of said review and audit shall be submitted to the Commission within thirty (30) days from completion of the audit. 36.4.1.3. Every application for registration as a transfer agent shall be filed with the Commission on SEC Form 36 — TA and be accompanied by the following documents: 36.4.1.3.1. For an existing corporation: 36.4.1.3.1.1. Certified True Copy of Articles of Incorporation; 36.4.1.3.1.2. Certified True Copy of By-Laws; 36.4.1.3.1.3. Latest Annual Audited Financial Statements; and 36.4.1.3.1.4. General Information Sheet. 36.4.1.3.2. For a newly registered corporation: 36.4.1.3.2.1. Certified True Copy of Articles of Incorporation; 36.4.1.3.2.2. Certified True Copy of By-Laws; and 36.4.1.3.2.3. List of Officers and Stockholders. 36.4.1.3.3. Transfer agent Rules and Procedures, certified true and correct by its President, including procedures on withdrawal as transfer agent and successor transfer agent; 36.4.1.3.4. Organizational Chart; 36.4.1.3.5. Business Plan; 36.4.1.3.6. Manual of Corporate Governance; 36.4.1.3.7. Copy of the sample engagement letter containing, among others, the identification of the services to be rendered and specification of the responsibilities of the transfer agent; 36.4.1.3.8. Undertaking under oath to comply with the rules and regulations, orders, memorandum circulars and policies promulgated by the Commission, and of other rules, procedures, standards and policies set by other Exchanges or SROs and duly approved by the Commission, and its own internal rules and procedures set for transfer agency operation; 36.4.1.3.9. Undertaking under oath to be a member of a transfer agent association/organization and to submit a copy of the transfer agent agreement with issuer companies; 36.4.1.3.10. Undertaking to conduct due diligence prior to engagement to warrant the completeness and reliability of the records to be received from the company or its former transfer agent; and 36.4.1.3.11. Undertaking to assume the obligation in relation to the stock transfer services as provided in the engagement letter during the period of engagement. Any amendment to such application shall be filed with the Commission on SEC Form 36-TA, in accordance with the instructions contained therein. 36.4.1.4. If any of the information reported on SEC Form 36-TA becomes inaccurate, misleading, or incomplete or requires updating for any reason, such as change/s in operating procedures and/or the list of directors and officers, the Issuer shall file an amendment within seven (7) days after the date on which the information in the application became inaccurate, misleading, or incomplete. 36.4.1.5. After reviewing an application for registration as a transfer agent, or an amendment thereto, the Commission shall, by order: acEHCD 36.4.1.5.1. Grant registration or approve the amendment; or 36.4.1.5.2. Deny registration or the amendment, place limitations on the activities, functions or operations of, suspend or revoke its registration, if the Commission finds, after notice and opportunity for hearing: 36.4.1.5.2.1. That such order is in the public interest; 36.4.1.5.2.2. That the Issuer does not meet applicable qualifications; 36.4.1.5.2.3. That the application is incomplete, inaccurate or misleading; or 36.4.1.5.2.4. That the transfer agent has been found to: 36.4.1.5.2.4.1. Be insolvent or not in sound financial condition; 36.4.1.5.2.4.2. Have violated or have not complied with the applicable provisions of the Code or the rules and regulations adopted thereunder, or any order of the Commission; 36.4.1.5.2.4.3. Have engaged in, or be engaged in, or is about to engage in fraudulent transactions; 36.4.1.5.2.4.4. Be in any other way dishonest or not of good repute; 36.4.1.5.2.4.5. Have not conducted its business in accordance with law or be engaged in a business that is illegal or contrary to government rules and regulations; 36.4.1.5.2.4.6. Have an officer, member of the board of directors, or principal shareholder who is disqualified to be such an officer, director or principal shareholder; 36.4.1.5.2.4.7. Have a backlog of share certificate transfers which indicates the inability of the Issuer to fulfill its responsibilities as a transfer agent; 36.4.1.5.2.4.8. Have repeatedly or materially failed to comply with its procedures or those of a registered clearing agency; or 36.4.1.5.2.4.9. Have filed an application for registration or an amendment thereto which is incomplete or inaccurate in any material respect or which includes any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the application or amendment not misleading. 36.4.1.6. A transfer agent cannot be the auditor of an issuer for whom it acts as transfer agent. 36.4.1.7. The procedures of a transfer agent are binding on and enforceable against issuers for which they act, registered securities holders and transferees who present securities for transfer. To minimize the issuance and movement of and to facilitate other dealings with those securities eligible to the operations of a registered clearing agency, a transfer agent and registered clearing agency shall jointly formulate and abide by written procedures addressing certificated and uncertificated securities issuance, transfers, cancellations, registration, confirmation and reconciliation of positions in securities, audit, replacement of lost securities, signature guarantees, delivery processes and turnaround times. 36.4.1.8. Every transfer agent registered pursuant to this Rule shall file the appropriate registration renewal form every June 1 to June 30 of each year, surrender its old license, and pay to the Commission the prescribed annual renewal fee. If such fee is not paid or the registration renewal form is not filed as required, the registration of such transfer agent shall be suspended or terminated as the case may be. 36.4.1.9. Nothing in this Rule shall be construed as precluding the Commission from requiring an applicant for registration or a registered transfer agent to submit other requirements it may deem reasonably necessary to effectively regulate and supervise the transfer agent and/or to protect the interest of the investing public. 36.4.2. Reports from Transfer Agents 36.4.2.1. Annual Report — Every registered transfer agent shall file with the Commission an annual report on SEC Form 36-AR in accordance with the instructions contained therein within 120 days after the end of its fiscal year. Reports filed on SEC Form 36-AR shall be deemed to satisfy Section 141 of the Corporation Code of the Philippines. 36.4.2.2. Exception Reports to the Commission — A transfer agent shall provide to the Commission within seven (7) days of the occurrence of any of the following events, a report detailing the reasons and circumstances for: 36.4.2.2.1. Any delay in the turnaround or processing of an issue, transfer or replacement of a security; 36.4.2.2.2. Any discrepancy between its records and those of the registered clearing agency, if applicable; 36.4.2.2.3. Actual termination of its function as a transfer agent for a particular security; 36.4.2.2.4. Withdrawal from business of a transfer agent; and 36.4.2.2.5. Additional listed issues being handled or have ceased from servicing. 36.4.2.3. Periodic Reporting to Issuer — At regular intervals within each and every year and upon request by the issuer, a transfer agent shall supply the issuer, for whom it acts in that capacity, with the list of holders of its securities, as shown by the register of holders of securities, and the changes to the register of transfers, showing the name and registered address of, and the number or face value of the securities held by each such holder and supply any other statements, lists, entries, information and material concerning issues, transfers and cancellations of securities. 36.4.2.4. Complaint Log — A record of all claims and complaints made to a transfer agent shall be kept by it at its principal office. The record shall contain: 36.4.2.4.1. The name of the security holder and a description of the security; 36.4.2.4.2. The date of the complaint or claim and a complete description thereof; and 36.4.2.4.3. The steps taken by the transfer agent, the manner in which the complaint or claim is resolved and any subsequent action taken or to be taken by the holder or the transfer agent. The record shall be open for inspection during normal business hours by the Commission and by any issuer with respect to securities issued by it. 36.4.3. Records Retention by Transfer Agents 36.4.3.1. In addition to the records required to be maintained pursuant to Section 74 of the Corporation Code of the Philippines, every transfer agent shall make and retain for a period of five (5) years the following books and records relating to its transfer agent activities: SDHTEC 36.4.3.1.1. Its rules and procedures; 36.4.3.1.2. Exception reports filed with the Commission pursuant to SRC Rule 36.4.2.2; 36.4.3.1.3. Complaint log as required to be maintained under SRC Rule 36.4.2.4; 36.4.3.1.4. Reports to the issuers for whom the firm acts as transfer agent as required under SRC Rule 36.4.2.3; and 36.4.3.1.5. Annual report on SEC Form 36-AR. 36.4.3.2. Every transfer agent shall make available any or all of its books and records upon request of an authorized representative of the Commission. Failure to do so shall result in an immediate suspension of the transfer agent's registration. Such suspension shall continue until such time as the books and records are made available to the Commission. 36.4.4. Clearing and Settlement 36.4.4.1. Exchanges and other trading markets shall ensure that the clearing and settlement arrangement in the exchange of assets subject of the trade shall be on a delivery versus payment (DVP) scheme such that delivery of the securities occurs if and only if payment occurs. 36.4.4.2. Exchanges and other trading markets shall have their DVP systems approved by the Commission. 36.4.4.3. No broker or dealer shall effect transactions in an OTC market unless it has secured an agreement from the counterparty as to how a transaction shall be cleared and settled. The broker or dealer shall ensure that the clearing and settlement arrangement shall be prompt and accurate and shall define among others: (1) Due date as to settlement; (2) Due date as to delivery of the security; and (3) Due date as to payment of cash. 36.4.4.4. No broker or dealer shall allow the clearing and settlement of transaction via an intermediary unless such intermediary is a registered clearing agency or has been authorized by the Commission to act as intermediary. 36.4.4.5. The Commission may require market participants to use uniform settlement systems in the public interest and for the protection of the investors including the use of a central counterparty (CCP) in the clearing and settlement of trades in all markets.

Rule 36

5 Trusts and Other Similar Funds for Broker Dealer Customers 36.5.1. A trust fund established to compensate customers for the extraordinary losses or damage they may suffer due to the business failure or fraud or mismanagement of a Broker Dealer shall be registered as an Accredited Trust Fund under this Rule. For purposes of this Rule, the term "extraordinary losses and damages" refers only to actual damages. 36.5.2. An application for registration shall be filed on SEC Form 36-TF and contain the following supporting documents: 36.5.2.1. Data on its organization, rules of procedure and membership/participation; 36.5.2.2. Copies of its rule; and 36.5.2.3. List of directors and officers and a list of their affiliations. 36.5.3. Business failure of the Broker Dealer shall be established upon a determination that the financial condition of the Broker Dealer has so deteriorated that the Broker Dealer cannot readily meet the demands of its customers for the delivery of securities and/or the payment of sales proceeds; provided, however, that such determination shall not be dependent upon a judicial declaration of insolvency. Such determination will be made by: a. the Exchange or the pertinent SRO; or b. the Commission, when the Exchange or the pertinent SRO fails or does not exercise such timely determination. 36.5.4. As a condition of their registration, all Broker Dealers shall be a member of or a participant in an Accredited Trust Fund. 36.5.5. An Accredited Trust Fund shall establish a Customer Protection Fund (the "Fund"). All amounts received by the Accredited Trust Fund, except amounts set outside for operating expenses, shall be deposited into the Fund which shall serve as trustee in compliance with general rules of trust. 36.5.6. The Commission shall not accredit a trust fund unless the trust fund has adopted rules governing: 36.5.6.1. The initial and the continuing required balance for the Fund; 36.5.6.2. Assessments to be imposed on members/participants and procedures for collecting such assessment; 36.5.6.3. Borrowing by the Fund; 36.5.6.4. Investment of Fund assets; 36.5.6.5. Procedures for paying customers for the extraordinary losses or damage they may suffer due to business failure or fraud or mismanagement of the Broker Dealer; 36.5.6.6. Role and duty of the trust fund as trustee; and 36.5.6.7. The composition of the trust fund's Board of Directors. 36.5.7. All rules of the Accredited Trust Fund, including amendments thereto, shall be approved by the Commission prior to becoming effective. 36.5.8. If the Exchange, pertinent SRO, or the Commission is aware of facts which may lead one to believe that the financial condition of a Broker Dealer, including an Exchange Trading Participant, has so deteriorated and the Broker Dealer has difficulties meeting the demands of its customers for the delivery of securities and/or the payment of sales proceeds, it shall immediately notify the Accredited Trust Fund; Provided, however, where such notification involves an Exchange Trading Participant, the Exchange or pertinent SRO shall simultaneously notify the Commission. 36.5.9. Every Exchange, or other SRO responsible for monitoring the financial condition of Broker Dealer shall file with the Accredited Trust Fund copies of financial reports submitted by such Broker Dealers. 36.5.10. The Commission may, having due regard to the public interest or the protection of investors, regulate, supervise, examine, suspend or otherwise discontinue such and other similar funds under such rules and regulations which the Commission may promulgate, and which may include taking custody and management of the fund itself as well as investments in and disbursements from the funds under such forms of control and supervision by the Commission as it may from time to time require. The authority granted to the Commission under this subsection shall also apply to all funds established for the protection of investors, whether established by the Commission or otherwise. The Commission, having due regard for national economic development, shall encourage competitiveness in the market by promulgating within six (6) months upon the enactment of the Code, rules for the registration and licensing of innovative and other trading markets or Exchanges covering, but not limited to, the issuance and trading of innovative securities, securities of small, medium, growth and venture enterprises, and technology-based ventures pursuant to Section 33 of the Code. AScHCD 38.1. This Rule shall apply to companies mentioned under Sec. 38 of the Code and to companies with secondary licenses that adopted in their Manuals on Corporate Governance the practice of nominating and electing independent director/s in their Boards. Said entities shall be referred to in this Rule as "covered companies". 38.2. As used in Section 38 of the Code, independent director means a person who, apart from his fees and shareholdings, is independent of management and free from any business or other relationship which could, or could reasonably be perceived to, materially interfere with his exercise of independent judgment in carrying out his responsibilities as a director in any covered company and includes, among others, any person who: 38.2.1. Is not a director or officer of the covered company or of its related companies or any of its substantial shareholders except when the same shall be an independent director of any of the foregoing; 38.2.2. Does not own more than two percent (2%) of the shares of the covered company and/or its related companies or any of its substantial shareholders; 38.2.3. Is not related to any director, officer or substantial shareholder of the covered company, any of its related companies or any of its substantial shareholders. For this purpose, relatives include spouse, parent, child, brother, sister, and the spouse of such child, brother or sister; 38.2.4. Is not acting as a nominee or representative of any director or substantial shareholder of the covered company, and/or any of its related companies and/or any of its substantial shareholders, pursuant to a Deed of Trust or under any contract or arrangement; 38.2.5. Has not been employed in any executive capacity by the covered company, any of its related companies and/or by any of its substantial shareholders within the last two (2) years; 38.2.6. Is not retained, either personally or through his firm or any similar entity, as professional adviser, by that covered company, any of its related companies and/or any of its substantial shareholders, within the last two (2) years; or 38.2.7. Has not engaged within the last two (2) years and does not engage in any transaction with the covered company and/or with any of its related companies and/or with any of its substantial shareholders, whether by himself and/or with other persons and/or through a firm of which he is a partner and/or a company of which he is a director or substantial shareholder other than transactions which are conducted at arms length and are immaterial. (SEC Memorandum Circular No. 07-18, [April 20, 2018]) 38.3. No person convicted by final judgment of an offense punishable by imprisonment for a period exceeding six (6) years, or a violation of this Code, committed within five (5) years prior to the date of his election, shall qualify as an independent director. This is without prejudice to other disqualifications which the covered company's Manual on Corporate Governance provides. 38.4. Any controversy or issue arising from the selection, nomination or election of independent directors shall be resolved by the Commission by appointing independent directors from the list of nominees submitted by the stockholders. 38.5. When used in relation to a company subject to the requirements of this Rule and Section 38 of the Code: 38.5.1. Related company means another company which is: (a) its holding company; (b) its subsidiary; or (c) a subsidiary of its holding company; and 38.5.2. Substantial shareholder means any person who is directly or indirectly the beneficial owner of more than ten percent (10%) of any class of its equity security. 38.6. Qualifications and Disqualifications 38.6.1. An independent director shall have the following qualifications: 38.6.1.1. He shall have at least one (1) share of stock of the corporation; 38.6.1.2. He shall be at least a college graduate or he shall have been engaged or exposed to the business of the corporation for at least five (5) years; 38.6.1.3. He shall possess integrity/probity; and 38.6.1.4. He shall be assiduous. HESIcT 38.6.2. No person enumerated under Section II (5) of the Code of Corporate Governance shall qualify as an independent director. He shall likewise be disqualified during his tenure under the following instances or causes: 38.6.2.1. He becomes an officer or employee of the corporation where he is such member of the board of directors/trustees, or becomes any of the persons enumerated under Section II (5) of the Code on Corporate Governance; 38.6.2.2. His beneficial security ownership exceeds two percent (2%) of the outstanding capital stock of the company where he is such director; 38.6.2.3. Fails, without any justifiable cause, to attend at least 50% of the total number of Board meetings during his incumbency unless such absences are due to grave illness or death of an immediate family; 38.6.2.4. Such other disqualifications which the covered company's Manual on Corporate Governance provides. 38.7. Number of Independent Directors 38.7.1. All companies are encouraged to have independent directors. However, issuers of registered securities and public companies are required to have at least two (2) independent directors or at least twenty percent (20%) of its board size, whichever is the lesser. Provided further that said companies may choose to have more independent directors in their boards than as above required. 38.7.2. The Exchange/s are required to have at least three (3) independent directors. To effectively carry out the provisions of Section 33.2 (g) of the Securities Regulation Code, the Exchange's independent director or a nominee for such director shall not solicit votes for himself. 38.8. Nomination and Election of Independent Director/s The following rules shall be applicable to all covered companies: 38.8.1. The Nomination Committee (the "Committee") shall have at least three (3) members, one of whom is an independent director. It shall promulgate the guidelines or criteria to govern the conduct of the nomination. The same shall be properly disclosed in the company's information or proxy statement or such other reports required to be submitted to the Commission. 38.8.2. Nomination of independent director/s shall be conducted by the Committee prior to a stockholders' meeting. All recommendations shall be signed by the nominating stockholders together with the acceptance and conformity by the would-be nominees. 38.8.3. The Committee shall pre-screen the qualifications and prepare a final list of all candidates and put in place screening policies and parameters to enable it to effectively review the qualifications of the nominees for independent director/s. 38.8.4. After the nomination, the Committee shall prepare a Final List of Candidates which shall contain all the information about all the nominees for independent directors, as required under Part IV(A) and (C) of Annex "C" of SRC Rule 12, which list, shall be made available to the Commission and to all stockholders through the filing and distribution of the Information Statement, in accordance with SRC Rule 20, or in such other reports the company is required to submit to the Commission. The name of the person or group of persons who recommended the nomination of the independent director shall be identified in such report including any relationship with the nominee. 38.8.5. Only nominees whose names appear on the Final List of Candidates shall be eligible for election as Independent Director/s. No other nominations shall be entertained after the Final List of Candidates shall have been prepared. No further nominations shall be entertained or allowed on the floor during the actual annual stockholders'/memberships' meeting. 38.8.6. Election of Independent Director/s 38.8.6.1. Except as those required under this Rule and subject to pertinent existing laws, rules and regulations of the Commission, the conduct of the election of independent director/s shall be made in accordance with the standard election procedures of the company or its by-laws. 38.8.6.2. It shall be the responsibility of the Chairman of the Meeting to inform all stockholders in attendance of the mandatory requirement of electing independent director/s. He shall ensure that an independent director/s are elected during the stockholders' meeting. 38.8.6.3. Specific slot/s for independent directors shall not be filled-up by unqualified nominees. 38.8.6.4. In case of failure of election for independent director/s, the Chairman of the Meeting shall call a separate election during the same meeting to fill up the vacancy. 38.8.6.5. The covered companies shall amend its by-laws in accordance with the foregoing requirements as soon as practicable. 38.9. Termination/Cessation of Independent Directorship In case of resignation, disqualification or cessation of independent directorship and only after notice has been made with the Commission within five (5) days from such resignation, disqualification or cessation, the vacancy shall be filled by the vote of at least a majority of the remaining directors, if still constituting a quorum, upon the nomination of the Committee otherwise, said vacancies shall be filled by the stockholders in a regular or special meeting called for that purpose. An independent director so elected to fill a vacancy shall serve only for the unexpired term of his predecessor in office.