The Securities Regulation Code and its Implementing Rules and Regulations

Rule 54

3 Enforcement of Administrative Sanctions In enforcing the provisions of Section 54 of the SRC and the payment of the fees and other dues collectible under the SRC, the following shall be observed. 54.3.1. No application for registration or licensing or amendment thereto, or request for exemptive relief or for reconsideration, or other similar requests filed by a non-paying delinquent or disobedient party shall be accepted by the Commission or any of its Operating Departments until a Decision, Order or Resolution being enforced is fully complied with. A delinquent or disobedient party refers to a natural or juridical person who fails or refuses to comply with a Decision, Order or Resolution of the Commission or any court that is being enforced or executed. 54.3.2. The name of the non-paying, delinquent or disobedient party shall be included in a Watchlist to be maintained by the Information & Communications Technology Department (ICTD) upon recommendation by the Operating Department concerned. Only upon full compliance, or partial compliance as may be directed by the Commission, shall the non-paying, delinquent or disobedient party be removed from the Watchlist upon recommendation by the Operating Department concerned to ICTD.

Rule 55

1 Settlement Offers 55.1.1. Any person or entity (proposer), who has an investigation or proceeding instituted against him, or any party to a proceeding already instituted, before the Enforcement and Investor Protection Department (EIPD), may, at any time propose in writing to the Director of the EIPD an offer of settlement. Only settlement offers equal to or more than fifty (50%) percent of the total imposable fine or damage caused shall be considered. However, if the violation involves fraud, deceit or manipulation, as determined by the handling staff/team, only settlement offers that are equal to or greater than one hundred percent (100%) of the total imposable fine or damage caused shall be considered. Settlement offers that are at least equal to 50% of the total imposable fine and/or damages shall be prioritized for resolution by the Commission. A settlement offer can no longer be made after an Order resolving the case has become final and executor or the case is already pending with the courts. Further, the following cases shall not be the subject of settlement: 55.1.1.1. Non-filing of required reports; 55.1.1.2. Late-filing of required reports; 55.1.1.3. Cases involving the Foreign Investments Act of 1991; 55.1.1.4. Fines for violation of the Corporation Code; and 55.1.1.5. Violations of the Revised Penal Code and special laws. 55.1.2. An offer of settlement shall state that it is being made pursuant to Section 55 of the Code and SRC Rule 55.1 adopted thereunder, recite or incorporate as part of the offer the provisions of SRC Rules 55.1.3.4 and 55.1.3.5, and be signed by the person making the offer. If the proposer is a juridical person, the proper board resolution certified by the Corporate Secretary shall also be attached to the offer. Upon submission of an offer of settlement, the proposer shall simultaneously tender the amount offered. 55.1.3. Consideration of Settlement Offers: 55.1.3.1. In the evaluation of offers of settlement, the Director of the EIPD, upon consultation with the handling staff/team shall take into consideration the following, to wit: 55.1.3.1.1. Whether the act or omission involved fraud; 55.1.3.1.2. The amount of damage, actual or estimate, if any; 55.1.3.1.3. Gravity of the offense; 55.1.3.1.4. The time and other resources spent by or required of the Commission on the case; 55.1.3.1.5. The amount of the imposable penalty and the financial capacity of the proposer to pay the same; 55.1.3.1.6. The level of cooperation of the proposer in the investigation or proceedings; 55.1.3.1.7. Whether the proposer has been found to have previously violated any laws or rules enforced by the Commission; 55.1.3.1.8. The chances of success if the case were to go to trial; DHESca 55.1.3.1.9. Public interest; and 55.1.3.1.10. Other meritorious considerations (ex. age of the respondent, stature, etc.) 55.1.3.2. The handling staff's/team's statements or position regarding the presence of fraud, deceit or manipulation, appropriateness of the offer of settlement or participation in a settlement conference shall not be construed by the proposer as bias or prejudgment by the handling staff/team regardless of the views expressed. Neither shall the Commission be bound by such statement or position. 55.1.3.3. The Director of the EIPD shall present the offer of settlement to the Commission with its recommendations: Provided, however, that if the EIPD's recommendation is unfavorable, the same shall be made known in writing to the proposer. The offer shall not be presented to the Commission unless the proposer so requests in writing within five (5) days from receipt of the denial of the offer. 55.1.3.4. By submitting an offer of settlement, the proposer waives, subject to the acceptance of the offer: 55.1.3.4.1. all hearings pursuant to the statutory provisions under which the investigation or proceeding is to be or has been instituted; 55.1.3.4.2. the filing of proposed findings of fact and conclusions of law; 55.1.3.4.3. proceedings before, and an initial decision by, the appropriate office or department of the Commission so delegated; 55.1.3.4.4. all post-hearing procedures; and 55.1.3.4.5. right to appeal the Order of the Commission. 55.1.3.5. By submitting an offer of settlement, the proposer further waives: 55.1.3.5.1. Such provisions of law as may be construed to prevent any member of the Commission's staff from participating in the preparation of, or advising the Commission as to, any order, opinion, finding of fact, or conclusion of law to be entered pursuant to the settlement offer; 55.1.3.5.2. Any right to claim bias or prejudgment by the Commission based on the consideration of discussions concerning settlement or all or any part of the proceeding. 55.1.3.6. If the Commission rejects the offer of settlement, the EIPD shall notify the proposer in writing of the Commission's action and the offer of settlement shall be deemed withdrawn. The rejected offer shall not constitute part of the record in any proceeding against the proposer; Provided, however, that rejection of an offer of settlement does not affect the continued validity of waivers pursuant to SRC Rule 55.1.3.5 with respect to any discussions concerning the rejected offer of settlement. 55.1.3.7. Final acceptance by the Commission of any offer of settlement shall occur only upon the issuance of a summary of findings, admission of fault or stipulation of facts, as the case may be, and the Order of the Commission shall become effective only upon public disclosure thereof on the Commission's website and/or in such other manner. The Order may be made without a determination of guilt or innocence on the part of the proposer and shall include the name of the proposer, sections of the Code and rules and regulations adopted hereunder involved, and other applicable conditions. 55.1.3.8. In any of the following instances, the Commission, may, in its discretion, require the proposer, to make an admission of fault or enter into stipulation of facts, as part of the terms of the settlement or as a condition for the acceptance of the settlement offer: 55.1.3.8.1. Where the violation committed by the proposer has caused widespread harm to the investing public; 55.1.3.8.2. When there is clear intention on the part of the proposer to violate the provisions of the law; 55.1.3.8.3. When the proposer, in order to avoid liability for violation of the provisions of the law enforced by the Commission, intentionally omits to provide material information and/or provides the Commission with false information or statements; 55.1.3.8.4. When the proposer employs means intended to obstruct, delay or defeat an ongoing SEC investigation and/or conceal the identity of the corporation, person or persons responsible for the said violation. 55.1.3.9. In cases wherein the proposer has caused damage to the public, the Commission, may, in its discretion, require the proposer, as a condition for the approval of the settlement offer, to disgorge all illegal gains. 55.1.3.10. In the absence of any period stated in the En Banc Resolution of the Commission, the proposer shall fully comply with the terms and conditions of the settlement within a period of fifteen (15) days upon receipt of a copy of the said Resolution. 55.1.3.11. In case the proposer shall fail to fully comply with any of the terms of the settlement offer within the period provided under the next preceding SRC Rule, the Resolution of the Commission on the settlement shall be considered withdrawn and the investigation or proceedings against the proposer shall be reinstated. 55.1.3.12. The approval of the settlement offer by the Commission and full compliance of the terms thereof by the proposer shall preclude the filing of criminal case. 55.1.4. The Commission may use the provisions of this Rule as guide in considering settlement offers made by a proposer who is a respondent or accused in a criminal complaint filed by the Commission in connection with any violation of the Code. 56.1. Any person acquiring a security, the registration statement of which or any part thereof contains on its effectivity an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make such statements not misleading, and who suffers damage, may sue and recover damages from the following enumerated persons, unless it is proved that at the time of such acquisition he knew of such untrue statement or omission: 56.1.1. The issuer and every person who signed the registration statement; 56.1.2. Every person who was a director of, or any other person performing similar functions, or a partner in, the issuer at the time of the filing of the registration statement or any part, supplement or amendment thereof with respect to which his liability is asserted; 56.1.3. Every person who is named in the registration statement as being or about to become a director of, or a person performing similar functions, or a partner in, the issuer and whose written consent thereto is filed with the registration statement; 56.1.4. Every auditor or auditing firm named as having certified any financial statements used in connection with the registration statement or prospectus. cDTACE 56.1.5. Every person who, with his written consent, which shall be filed with the registration statement, has been named as having prepared or certified any part of the registration statement, or as having prepared or certified any report or valuation which is used in connection with the registration statement, with respect to the statement, report, or valuation, which purports to have been prepared or certified by him. 56.1.6. Every selling shareholder who contributed to and certified as to the accuracy of a portion of the registration statement, with respect to that portion of the registration statement which purports to have been contributed by him. 56.1.7. Every underwriter with respect to such security. 56.2. If the person who acquired the security did so after the issuer has made generally available to its security holders an income statement covering a period of at least twelve months beginning from the effective date of the registration statement, then the right of recovery under this subsection shall be conditioned on proof that such person acquired the security relying upon such untrue statement in the registration statement or relying upon the registration statement and not knowing of such income statement, but such reliance may be established without proof of the reading of the registration statement by such person. 57.1. Any person who: 57.1.1. Offers to sell or sells a security in violation of Chapter III of the Code; or 57.1.2. Offers to sell or sells a security, whether or not exempted by the provisions of the Code, by the use of any means or instruments of transportation or communication, by means of a prospectus or other written or oral communication, which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements, in the light of the circumstances under which they were made, not misleading (the purchaser not knowing of such untruth or omission), and who shall fail in the burden of proof that he did not know, and in the exercise of reasonable care could not have known, of such untruth or omission, shall be liable to the person purchasing such security from him, who may sue to recover the consideration paid for such security with interest thereon, less the amount of any income received thereon, upon the tender of such security, or for damages if he no longer owns the security. 57.2. Any person who shall make or cause to be made any statement in any report, or document filed pursuant to the Code or any rule or regulation thereunder, which statement was at the time and in the light of the circumstances under which it was made false or misleading with respect to any material fact, shall be liable to any person who, not knowing that such statement was false or misleading, and relying upon such statements shall have purchased or sold a security at a price which was affected by such statement, for damages caused by such reliance, unless the person sued shall prove that he acted in good faith and had no knowledge that such statement was false or misleading. Any person who engages in any act or transaction in violation of Sections 19.2, 20 or 26 of the Code, or any rule or regulation of the Commission thereunder, shall be liable to any other person who purchases or sells any security, grants or refuses to grant any proxy, consent or authorization, or accepts or declines an invitation for tender of a security, as the case may be, for the damages sustained by such other person as a result of such act or transaction. Any person who willfully participates in any act or transaction in violation of Section 24 of the Code shall be liable to any person who shall purchase or sell any security at a price which was affected by such act or transaction, and the person so injured may sue to recover the damages sustained as a result of such act or transaction. 60.1. Any person who engages in any act or transaction in willful violation of any rule or regulation promulgated by the Commission under Section 11 or 16 of the Code, which the Commission denominates at the time of issuance as intended to prohibit fraud in the offer and sale of commodity future contracts or to prohibit fraud, manipulation, fictitious transactions, undue speculation, or other unfair or abusive practices with respect to commodity future contracts, shall be liable to any other person sustaining damage as a result of such act or transaction. 60.2. As to each such rule or regulation so denominated, the Commission by rule shall prescribe the elements of proof required for recovery and any limitations on the amount of damages that may be imposed. 61.1. Any insider who violates Subsection 27.1 of the Code and any person in the case of a tender offer who violates Subsection 27.4 (a) (i) of the Code, or any rule or regulation thereunder, by purchasing or selling a security while in possession of material information not generally available to the public, shall be liable in a suit brought by any investor who, contemporaneously with the purchase or sale of securities that is the subject of the violation, purchased or sold securities of the same class unless such insider, or such person in the case of a tender offer, proves that such investor knew the information or would have purchased or sold at the same price regardless of disclosure of the information to him. 61.2. An insider who violates Subsection 27.3 of the Code or any person in the case of a tender offer who violates Subsection 27.4 (a) of the Code, or any rule or regulation thereunder, by communicating material non-public information, shall be jointly and severally liable under Subsection 61.1 of the Code with, and to the same extent as, the insider, or person in the case of a tender offer, to whom the communication was directed and who is liable under Subsection 61.1 of the Code by reason of his purchase or sale of a security. 62.1. No action shall be maintained to enforce any liability created under Section 56 or 57 of the Code unless brought within two (2) years after the discovery of the untrue statement or the omission, or, if the action is to enforce a liability created under Subsection 57.1 (a) of the Code, unless brought within two (2) years after the violation upon which it is based. In no event shall any such action be brought to enforce a liability created under Section 56 or Subsection 57.1 (a) of the Code more than five (5) years after the security was bona fide offered to the public, or under Subsection 57.1 (b) of the Code, more than five (5) years after the sale. 62.2. No action shall be maintained to enforce any liability created under any other provision of this Code unless brought within two (2) years after the discovery of the facts constituting the cause of action and within five (5) years after such cause of action accrued. 63.1. All suits to recover damages pursuant to Sections 56, 57, 58, 59, 60 and 61 of the Code shall be brought before the Regional Trial Court, which shall have exclusive jurisdiction to hear and decide such suits. The Court is hereby authorized to award damages in an amount not exceeding triple the amount of the transaction plus actual damages. Exemplary damages may also be awarded in cases of bad faith, fraud, malevolence or wantonness in the violation of the Code or the rules and regulations promulgated thereunder. The Court is also authorized to award attorney's fees not exceeding thirty percentum (30%) of the award. 63.2. The persons specified in Sections 56, 57, 58, 59, 60 and 61 of the Code hereof shall be jointly and severally liable for the payment of damages. However, any person who becomes liable for the payment of such damages may recover contribution from any other person who, if sued separately, would have been liable to make the same payment, unless the former was guilty of fraudulent representation and the latter was not. 63.3. Notwithstanding any provision of law to the contrary, all persons, including the issuer, held liable under the provisions of Sections 56, 57, 58, 59, 60 and 61 of the Code shall contribute equally to the total liability adjudged herein. In no case shall the principal stockholders, directors and other officers of the issuer or persons occupying similar positions therein, recover their contribution to the liability from the issuer. However, the right of the issuer to recover from the guilty parties the amount it has contributed under this Section shall not be prejudiced. 64.1. The Commission, after proper investigation or verification, motu proprio, or upon verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public. 64.2. Until the Commission issues a cease and desist order, the fact that an investigation has been initiated or that a complaint has been filed, including the contents of the complaint, shall be confidential. Upon issuance of a cease and desist order, the Commission shall make public such order and a copy thereof shall be immediately furnished to each person subject to the order. 64.3. Any person against whom a cease and desist order was issued may, within five (5) days from receipt of the order, file a formal request for a lifting thereof. Said request shall be set for hearing by the Commission not later than fifteen (15) days from its filing and the resolution thereof shall be made not later than ten (10) days from the termination of the hearing. If the Commission fails to resolve the request within the time herein prescribed, the cease and desist order shall automatically be lifted. Service of summons or other process shall be made upon the Commission in actions or legal proceedings against an issuer or any person liable under the Code who is not domiciled in the Philippines. Upon receipt by the Commission of such summons, the Commission shall within ten (10) days thereafter, transmit by registered mail a copy of such summons and the complaint or other legal process to such issuer or person at his last known address or principal office. The sending thereof by the Commission, the expenses for which shall be advanced by the party at whose instance it is made, shall complete such service. 66.1. All information filed with the Commission in compliance with the requirements of the Code shall be made available to any member of the general public, upon request, in the premises and during regular office hours of the Commission, except as set forth in this Section. 66.2. Nothing in the Code shall be construed to require, or to authorize the Commission to require, the revealing of trade secrets or processes in any application, report, or document filed with the Commission.