The Securities Regulation Code and its Implementing Rules and Regulations

Rule 24

Circulating Information to Affect the Price of a Security It shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly, 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.

Rule 24

Advertisements and Communications with the Public; False and Misleading Statements 24.1(d).1. All communications by Broker Dealers or associated persons or salesmen of Broker Dealers (hereinafter "registered persons"), with the public shall be based on principles of fair dealing and good faith and should provide a sound basis for evaluating the facts in regard to any particular security or securities or type of security, industry discussed, or service offered. No material fact or qualification shall be omitted if the omission, in the light of the context of the material presented, would cause the advertising or sales literature to be misleading. 24.1(d).2. Exaggerated, unwarranted or misleading statements or claims are prohibited in all public communications of registered persons. In preparing such literature, it must be borne in mind by registered persons that inherent in investment are the risks of fluctuating prices and the uncertainty of dividends, rates of return and yield, and no registered person shall, directly or indirectly, publish, circulate or distribute any public communication that he knows, or had reason to know, contains any untrue statement of a material fact or is otherwise false or misleading. 24.1(d).3. Communications with the public shall not contain promises of specific results, exaggerated or unwarranted claims, or unwarranted superlatives, unfounded opinions for which there is no basis, or forecasts of future events which are unwarranted, or which are not clearly labeled as forecasts. 24.1(d).4. In judging whether a communication or a particular element of a communication may be misleading, several factors should be considered, including but not limited to: 24.1(d).4.1. The overall context in which the statement/s is/are made. A statement made in one context may be misleading even though such a statement could be perfectly appropriate in another context. An essential test in this regard is the balance of treatment of risks and potential benefits; 24.1(d).4.2. The audience to which the communication is directed. Different levels of explanation or detail may be necessary depending on the audience to which a communication is directed and the ability of the registered person given the nature of the media used, to restrict the audience appropriately. If the statements made in a communication would be applicable only to a limited audience, or if additional information might be necessary for other audiences, it should be kept in mind that it is not always possible to restrict the readership of a particular communication; and/or 24.1(d).4.3. The clarity of the communication. A statement or disclosure made in an unclear manner can result in a failure to understand the statement, or in a serious misunderstanding. A complex or overly technical explanation may worse cause even greater misunderstanding than too scant information. Likewise material disclosure relegated to legends or footnotes

Rule 24

2-2 Short Sales 24.2-2.1. Definition of Short Sale The term "short sale" shall mean any sale of a security which the seller does not own or any sale which is consummated by the delivery of a security borrowed by, or for the account of the seller with the commitment of the seller or securities borrower to return or deliver said securities or their equivalent to the lender on a determined or determinable future date. A person shall be deemed to own a security if: (1) he or his agent has title to it; (2) he has purchased, or has entered into an unconditional contract, binding on both parties thereto, to purchase it and has not yet received it; (3) he owns a security convertible into or exchangeable for it and has tendered such security for conversion or exchange; (4) he has an option to purchase or acquire it and has exercised such option; or (5) he has rights or warrants to subscribe to it and has exercised such rights or warrants provided, however, that a person shall be deemed to own securities only to the extent he has a net long position in such securities. 24.2-2.2. Determination of Good Delivery No Broker or Dealer shall accept a long sale order from a customer unless he has made a determination that the customer owns the security and will deliver in good deliverable form within the settlement period provided by exchange or clearing agency, or as may be prescribed by the Commission. The determination must include a notation on the order ticket at the time the order is taken which reflects the conversation with the customer regarding the present location of the securities, whether they are in good deliverable form, and the customer's ability to make delivery. 24.2-2.3. Order for Short Sale Upon receiving an order to sell short a qualified security, the order should be indicated on the selling order and throughout all the records pertinent to the sale. Prior to acceptance of any short sale order, the broker dealer shall make a determination that the customer has already borrowed the security and such will be delivered in good deliverable form within the prescribed settlement period. 24.2-2.4. Definition of Qualified Security For purposes of this rule, the term qualified security shall mean a listed security that is eligible for short selling in accordance with the following standards: (1) market capitalization; (2) tradability; (3) liquidity; and (4) with other applicable guidelines as may be prescribed by the Commission. 24.2-2.5. Execution of Short Sale/Uptick Rule No broker or dealer shall use any facility of a securities exchange to effect a short sale of any security unless (1) at a price higher than the last sale or (2) at the price of the sale if that price is above the next preceding different sale price on such day. Unless otherwise provided by the Commission, this price requirement shall not apply to a sale due to a bona fide market-making or arbitrage activity executed by a broker dealer authorized to engage in such activities. 24.2-2.6. Failure to Deliver No person shall, directly or indirectly, by the use of any facility of a securities exchange, effect a short sale in a security registered or listed on any securities exchange, where the seller does not intend or is unable to make delivery of the securities within the prescribed settlement period. Failure on the part of the seller to make delivery on such date will be construed by the Commission as prima facie evidence of the lack of intention on his part to make such delivery. 24.2-2.7. Mandatory Close-Out A contract involving a short sale which has not resulted in a delivery by the Broker Dealer within the settlement period must be closed by the Broker Dealer either by purchasing for cash or guaranteed delivery, securities of like kind and quantity on the next business day after settlement date, unless such purchase cannot be effected within said period for justifiable reasons in which case, notification in writing shall be made with the Exchange and the Commission, or in accordance with rules of the clearing agency that shall clear and settle the transactions. 24.2-2.8. Directors, Officers or Principal Stockholders No director, officer or principal stockholder of a corporation shall make a short sale in securities of the corporation in which he is a director, officer or principal stockholder. 24.2-2.9. Record Keeping A Broker Dealer who engages in short selling activities is required to maintain and keep up-to-date ledgers, whether in manual or preferably in electronic form, to record the complete details of all short selling transactions whether for its account or for the account of its customers. Such ledgers shall be kept in accordance with the Records Retention Rule and be made available to the Commission. 24.2-2.10. Prohibition on Short Selling The Commission may, motu proprio or upon recommendation of the Exchange, prohibit short selling in the Exchange indefinitely or for such period as it may deem proper for the protection of the investors. The Commission may also prohibit short selling in any Exchange as an emergency measure or whenever such short selling is necessary or appropriate in the public interest. 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. The terms "put", "call", "straddle", "option", or "privilege" shall not include any registered warrant, right or convertible security. 26.1. It shall be unlawful for any person, directly or indirectly, in connection with the purchase or sale of any securities to: (i) employ any device, scheme, or artifice to defraud; (ii) obtain money or property by means of any untrue statement of a material fact or 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 (iii) engage in any act, transaction, practice or course of business which operates or would operate as a fraud or deceit upon any person. 26.2. Use of Information Obtained in Fiduciary Capacity A Broker Dealer, Associated Person or salesman of a Broker Dealer, a paying agent, transfer agent, trustee, or any other person acting in a similar fiduciary capacity, who has received information as to the ownership of securities, shall not make use of such information for the purpose of soliciting or making purchases, sales or exchanges of securities or, except as provided in SRC Rule 30.2.9, provide such information to any person who does not need such information to fulfill his responsibilities under the Code. 26.3. Prohibited Representations, Dealings and Solicitations It shall be unlawful for any: 26.3.1. Person to represent that he has been registered as a securities intermediary with the Commission unless such person is registered under the Code. Registration under the Corporation Code shall not be deemed to be registration under the Code; 26.3.2. Broker Dealer to represent that the registration of the Broker Dealer under the Code, or the failure of the Commission to deny, suspend, or revoke such registration, indicates in any way that the Commission has passed upon or approved the financial standing, business, or conduct of such Broker Dealer, or the merits of any security or any transaction/s conducted thereby; 26.3.3. Person to represent that a security is a particular type of security when such representation is inconsistent with a stated definition under the Code or rules or regulations adopted thereunder. 26.3.4. Person to represent that a security to be sold, transferred, pledged, mortgaged, encumbered, used for delivery, or any other purpose to another entity or itself has been legally authorized by the registered owner when such representation is not true and documented in writing at the time and date it was used. 26.3.5. Person, whether as principal or agent, to buy, sell or deal in securities or solicit investments in securities and other investment contracts, unless he is a registered broker, dealer or licensed salesman of a broker dealer and the securities are registered under the Code or exempt from registration pursuant to Sections 9 and 10 thereof. Dealing in securities includes making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into any agreement for or with a view to acquiring, disposing of, subscribing for securities. Solicitation is the act of seeking or asking for business or information and including the act of providing information about a security or investment product being offered for sale with the view of making another person a client or closing or bringing in a sale or purchase of security or investment product. The solicitor need not be a signatory to any contract relative to such offer or sale of the security. An investment contract means a contract, transaction or scheme (collectively "contract") whereby a person invests his money in a common enterprise and is led to expect profits primarily from the efforts of others. An investment contract is presumed to exist whenever a person seeks to use the money or property of others on the promise of profits. A common enterprise is deemed created when two (2) or more investors "pool" their resources, creating a common enterprise, even if the promoter receives nothing more than a broker's commission. 27.1. 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: (a) The insider proves that the information was not gained from such relationship; or (b) If the other party selling to or buying from the insider (or his agent) is identified, the insider proves: (i) that he disclosed the information to the other party, or (ii) that he had reason to believe that the other party otherwise is also in possession of the information. A purchase or sale of a security of the issuer made by an insider defined in Section 3.8 of the Code, or such insider's spouse or relatives by affinity or consanguinity within the second degree, legitimate or common-law, shall be presumed to have been effected while in possession of material nonpublic information if transacted after such information came into existence but prior to dissemination of such information to the public and the lapse of a reasonable time for market to absorb such information; Provided, however, That this presumption shall be rebutted upon a showing by the purchaser or seller that he was aware of the material nonpublic information at the time of the purchase or sale. 27.2. Information is "material nonpublic" under this Rule if: (a) It 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 (b) 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. 27.3. 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 Section 3.8 of the Code, 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. 27.4. Where a tender offer has commenced or is about to commence, it shall be unlawful for: 27.4.1. Any person (other than the tender offeror) who is in possession of material nonpublic information relating to such tender offer, to buy or sell the securities of the issuer that are sought or to be sought by such tender offer if such person knows or has reason to believe that the information is nonpublic and has been acquired directly or indirectly from the tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, or any insider of such issuer; and 27.4.2. Any tender offeror, those acting on its behalf, the issuer of the securities sought or to be sought by such tender offer, and any insider of such issuer to communicate material nonpublic information relating to the tender offer to any other person where such communication is likely to result in a violation of the preceding SRC Rule. The term "securities of the issuer sought or to be sought by such tender offer" shall include any securities convertible or exchangeable into such securities or any options or rights in any of the foregoing securities.

Rule 24

1 (A AND B) Manipulative Practices 24.1.1. It shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly: 24.1.1.1. To create a false or misleading appearance of active trading in any listed security traded in an Exchange or any other trading market (hereafter referred to purposes of this Chapter as "Exchange"): 24.1.1.1.1. By effecting any transaction in such security which involves no change in the beneficial ownership thereof; 24.1.1.1.2. 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; or 24.1.1.1.3. By performing similar act where there is no change in beneficial ownership. 24.1.2. It shall be unlawful for any person to make a bid or offer, or deal in securities which has the effect or is likely to have the effect of creating a false or misleading appearance of active trading in any security or with respect to the market for, or the price of, any security. 24.1.3. It shall be unlawful for any Broker Dealer, Associated Person or salesman of a Broker Dealer (hereinafter collectively referred to as "registered person") to make a bid or offer for, or deal in securities, on account of any other person, where the registered person creates, or is aware that the other person creates, or taking into account the circumstances of the order, reasonably suspects that the order creates or will create, a false or misleading appearance of active trading in any security or with respect to the market for, or the price of, any security. 24.1.4. In considering whether an order violates Section 24 of the Code, a Broker Dealer shall consider: 24.1.4.1. Whether the order or execution of the order, would materially alter the market for, and/or the price of, the securities; 24.1.4.2. The date and time the order is entered or any instructions concerning the date and time of entry of the order; 24.1.4.3. Whether the person on whose behalf the order is placed, or another person who the Broker Dealer knows to be a related party of that person, may have an interest in creating a false or misleading appearance of active trading in any security or with respect to the market for, or the price of, any security; 24.1.4.4. Whether the order is accompanied by settlement, delivery or security arrangements which are unusual; 24.1.4.5. Whether the order appears to be part of a series of orders, which when put together with the other orders which appear to make up the series, the order or the series is unusual having regard to the matters referred to in SRC Rule 24.1.3; and 24.1.4.6. Whether there appears to be a legitimate commercial reason or basis in placing the order, unrelated to an intention to create a false or misleading appearance of active trading in or with respect to the market for, or price of, any security. Failure to consider these factors shall raise a presumption that the transaction/s is/are manipulative. 24.1.5. Set forth below are examples of prohibited conduct: 24.1.5.1. Engaging in a series of transactions in securities that are reported publicly to give the impression of activity or price movement in a security (e.g., painting the tape); 24.1.5.2. Buying and selling securities at the close of the market in an effort to alter the closing price of the security (marking the close); 24.1.5.3. Engaging in buying activity at increasingly higher prices and then selling securities in the market at the higher prices (hype and dump) or vice versa (i.e., selling activity at lower prices and then buying at such lower prices); 24.1.5.4. Engaging in transactions in which there is no change in beneficial ownership of a security (wash sales). 24.1.5.5. 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 (squeezing the float); 24.1.5.6. Disseminating false or misleading market information through media, including the internet, or any other means to move the price of a security in a direction that is favorable to a position held or a transaction; and 24.1.5.7. Other types of prohibited conduct and/or manipulative practices which include, among others, the creation of temporary funds for the purpose of engaging in other manipulative practices. 24.1.6. Obligations imposed on registered persons under this rule apply in respect of all orders, irrespective of the trading system used and whether executed or not.

Rule 24

Price Fixing It shall be unlawful for any person acting for himself or through a dealer or broker, directly or indirectly, 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 the SRC or these Rules.