The Securities Regulation Code and its Implementing Rules and Regulations

Rule 52

1 Accounts and Records, Reports, Examination of Exchanges, Members, and Others 52.1.1. Books and Records Rule 52.1.1.1. A Broker Dealer shall make, keep current and maintain in its principal office the following books and records relating to its business: 52.1.1.1.1. Blotter and Similar Records — A Broker Dealer shall have blotters or books of original entry containing a historical account of all the daily transactions of the Broker Dealer or its customers. The Broker Dealer may keep a number of different blotters to record separate types of transactions, provided that the Broker Dealers shall have at least: 52.1.1.1.1.1. A Purchase and Sales Blotter setting forth for each transaction the purchaser and seller, subject security, confirmation invoice number, quantity, price, amount, any interest or commission, net amount of proceeds from the transaction, trade date, and settlement date; 52.1.1.1.1.2. An In/Out Receipts Book setting forth the receipt and delivery of securities to and from other Broker Dealers and securities depository in case of stock dividend distribution, including information on the date of receipt or delivery of the securities to or from Broker Dealers, the In/Out Receipt number, name of security, number of shares, and description of such receipt and delivery of securities (e.g., lodgment or upliftment of shares, transfer request by a customer). If the receipt and delivery of shares refer to a transfer of shares by a customer from/to his account with the Broker Dealer to/from his other account with another Broker Dealer, the Broker Dealer should obtain a written transfer request from the customer prior to executing the transfer and keep the document on file; 52.1.1.1.1.3. A Stock Debit Memo (SDM)/Stock Credit Memo (SCM) book setting forth the receipt and delivery of securities to and from customers of the Broker Dealer, including information on the date of receipt and delivery of the securities, the SDM/SCM number, name of security, number of shares, and a short description of such receipt and delivery of securities; and 52.1.1.1.1.4. Cash Receipts/Disbursement Book setting forth the receipt and disbursement of cash, including information on the official receipt/check voucher number, check number, bank account from which cash was withdrawn or deposited, utilization of the cash and accounting entries at the end of each month. HcDSaT The IN/OUT Receipts, SDM/SCM and Official Receipts/Check Vouchers shall be utilized in chronology according to their control numbers. 52.1.1.1.2. General Ledger — A Broker Dealer shall have a General Ledger reflecting all its assets and liabilities, and its income and expense and capital accounts, and from which a trial balance can be abstracted in order to prepare financial statements showing the Broker Dealer's financial condition. (Annex 52.1-A) 52.1.1.13. Subsidiary Ledgers — A Broker Dealer shall have an individual Subsidiary Ledger of all its asset and liability accounts, and its income and expense and capital accounts which shall set forth the itemized account activity and entries. (Annex 52.1-A) 52.1.1.1.4. Journal Book — A Broker Dealer shall have a Journal Book which shall set forth all entries showing the asset, liability, income, expense, or capital accounts debited and credited, the amounts and the journal voucher control numbers and the description of such entries. Journal vouchers shall be utilized in chronology according to their control numbers. 52.1.1.1.5. Customer's Ledger — A Broker Dealer shall have a Customer's Ledger, which shall set forth the itemized account activity and the securities positions and money balances (beginning and ending positions and balances) of the customer. A complete set of the statements of account of a customer on file with the Broker Dealer can be the Customer's Ledger. 52.1.1.1.6. Detailed Collateral Valuation Schedule — A Broker Dealer shall have a Detailed Collateral Valuation Schedule, which shall set forth the name of the customer, money balance, name of security, number of shares, market value of position, and percentage of total market value of position of customer over money balance classified as follows: 52.1.1.1.6.1. More than 250%; 52.1.1.1.6.2. At least 200% but not more than 250%; 52.1.1.1.6.3. At least 150% but not more than 200%; 52.1.1.1.6.4. At least 100% but not more than 150%; 52.1.1.1.6.5. Less than 100%; and 52.1.1.1.6.6. Fully Secured. (from RBCA Rules) 52.1.1.1.7. Securities in Transfer Ledger — A Broker Dealer shall have a Securities in Transfer Ledger, which shall show the number of the transfer receipts received from the transfer agent, the number of shares, name of security, name of previous owner, name of new owner, date sent out to transfer agent, old certificate number, date received back from transfer, and new certificate number. (Annex 52.1-A) 52.1.1.1.8. Dividends and Interest Received Ledger — A Broker Dealer shall have a Dividends and Interest Received Ledger, which shall show the name of the security, the ex-dividend date (or interest date), the rate per share, and the payment date. (Annex 52.1-A) 52.1.1.1.9. Securities Borrowed and Securities Loaned Record — A Broker Dealer shall have a record of securities borrowed to make deliveries against sales and securities lent to other Broker Dealers. Said record shall state the borrowing or lending date, name of borrowing or lending Broker Dealer, number of shares, name of security, price, amount, the date returned, and any interest or other compensation. As securities are marked to market, resulting in additional monies paid or collected, the record should reflect that money movement in order to balance the daily cash blotter and reflect the appropriate money amount to be paid or collected when the loan is paid. (Annex 52.1-A) 52.1.1.1.10. Record of Monies Borrowed, Monies Loaned, etc. — A Broker Dealer shall have a record of all borrowings, regardless of whether customers' or its securities are pledged as collateral. This record should show the name of the bank, the date of payment, and particulars of the collateral, if any. (Annex 52.1-A) 52.1.1.1.11. Record of Securities and Monies Failed to Receive or Failed to Deliver — A Broker Dealer shall have a record of securities and monies, which the Broker Dealer failed to receive or deliver. In case of failure to receive securities and monies, the Broker Dealer shall state in said record the date on which delivery was due but not made, number of securities or amount of money, name of security, purchase price, Broker Dealer from whom delivery is due, and date received. In case of failure to deliver securities and monies, the Broker Dealer shall state in such record the date on which delivery was due, number of shares or amount of money, name of security, Broker Dealer to whom securities were sold, sale price and date on which delivery is made. (Annex 52.1-A) 52.1.1.1.12. Securities Record or Ledger — A Broker Dealer shall have securities record or ledger or position book, which shall state separately for each security all long or short positions (including securities in safekeeping) carried by the Broker Dealer either for its account or for the account of its customers. Said record or ledger shall state the location of all securities "long", the offsetting position to all securities "short", and in all cases the name or designation of the account in which each position is carried. (Annex 52.1-A) 52.1.1.1.13. Order Ticket — A Broker Dealer shall have a memorandum of each order and any other instruction, which the Broker Dealer, on its behalf or on behalf of its customer, gave or received for the purchase or sale of securities, whether executed or unexecuted. The memorandum shall state the terms and conditions of the order or instructions and of any modification or cancellation thereof, the account for which entered, the time of entry (i.e., the time the order was transmitted by the Broker Dealer and received by the relevant party), the price at which executed, and, to the extent feasible, the time of execution or cancellation. Orders entered pursuant to the exercise of discretionary power by the Broker Dealer shall be so designated. A Broker Dealer may adopt an electronic form for the order ticket with the approval of the Commission. 52.1.1.1.14. Confirmations and Notices — A Broker Dealer shall have copies (Broker's copies and copies acknowledged by customers) of (i) confirmations of all purchases and sales of securities and (ii) copies of notifications of all other debits and credits for cash and/or securities for the account of customers. 52.1.1.1.15. Records on Cash and Margin Accounts — A Broker Dealer shall have, in respect of each cash and margin account, a record containing the name and address of the beneficial owner of the account, and, in the case of a margin account, the signature of the owner, subject to the following rules: 52.1.1.1.15.1. In case of a joint account or an account of a corporation, the record shall only be in respect of the person or persons authorized to transact business for such account; IDaEHC 52.1.1.1.15.2. In case of a Done-Through Account and for purposes of record keeping, only the Broker Dealer maintaining said account with another Broker Dealer shall be regarded as the beneficial owner; the customers of the Broker Dealer maintaining the account shall not be customers of the Broker Dealer with whom the Done Through Account is maintained. Transactions of a done-through account, however, should be executed in accordance with the "Customer First" policy and in compliance with SRC Rule 34.1.1; and 52.1.1.1.15.3. Where a trustee, nominee or other fiduciary opens and maintains an account with a Broker Dealer as a representative of one or more particular beneficiaries and where all transactions effected in that trust are solely for the particular predetermined beneficiaries for whom the account is maintained, such beneficiaries (who thus have ownership of the account itself as distinguished from an interest in particular securities or credits which may happen to be recorded therein) shall be beneficial owners of the account. Where the agent's or trustee's transactions on behalf of a trust or particular individuals are of such volume and importance as to warrant the opening of a separate account for the particular trust or individuals, the Broker Dealer shall obtain the name and address either of the particular trust or of the beneficiaries. 52.1.1.1.16. Monthly Trial Balances and RBCA Computation — A Broker Dealer shall prepare at least once a month a current record of (a) the proof of money balances in all ledger accounts in the form of trial balances; and (b) the computations of the aggregate indebtedness, net liquid capital and RBCA ratio as of the trial balance date; Provided, however, that the computation of the aggregate indebtedness net capital and RBCA ratio shall be made on a daily basis and available for review when required by the Commission or the Exchange. 52.1.1.1.17. A Broker Dealer shall have on file its written supervisory procedures (WSP) detailing the operating procedures established by the Broker Dealer and other internal procedures adopted in compliance with the requirements and provisions of the SRC, these Rules and other relevant regulations. A Broker Dealer shall always update these internal procedures to be compliant with the new rules and regulations issued by the Exchange, the Commission, Anti-Money Laundering Council and other relevant organizations. A Broker Dealer shall have on file an employment questionnaire or application for each Associated Person and Salesman. Such questionnaire or application shall state material and relevant information on such person such as possible conflict of interest situations, and must be approved in writing by the designated Associated Person or other authorized agent of the Broker Dealer. A Broker Dealer shall retain a complete copy of the registration application of each Associated Person and salesman, stamped "Received" by the Commission or such other proof of receipt as the Commission may prescribe. 52.1.1.1.18. A Broker Dealer shall have on file all Anti-Money Laundering Act (AMLA) Resolutions and such file shall be updated with any new AMLA resolutions released by the Anti-Money Laundering Council. 52.1.1.2. A Broker Dealer shall maintain a logbook on material compliance and non-compliance of Broker companies and the Compliance Reports maintained and/or submitted by the Associated Person pursuant to SRC Rule 30.2.6.5. 52.1.1.3. With the prior approval of the Commission and in addition to the computerized and effective recording and accounting system mandated by SRC Rule 28.1, a Broker Dealer may make, keep current and maintain the books and records in electronic form and/or medium (including electronic records, which the Exchange trading system may allow to be so made, kept current and maintained), Provided that, upon directive by the Commission, the Exchange, or any other party, who may be legally entitled or authorized to access said books and records, the Broker Dealer shall promptly and readily provide a comprehensible and certified true printed and/or electronic copy of the books and records or any part thereof. Failure to do so shall result in immediate suspension of the Broker Dealer's registration. Such suspension shall continue until such time as the books and records are made available to the requesting organization and the said organization has satisfied itself that the books and records have not been modified or otherwise changed or altered during the period of suspension. 52.1.1.4. All Broker Dealers shall comply with the International Accounting Standards (IAS) and the Philippine Financial Reporting Standards. 52.1.2. Records Retention Rule 52.1.2.1. Every Broker Dealer shall preserve for a period of not less than five (5) years, the first two (2) years in an easily accessible place. 52.1.2.2. All books and records required under the Books and Records Rule include but not limited to the following: 52.1.2.2.1. All records required to be made of the Books and Records Rule, SRC Rule 52.1-1; 52.1.2.2.2. All Check books, bank statements and passbooks, cancelled checks and cash reconciliations; 52.1.2.2.3. All bills receivable or payable (or copies thereof), paid or unpaid, relating to the business of such Broker Dealer as such; 52.1.2.2.4. Originals of all communications received and copies of all communications sent by such Broker Dealer (including interoffice memoranda, e-mails and other communications) relating to his business as such; 52.1.2.2.5. All trial balances, computations of aggregate indebtedness and net capital (and working papers in connection therewith), financial statements, branch office reconciliations and internal audit working papers, relating to the business of such Broker Dealer; 52.1.2.2.6. All guaranteed accounts and all powers of attorney and other evidence of the granting of any discretionary authority given in respect of any account, and copies of resolutions empowering an agent to act on behalf of a corporation; 52.1.2.2.7. All written agreements (or copies thereof) entered into by such Broker Dealer relating to his business as such, including client agreements; 52.1.2.2.8. Records which contain the following information in support of amounts included in the report prepared as of the audit date in annual audited financial statements required by SRC Rule 52.1.5: ASTcaE 52.1.2.2.8.1. Money balance and position, long or short, including description, quantity, price and valuation of each security, including contractual commitments in customer's accounts, in cash and fully secured accounts, partly secured accounts, unsecured accounts and in securities accounts payable to customers; 52.1.2.2.8.2. Money balance and position, long or short, including description, quantity, price and valuation of each security, including contractual commitments in non-customers' accounts, in cash and fully secured accounts, partly secured and unsecured accounts and in securities accounts payable to non-customers; 52.1.2.2.8.3. Money balance and position, long or short, including description, quantity, price and valuation of each security, including contractual commitments included in the computation of Risk Based Capital Adequacy (RBCA) Ratio as commitments, securities owned, securities owned not readily marketable, and other investments owned not readily marketable; 52.1.2.2.8.4. Amount of secured demand note, description of collateral securing such secured demand note including quantity, price and valuation of each security and cash balance securing such secured demand note; 52.1.2.2.8.5. Number of shares, description of security, exercise price, cost and market value of put and call options including short out of the money, having no market or exercise value, showing listed and unlisted put and call options separately; 52.1.2.2.8.6. Quantity, price, and valuation of each security underlying the haircut for undue concentration made in the Computation for Net Capital; 52.1.2.2.8.7. Description, quantity, price, and valuation of each security or contractual commitment, long or short, in each joint account in which the Broker Dealer has an interest, including each participant's interest and margin deposit; 52.1.2.2.8.8. Description, settlement date, contract amount, market price, and valuation for each aged failed to deliver requiring a charge in the Computation of Net Capital; 52.1.2.2.8.9. Detail of all items, not otherwise substantiated which are charged or credited in the Computation of Net Capital pursuant to the Net Capital Rule, such as cash margin deficiencies, deductions related to securities values and undue concentration, aged securities differences and insurance claims receivable; and 52.1.2.2.8.10. Details relating to information for possession or control requirements and computations for determination of reserve requirements under the Rule on Customer Protection-Reserves and Custody of Securities. 52.1.2.2.8.11. A detailed description of the procedures which the Broker Dealer utilizes to comply with requirements set forth in "Annex E".49.1-1-A. 52.1.2.3. Every Broker Dealer shall preserve for a period of not less than five (5) years after the closing of any customer's account, the client agreement, account statement and any other records which relate to the terms and conditions with respect to the opening and maintenance of such account, including but not limited to customer identification, account files and business correspondence, provided, that if criminal, civil, or administrative cases including money laundering cases, have been filed in a competent judicial or administrative body, or an investigation is being conducted in which the customer is involved or impleaded as a party to the case or investigation, the documents mentioned above must be retained beyond the five-year period until it is confirmed by final judgment that the case has been finally resolved or terminated by the judicial or administrative body. 52.1.2.4. Every Broker Dealer shall preserve during the life of the enterprise and of any successor enterprise all partnership articles or, in the case of a corporation, all articles of incorporation or charter, minute books and stock certificate books. 52.1.2.5. Every Broker Dealer shall maintain and preserve in an easily accessible place all records required under SRC Rule 52.1.1.1.12 of the Books and Records Rule until at least three (3) years after the associated person or salesman has terminated his employment and any other connection with the Broker Dealer. 52.1.2.6. The records required to be maintained and preserved pursuant to this Rule may be immediately produced or reproduced on electronic form and/or medium and be maintained and preserved for the required time in that form. If such electronic form and/or medium substitution for hard copy is made by a Broker Dealer, it shall (a) at all times have available for the Commission, Exchange or SRO of which it is a member for examination of its records, facilities for immediate, easily readable projection of the electronic form and/or medium and for producing easily readable facsimile enlargements, (b) arrange the records and index and file the film in electronic form and/or medium in such a manner as to permit the immediate location of any particular record, (c) be ready at all times to provide and immediately provide, any facsimile enlargement which the Commission, Exchange or SRO by their examiners or other representatives may request, and (d) store separately from the original one other copies of the electronic form and/or medium for the time required. 52.1.2.7. Every Broker Dealer who ceases or suspends its trading operations voluntarily, shall preserve for a period of not less than five (5) years, from the date that the Exchange, SRO or Commission has approved the cessation or suspension, all records required to be maintained pursuant to the Books and Records Rule. The Broker Dealer shall inform the Exchange, SRO and the Commission of the names and addresses of at least two (2) persons responsible in the safekeeping of all the records, reporting any change in the person/s responsible, if there is any. For this purpose, the Broker Dealer and the named records custodians shall execute and file with the Commission a notarized undertaking to this effect. If administrative, civil or criminal cases have been filed in court or an investigation is being conducted or the customer is involved or impleaded as a party to the case or investigation, the books, records and trade-related assets shall be retained beyond the five-year period until it is confirmed by final judgment that the case has been finally resolved or terminated. Every Broker Dealer who has been involuntarily suspended shall surrender all books and records and trade-related assets to the pertinent SRO. The SRO shall retain custody over these books, records and trade-related assets for a period of not less than five (5) years, from the date that the SRO or Commission issued the takeover order. If administrative, civil or criminal cases have been filed in court or an investigation is being conducted on the Broker Dealer involved or impleaded as a party to the case or investigation, the SRO shall retain custody over these books, records and trade-related assets which must be retained beyond the five-year period until it is confirmed by final judgment that the case has been finally resolved or terminated. 52.1.2.8. If the records required to be maintained and preserved pursuant to the Books and Records Rule and Records Retention Rule are prepared or maintained by an outside service bureau, depository, bank or other recordkeeping service on behalf of the Broker Dealer required to maintain and preserve such records, such outside entity shall file with the SRO and the Commission a written undertaking in a form acceptable to the Commission, signed by a duly authorized person, to the effect that such records are the property of the Broker Dealer required to maintain and preserve such records and will be surrendered promptly on request of the Broker Dealer and including the following provision: "With respect to any books and records maintained or preserved on behalf of [name of Broker Dealer], the undersigned hereby undertakes to permit examination of such books and records at any time or from time to time during business hours by representatives or designees of the Securities and Exchange Commission, and/or any SRO to which the Broker Dealer is a member and to promptly furnish to the Commission and that SRO or their designee true, correct, complete and current hard copy of any or all or any part of such books and records." Agreement with an outside entity shall not relieve such Broker Dealer from the responsibility to prepare and maintain records as specified in this rule or in the Books and Records Rule. 52.1.2.9. Every Broker Dealer subject to this Rule shall furnish promptly to a representative of the Commission and any SRO to which the Broker Dealer is a member legible, true and complete copies of those records of the Broker Dealer which are required to be preserved under this Rule which are requested by the Commission or that SRO. 52.1.3. Keeping of Exchange Records An Exchange shall keep complete and accurate records of all its proceedings, transactions and decisions and such records shall be made available for inspection by the Commission. 52.1.4. Reports of Exchange Members and Brokers or Dealers Trading Through Members Every member of an Exchange and every Broker Dealer who transacts a business in securities through the medium of any such member shall, in the manner and form to be prescribed by the Commission, make such periodic, special or other reports as the Commission may by order require from time to time. 52.1.5. Annual Audited Financial Reports of Broker Dealers 52.1.5.1. Every Broker Dealer shall file with the Commission and SRO to which it is a member an Annual Audited Financial Report on SEC Form 52-AR, accomplished by a Commission-accredited independent certified public accountant, and a statement of management responsibility signed by chairman of the board of directors, chief executive officer and chief financial officer of the said Broker Dealer. 52.1.5.2. For Broker Dealer whose fiscal year ends on December 31, SEC Form 52-AR shall be filed with the Commission depending on the last numerical digit of its registration number as prescribed by the Commission. Broker Dealers whose fiscal year ends on a date other than December 31 shall file SEC Form 52-AR, 110 calendar days after the close of such fiscal year. 52.1.5.3. The report shall contain the Statement of Financial Condition, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows, Statement of Management's Responsibility, Statement of Changes in Liabilities Subordinated to Claims of General Creditors, Computation of Risk Based Capital Adequacy Requirement, Information Relating to the Possession or Control Requirements under Annex 49-2-A, Computation for Determination of Reserve Requirements Under Annex 49.2-B, a Report describing any material inadequacies found to exist or found to have existed since the date of the previous audit, Results of Monthly Securities Count Conducted pursuant to SRC Rule 52.1.10 as of the date of the balance sheet statement in the Annual Audited Financial Report. 52.1.5.4. All supporting papers pertaining to such report or statement shall be kept in the possession of the Broker Dealer for at least five (5) years and shall be made available for examination by the Commission and SRO. 52.1.5.5. For the purposes of this Rule, the term market value shall be understood to mean the last sale price of the security on the date of the report or statement; if no sale of the corresponding security is made on that date, it shall be understood to mean the bid price and, in the absence of any buyer, it shall be taken to mean the last sale price which is below the offer price on the date of the report or statement. For purposes of determining market value for a short position, where no sale of the corresponding security is made on that date, it shall be understood to mean the offer price and, in the absence of any seller, it shall be taken to mean the last sale price which is above the bid price on the date of the report or statement. 52.1.5.6. For the purposes of this Rule, the term material inadequacy encompasses either a material weakness in internal control or a material inadequacy in the practices and procedures for safeguarding securities. A material inadequacy that is expected to be reported includes any condition that has either contributed substantially to or, if appropriate corrective action is not taken, could reasonably be expected to cause any of the following: 52.1.5.6.1. Inhibit a Broker Dealer from completing securities transactions or promptly discharging its responsibilities to customers or to other Broker Dealers or creditors; 52.1.5.6.2. Result in material financial loss; 52.1.5.6.3. Result in material misstatements of the Broker Dealer's financial statements; 52.1.5.6.4. Result in violations of the Commission's recordkeeping or financial responsibility rules to an extent that could reasonably be expected to result in the conditions described above. If conditions believed to be material weaknesses are found to exist or have existed during the year, the report should disclose the nature of the weaknesses and the corrective action taken or proposed to be taken by the Broker Dealer. If management has implemented control procedures to correct the weaknesses, the auditor should not refer to this corrective action in his or her report unless the auditor is satisfied that the procedures are suitably designed to correct the weakness and are being applied as prescribed. cDSAEI 52.1.6. Customer Account Information Rule 52.1.6.1. Every Broker Dealer shall maintain for each account, the following information and requirements: 52.1.6.1.1. Customer's name, residence address, office address, principal business address and their corresponding phone numbers and email addresses, mobile phone number; 52.1.6.1.2. Trading Account Code; 52.1.6.1.3. Occupation of customer, and the name, address and phone number of employer, if employed; 52.1.6.1.4. At least one (1) of the following: Social Security Number, Government Service and Insurance System Number, Passport Number, Driver's License Number, Senior Citizen ID Number, Voter's ID Number or any government issued identification card number; 52.1.6.1.5. Sources of funds; 52.1.6.1.6. Nationality; 52.1.6.1.7. Signature of the salesman introducing the account and signature of the partner, officer or manager who accepts the account; 52.1.6.1.8. If the customer is a corporation, partnership or other legal entity: Articles of Incorporation/Partnership; By laws; Constitutive Documents of the entities; List of directors/partners and principal officers; List of stockholders owning at least two percent (2%) of the capital stock; Names of person/s authorized to transact business on behalf of the entity; Secretary's Certificate of board resolution authorizing the opening of the account with the Broker Dealer firm; 52.1.6.1.9. Specimen signatures; 52.1.6.10. Option whether confirmation of customer orders would be via courier, facsimile or electronically. 52.1.6.11. Where the customer is acting as agent of another person, the broker dealer shall validate the true and full identity of the principal on whose behalf a transaction is being conducted, and the name of such principal shall be indicated in said Customer Account Information Form ("CAIF"), otherwise said customer shall be considered as owner of the account. 52.1.6.12. Written authorization of the broker dealer and client for the duly authorized representatives of the Commission to examine and require the submission of the client records, accounts, orders, trades, positions, trading account codes and the names of clients corresponding to such trading account codes and any other information that the Commission may need at any time. 52.1.6.13. Taxpayer Identification Number and tax status. 52.1.6.2. For each account other than an institutional account, the Broker Dealer shall obtain in addition to the information and requirements under SRC Rule 52.1.6, prior to the settlement of the initial transaction in the account, the following information to the extent it is applicable to the account: 52.1.6.2.1. Whether the customer is employed by or otherwise associated with another Broker Dealer (e.g., officer, director, salesman, shareholder); 52.1.6.2.2. Whether the customer is an officer or director of a company listed on an Exchange; 52.1.6.2.3. The customer's investment objective and other related information concerning the customer's financial situation and needs; 52.1.6.2.4. If duplicate confirmations are required to be sent to another person, the identity of that person and his relationship to the customer. 52.1.6.3. For discretionary accounts, the Broker Dealer shall in addition to the information and requirements under SRC Rule 52.1.6.1 also: 52.1.6.3.1. Obtain the signature of each person authorized to exercise discretion in the account; 52.1.6.3.2. Record the date such discretion is granted; 52.1.6.3.3. Attach discretionary agreement executed between the Broker Dealer and the customer indicating the terms and conditions and extent of discretion to be exercised. 52.1.6.4. For corporate or institutional accounts, the Broker Dealer shall in addition to the information and requirements under SRC Rule 52.1.6, obtain, prior to the settlement of the initial transaction in the account, the following information to the extent it is applicable to the account: 52.1.6.4.1. Beneficial owners, if any; 52.1.6.4.2. Verification of the authority and identification of the person purporting to act on behalf of the client; 52.1.6.4.3. Financial Information; 52.1.6.4.4. Investment objective. 52.1.6.5. If more than one party is named on the account, separate account information shall be obtained for each party. 52.1.6.6. If the account is a trust account, a copy of the trust agreement shall be required. The agreement shall specify the types of transactions that the trustee is allowed to perform. These accounts cannot be margin accounts unless specifically authorized by the trust agreement. In addition, the trust account must indicate the following information: (1) if it is common, collective or individual account; (2) the name/s of the beneficial owner/s; (3) the name/s of the account owner/s; (4) if acting for his own account or as agent; and (5) if acting as agent, the principal must be specified. 52.1.6.7. A Broker Dealer shall not maintain a numbered account for trading or investment purposes of a client or his own account. All existing numbered accounts shall comply with the requirements of these revised rules within thirty (30) days from effectivity thereof. 52.1.6.8. The Broker Dealer shall develop clear customer acceptance policies and procedures when conducting business relations or accommodating specific transactions and shall exercise due diligence in implementing its policies and procedures. Furthermore, it shall adopt adequate internal control measures for verifying and recording the true and full identity of their customers. It shall require customers to produce original documents of identity issued by an official authority, preferably bearing a photograph of the customer and where practicable, maintain file copies of documents of identity; otherwise, relevant details on the identity documents will be recorded. 52.1.6.9. In the case of corporate clients, the Broker Dealer shall require a system of verifying their legal existence and organizational structure, as well as the authority and identification of all persons purporting to act on their behalf and shall exercise due diligence in implementing its policies and procedures. It shall endeavor to ensure, prior to establishing business relationships, that the corporate entity has not been or is not in the process of being dissolved, wound up, liquidated, or voided, or that its business or operations has not been or is not in the process of being, closed, shut down, phased out, or terminated. Dealings with shell companies and corporations, being legal entities which have no business substance in their own right but through which financial transactions may be conducted, should be undertaken with extreme caution. 52.1.6.10. In addition to the requirements prescribed in the immediately preceding SRC Rules, in the case of customers who are acting as trustee, nominee, agent or in any capacity for and on behalf of another, the Broker Dealer shall verify and record the true and full identity of the person(s) on whose behalf a transaction is being conducted. In case of doubt as to whether such persons are being used as dummies in circumvention of existing laws, the firm shall immediately make the necessary inquiries to verify the status of the business relationship between the parties. 52.1.6.11. Anonymous accounts, accounts under fictitious names, and all other similar accounts shall be absolutely prohibited. 52.1.6.12. The Broker Dealer cannot create new accounts without a face-to-face meeting. 52.1.6.13. All existing CAIFs shall be updated within one hundred eighty (180) days after the effectivity of these amendments and every two (2) years subsequent thereto. 52.1.6.14. The Broker Dealer shall maintain an electronic database of the information as contained in the CAIF, including the trading account code or client code, in such form or system wherein any information may be easily obtained or extracted. Client information in the database shall be made and kept current or as the need arises. The database shall be made available to the Commission, the Exchange or SRO during the conduct of an audit or for valid reason or upon request at any time by the Commission. 52.1.6.15. It is the Broker Dealer's duty to know its clients well and, accordingly, it shall be primarily responsible in keeping current all material information contained in the CAIF. 52.1.6.16. The Broker Dealer, its directors, officers, and associated persons, are required to report any suspicious client transaction to the Anti-Money Laundering Council (AMLC), pursuant to the provisions of the Anti-Money Laundering Act (RA 9160, as amended). For purposes of this section, a suspicious client transaction shall mean any transaction which causes any ordinary person to have a feeling of apprehension or mistrust about the transaction considering (a) its unusual nature or circumstances, or (b) the person or group of persons with whom they are dealing, and based on the bringing together of all relevant factors including knowledge or the person's or persons' business or background (as well as behavioral factors). 52.1.6.17. Broker Dealers shall comply with the provision on identification of customer's accounts and orders through the use of code, symbol or account number and multiple accounts. 52.1.6.18. Broker Dealers shall designate a unique or dedicated trading account/client code for each account maintained with the firm. Direct market access clients must be assigned unique client codes that will readily identify them as such. The unbundling of bundled accounts whether there is a change in nationality flag or not should be made not later than 12:00 Noon on T+1 in the case of trades in the Philippine Stock Exchange or such other deadline as may be ordered by the Commission. Should a client of a particular trading participant is another broker (who may or may not be a TP of PSE), then for purposes of execution of the order of such broker client, to classify such order as a bundled account. 52.1.6.19. Broker Dealers, Exchanges, SROs and trading market operators shall adopt a unique identifier for each client which shall be used in their respective markets and will be recognizable across markets. These entities shall coordinate with each other to devise the unique or compatible format for the required client identifier within one (1) year from effectivity of these revised rules. 52.1.7. Order Ticket Rule 52.1.7.1. Every order received by a Broker Dealer or any other associated person or salesman of a Broker Dealer to buy or sell securities for customers shall be entered on an order form, which shall contain at the minimum, all the information required by this Rule. Each buying or selling order form shall be time stamped by the Broker Dealer or any other associated person or salesman of a Broker Dealer or any person acting on his behalf upon receipt of the customer's order and upon transmission to the trading floor, if necessary. Time recording of subsequent action on an order, whether for amendment, cancellation or actual matching thereof, shall be captured by the computerized trading system of the Exchange or by time stamping, for over-the-counter transaction. Any such information captured by the computerized trading system of the Exchange shall be printed and made available for legal and/or audit purposes. 52.1.7.2. All the necessary time recordings shall be disclosed for the confirmation to the customer upon his request. 52.1.7.3. All Broker Dealers, who deal for their own account either directly or where a Member Broker Dealer, through another Member Broker, or trade for a discretionary account, as well as their partners, floor traders, officials and employees, shall record all purchase and sale orders on the same order form used by such brokers for their customers, and such order forms shall also be time-stamped as required by SRC Rule 52.1.7.1 hereof, and comply with SRC Rule 34.1. 52.1.7.4. Every Broker Dealer, associated person and salesman of a Broker Dealer, executing an order for a transaction in securities shall enter on the order ticket whether the transaction will be matched through the Exchange trading system or transacted as a block sale in accordance with SRC Rule 30.2.8, whether the firm is acting as agent or principal in connection with the transaction; Provided, however, Member Brokers are required to comply with SRC Rule 34.1 when placing orders for their own account. 52.1.7.5. In addition to the information required in SRC Rules 52.1.7.1, 52.1.7.2, 52.1.7.3, the order ticket shall reflect the terms and conditions of the order or instructions, including a notation if the order is a short sale, and any subsequent modification or cancellation, the name of the customer for which the order was entered, the name of the salesman who took the order, the price at which it is executed, and whether the order was solicited or unsolicited. 52.1.7.5.1. For purposes of this rule, an order is solicited or unsolicited depending on who first mentioned the name of the security. If mentioned first by the customer, the order should be marked unsolicited (regardless of who initiated the phone call or other communication). If mentioned first by the salesman, the order should be marked solicited. 52.1.7.5.2. The designation should be entered on real time on the order ticket and indicated on the confirmation. No person shall solicit investments in securities and other investment products unless he is a registered broker or dealer or licensed salesman of a broker dealer. 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. EDCcaS 52.1.7.6. All purchase and sale orders for the same security and under the same terms and conditions, including those placed by the Broker Dealer for its own account or for discretionary accounts and those placed by partners, floor traders, officials and employees, shall be executed by the Broker Dealer in the order in which they were received; Provided, however, Member Brokers shall comply with SRC Rule 34.1.2 regarding priority of customer orders. 52.1.7.7. All time stamping machines that are being used by Broker Dealers for the purposes of this Rule should be synchronized at all times in accordance with the official time of the Exchange and time stamping prints should always be clear. 52.1.7.8. Subject to prior approval by the Commission, a Broker Dealer may opt to maintain in electronic format the information required in this Rule. However, the Broker Dealer shall ensure that electronic copies of such information or its equivalent shall be kept current and made available to the Commission, the Exchange, or SRO concerned during the conduct of an audit or for any valid reason. Upon order of the Commission, or the request of the Exchange, or the SRO concerned, the Broker Dealer shall prepare in electronic form or printed hard copies of such information and submit such to the Commission or requestor without delay but in no case later than the period stated in the order or request. 52.1.8. Customer Account Statements 52.1.8.1. A Broker Dealer shall, at least once a month, send a statement of account containing a description of any securities positions, money balances, or account activity to each customer whose account has trades during the period since the last such statement was sent to the customer. Upon written request of the customer, the Broker Dealer may issue quarterly statements, in lieu of monthly statements, provided such written request shall be kept in the company's files for audit/investigation purposes. 52.1.8.2. Subject to prior approval by the Commission, a Broker Dealer may opt to use a statement of account in electronic format required in this Rule; Provided, that Broker Dealer shall provide his client a statement of account in paper format if requested by such client. A Broker Dealer shall ensure that the electronic copies of the account statement or the equivalent will be kept current and made available to the Commission, the Exchange, or SRO concerned during the conduct of an audit or for any valid reason, and upon the request of the Commission, the Exchange, or SRO concerned, prepare or print hard copies of such document and submit the same without delay. 52.1.8.3. The Broker Dealer shall be excused from the foregoing obligation if, after at least three (3) attempts, the statement sent by mail (with registry return cards), personal service, commercial courier or electronic mail is returned by the post office or commercial courier to the sender for failure to locate the addressee's whereabouts or it has not received any notification/indication that the customer has not received such electronic mail. In such cases, the Broker Dealer shall notify the Exchange of the status of these accounts and retain in its files the returned mail. 52.1.8.4. Notwithstanding the issuance of quarterly statements of account, the Broker Dealer shall maintain closing balances of customers' positions every end of the month. These balances shall be reflected and easily identified in the company's books and records. They shall be available for inspection by the Exchange, SRO and/or the Commission any time. 52.1.8.5. Such statements shall disclose that free credit balances are not segregated and may be used in the operation of the Broker Dealer and that such funds are payable on demand by the customer. 52.1.8.6. For purposes of this Rule, the term "account activity" shall include, but not be limited to, purchases, sales, interest credits or debits, charges or credits, dividend payments, transfer activity, securities receipts or deliveries, and/or journal entries relating to securities or funds in the possession or control of the Broker Dealer. 52.1.9. Customer Complaint Rule 52.1.9.1. Every Broker Dealer shall maintain and preserve in its respective offices separate files of all complaints from customers received by that office and the action taken by the Broker Dealer, properly indexed and referenced to the files containing the correspondence connected with such complaint. 52.1.9.2. Every Broker Dealer shall keep in its main office either a duplicate copy of all written complaints of customers received by all offices of the Broker Dealer and the action taken in respect thereto or a separate record of such complaints properly indexed and referenced to the files containing the correspondence connected with such complaint. 52.1.9.3. Every Broker Dealer shall notify in writing the SRO and the Commission of any written complaints received from the client and the action taken thereon by the Broker Dealer with respect thereto every 15th day of the month. Duplicate copies of the complaints shall be attached to the report. 52.1.9.4. Complaint shall mean any written statement and/or a transcript/written summary of the oral/verbal statements of a customer or any person acting on behalf of a customer alleging a grievance involving the activities of those persons under the control of the Broker Dealer in connection with the solicitation or execution of any transaction, the disposition of securities or funds of that customer or any other aspect of the Broker Dealer's business. 52.1.10. Monthly Securities Counts by Brokers Dealers 52.1.10.1. This rule shall apply to all Broker Dealers except those Broker Dealers who promptly transmit all funds and delivers all securities received in connection with its activities as a Broker Dealer, and who do not otherwise hold securities for itself or hold funds or securities for, or owe money or securities to, customers. 52.1.10.2. Any Broker Dealer who is subject to the provisions of this rule shall at least once a month: 52.1.10.2.1. If applicable, physically examine and count all securities held and compare the results with its records; 52.1.10.2.2. Account for and verify the discrepancies noted which may be caused by securities in transit, in transfer, pledged, loaned, borrowed, deposited, failed to receive, failed to deliver, subject to repurchase and reverse repurchase agreements, or otherwise subject to its control or direction but not in its physical possession. 52.1.10.2.3. Record on its books and records all unresolved discrepancies, setting forth the security involved, not later than the date when the securities count was made. 52.1.10.2.4. All unresolved securities differences shall be examined and accounted for within seven (7) business days after the date such differences were discovered. cDCEIA 52.1.10.2.5. Record on its books and records all unresolved differences setting forth the security involved and date of comparison in a security count difference account no later than seven (7) business days after the date of each required monthly security examination, count and verification in accordance with the requirements of SRC Rule 52.1.10.3; Provided, however, that no examination, count, verification and comparison for the purpose of this rule shall be made within fifteen (15) days following a prior examination, count, verification and comparison. 52.1.10.3. An independent quarterly examination, count, verification and comparison shall be conducted by the auditor. Such independent quarterly examination, count, verification and comparison may be made either as of a date certain or on a cyclical basis covering the entire list of securities. The provision of SRC Rule 52.1.10.2.4 shall apply for security differences noted. 52.1.10.4. The Commission and/or Exchange, if the Broker Dealer is a member of that Exchange, may, upon written request, exempt from the provisions of this rule, either unconditionally or on specified terms and conditions, any Broker Dealer who satisfies the Commission or that Exchange that it is not necessary in the public interest and for the protection of investors to subject that particular Broker Dealer to certain or all of the provisions of this rule because of the special nature of the Broker Dealer's business, the safeguards it has established for the protection of customers' funds and securities, or such other reasons as may be deemed appropriate. 52.1.11. Monthly Aging of Customers Receivable 52.1.11.1. Every Broker Dealer shall file with the Commission its Monthly Aging Schedule of Customers Receivable which shall be filed with the RBCA Report, certified to by the company's Associated Person and president/nominee director and also submitted to the Broker Dealer's audit committee or in lieu thereof, its board of directors. 52.1.11.2. The aging schedule shall indicate the monetary and securities collateral values of the customers' receivable as of end of month, broken down as follows: Classification T + 0 to T + 2 T + 3 to T + 13 T + 14 to T + 30 T + 31 up 52.1.11.3. Every Broker Dealer shall appropriate Allowance for Doubtful Accounts (ADA) using and in accordance with the following schedule: The ADA is computed by getting, for each doubtful account, an amount equivalent to the provision (see Table above) of the amount outstanding, net of collateral (net of haircut). Basis for the computation would be the individual accounts. 52.1.12. Access to Back Office Records Broker dealers shall provide the Commission and the SRO concerned access to their back office records via electronic means or otherwise for monitoring, surveillance, examination, investigation and reconstruction of trade events and conduct of trade analysis, and upon the request of the Commission, or SRO concerned, prepare or print copies of such records and submit the same within twenty four (24) hours from receipt of request. 53.1. The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of the Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency, other self-regulatory organization, and may require or permit any person to file with it a statement in writing, under oath or otherwise, as the Commission shall determine, as to all facts and circumstances concerning the matter to be investigated. The Commission may publish information concerning any such violations, and to investigate any fact, condition, practice or matter which it may deem necessary or proper to aid in the enforcement of the provisions of the Code, in the prescribing of rules and regulations thereunder, or in securing information to serve as a basis for recommending further legislation concerning the matters to which the Code relates; Provided, however, That any person requested or subpoenaed to produce documents or testify in any investigation shall simultaneously be notified in writing of the purpose of such investigation; Provided, further, That all criminal complaints for violations of the Code, and the implementing rules and regulations enforced or administered by the Commission shall be referred to the Department of Justice for preliminary investigation and prosecution before the proper court; Provided, furthermore, That in instances where the law allows independent civil or criminal proceedings of violations arising from the same act, the Commission shall take appropriate action to implement the same; Provided, finally, That the investigation, prosecution, and trial of such cases shall be given priority. 53.2. For the purpose of any such investigation, or any other proceeding under the Code, the Commission or any officer designated by it is empowered to administer oaths and affirmations, subpoena witnesses, compel attendance, take evidence, require the production of any book, paper, correspondence, memorandum, or other record which the Commission deems relevant or material to the inquiry, and to perform such other acts necessary in the conduct of such investigation or proceedings. 53.3. Whenever it shall appear to the Commission that any person has engaged or is about to engage in any act or practice constituting a violation of any provision of the Code, any rule, regulation or order thereunder, or any rule of an Exchange, registered securities association, clearing agency or other self-regulatory organization, it may issue an order to such person to desist from committing such act or practice; Provided, however, That the Commission shall not charge any person with violation of the rules of an Exchange or other self-regulatory organization unless it appears to the Commission that such Exchange or other self-regulatory organization is unable or unwilling to take action against such person. After finding that such person has engaged in any such act or practice and that there is a reasonable likelihood of continuing, further or future violations by such person, the Commission may issue ex-parte a cease and desist order for a maximum period of ten (10) days, enjoining the violation and compelling compliance with such provision. The Commission may transmit such evidence as may be available concerning any violation of any provision of the Code, or any rule, regulation or order thereunder, to the Department of Justice, which may institute the appropriate criminal proceedings under the Code. 53.4. Any person who, within his power but without cause, fails or refuses to comply with any lawful order, decision or subpoena issued by the Commission under Subsection 53.2 or Subsection 53.3 or Section 64 of the Code, shall after due notice and hearing, be guilty of contempt of the Commission. Such person shall be fined in such reasonable amount as the Commission may determine, or when such failure or refusal is a clear and open defiance of the Commission's order, decision or subpoena, shall be detained under an arrest order issued by the Commission, until such order, decision or subpoena is complied with. 54.1. If, after due notice and hearing, the Commission finds that: (a) There is a violation of the Code, its rules, or its orders; (b) Any registered broker or dealer, associated person thereof has failed reasonably to supervise, with a view to preventing violations, another person subject to supervision who commits any such violation; (c) Any registrant or other person has, in a registration statement or in other reports, applications, accounts, records or documents required by law or rules to be filed with the Commission, made any untrue statement of a material fact, or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading; or, in the case of an underwriter, has failed to conduct an inquiry with reasonable diligence to insure that a registration statement is accurate and complete in all material respects; or (d) Any person has refused to permit any lawful examinations into its affairs, it shall, in its discretion, and subject only to the limitations hereinafter prescribed, impose any or all of the following sanctions as may be appropriate in light of the facts and circumstances: 54.1.1. Suspension, or revocation of any registration for the offering of securities; 54.1.2. A fine of no less than Ten thousand pesos (P10,000.00) nor more than One million pesos (P1,000,000.00) plus not more than Two thousand pesos (P2,000.00) for each day of continuing violation; 54.1.3. In the case of a violation of Sections 19.2, 20, 24, 26 and 27, disqualification from being an officer, member of the Board of Directors, or person performing similar functions, of an issuer required to file reports under Section 17 of the Code or any other act, rule or regulation administered by the Commission; 54.1.4. In the case of a violation of Section 34, a fine of no more than three (3) times the profit gained or loss avoided as a result of the purchase, sale or communication proscribed by such Section; and 54.1.5. Other penalties within the power of the Commission to impose. 54.2. The imposition of the foregoing administrative sanctions shall be without prejudice to the filing of criminal charges against the individuals responsible for the violation.