MIDTERMS

• The Securities and Exchange Commission (SEC) is the administrative agency that administers the Securities Regulation Code (Republic Act 8799)
• Emilio Benito Aquino


  First CPA-Lawyer appointed as Chairperson and CEO of the SEC, serving a 7-year term since June 7, 2018
• SEC Chairperson and Commissioners

  • Appointed by the President for a 7-year term
  • Must be natural-born Filipino citizens, at least 40 years old for Chairperson and 35 for Commissioners
  • Must have good moral character, unquestionable integrity, known probity and patriotism, and recognized competence in social and economic disciplines
  • Majority must be members of the Philippine Bar
• Chairperson of the SEC


  Chief executive officer, executes and administers the policies, decisions, orders and resolutions approved by the Commission, has general executive direction and supervision of the SEC's work and operations
• The salary of the SEC Chairperson and Commissioners is fixed by the President based on an objective classification system, comparable to the Monetary Board and commensurate to the importance and responsibilities of the position
• SEC Meetings


  1. Held at least once a week or as often as necessary upon call of the Chairperson or request of 3 Commissioners

  2. Quorum is 3 Commissioners, in absence of Chairperson the most senior Commissioner presides
• The SEC may delegate any of its functions to any department, office, individual Commissioner or staff member, except its review/appellate authority and power to adopt, alter or supplement rules/regulations
• Powers and Functions of the SEC

  • Have jurisdiction and supervision over corporations, partnerships or associations with government-issued franchises, licenses or permits
  • Formulate policies and recommendations on securities market, advise Congress and other agencies, propose legislation
  • Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications
  • Regulate, investigate or supervise the activities of persons to ensure compliance
  • Supervise, monitor, suspend or take over exchanges, clearing agencies and other SROs
  • Impose sanctions for violations of laws, rules, regulations and orders
  • Prepare, approve, amend or repeal rules, regulations and orders, issue opinions and provide guidance
  • Enlist aid and support of government enforcement agencies and private entities
  • Issue cease and desist orders to prevent fraud or injury to the investing public
  • Punish for contempt of the Commission
  • Compel officers of registered corporations/associations to call stockholder/member meetings
  • Issue subpoena duces tecum, order examination, search and seizure of documents
  • Suspend or revoke franchises or certificates of registration
  • Exercise other powers provided by law or necessary to carry out its express powers
• Underwriting activities are regulated by the SEC, and Republic Act 8799 governs the issuance of securities in the Philippines
• Registration Statement


  Filed by the issuer of a security, containing information on the issuer's business, key features of the security, investment risks, and management background. Must include financial statements audited by an independent public accountant.
• Registration Process


  • First part is the prospectus distributed to the public as the securities offering
  • Second part contains supplemental information available from the SEC upon request
  • Underwriter may be sued if they do not conduct thorough due diligence investigation
• Shelf Registration


  Allows securities to be registered for a continuous or delayed offering over a period of up to 3 years, enabling issuers to raise capital as needed or when market conditions are favorable
• Private Placement


  Sale of securities to less than 20 persons, typically large investors like banks, mutual funds and pension funds
• Secondary market


  • Provides regular information to the issuer about the value of securities
  • Provides opportunity to the original buyers of the asset to reverse their investment by selling it for cash
• Primary Market


  Where new securities are created and sold by firms, governments and institutions to raise additional funds through debt and equity offerings
• Entities in the Primary Market

  • Company issuing securities for the first time through an Initial Public Offering
  • Underwriter that decides the sale price of the new issue securities
  • Investors purchasing the new securities
• The Philippine Stock Exchange is located at 1801 East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City
• Securities and Exchange Commission (SEC)

  • Independent government agency which supervises the securities market, oversees the operation of the PSE and its members, and ensures compliance with the provisions of the securities act
  • Issues the rules and regulations subject to the approval by the Monetary Board
  • Major functions include: Registration of securities, analysis of every registered security, evaluation of the financial condition and operations of applicants for security issue
• Philippine Stock Exchange (PSE)

  • A self-regulatory organization with the authority to police its ranks through the Compliance and Surveillance Group (CSG)
  • A private non-profit and non-stock organization created to provide and maintain a fair, efficient, transparent and orderly market for the purchase and sale of securities such as stocks, warrants, bonds, options and others
• Primary Market


  Where securities are created. Firms sell new stocks and bonds to the market for the first time.
• Primary Market


  Enables the government, companies, and other institutions to raise additional funds through the sale of debt and equity related securities.
• Examples of primary market securities: notes, bills, government bonds, and stocks of companies
• Philippine Stock Exchange: 1801 East Tower, Philippine Stock Exchange Centre, Exchange Road, Ortigas Center, Pasig City Postal Code 1605
• Role of the PSE

  1. Bring together companies which aim to raise capital through the issue of new securities

  2. Provide companies with easier access to their funds through the listing of their share in the stock exchange

  3. Facilitate the selling and buying of the issued stocks and warrants

  4. Provide a suitable market for trading securities to individuals and organization who want to invest their savings and excess funds

  5. Committed to protect the interest of the investing public and develop and maintain an efficient, fair, orderly and transparent market
• Entities in the Primary Market

  • Company
  • Underwriter
  • Investors
• Efficient market


  • Orders are executed and transactions are settled in the fastest possible way
  • Fully automated machine is installed
  • Installation of trading terminal outside metro manila to encourage provincial investors
• Company


  Issues securities for the first time in the primary market. This process is known as Initial Public Offering.
• Underwriter


  Decides the sale price of the new issue securities. Financial institutions such as investment banks, insurance companies, etc. offer underwriting services.
• Fair market


  • PSE assures that no investor will have undue advantage over another market player in manipulating prices and engaging into insider trading
  • Insider trading is the act of buying and selling a particular stock based on certain privileged information which is not available to the public, this is illegal and prohibited by the PSE
• Investors


  Purchasers of the new security in the primary market. Once the company receives the money, it issues the certificate to the investor. The certificate can be issued at face value, premium value or par value.
• Market transparency


  • Investor can only make informed and intelligent stock information about the particular stocks he wants to buy
  • The PSE required the listed companies to disclose timely, complete and accurate material information to the exchange and the public regularly
• Primary distribution


  Sale of a new security. Public reception to new issue is still unknown factor, established companies take precautions in marketing a new issue through experienced institutional security dealer.
• Unit trading


  • The exchanges establishes a unit of trading called board or round lot
  • Board lot means buying or selling the securities in an established amount
  • The PSE establishes board lots on the basis of respective price ranges
• Primary distribution


  Mostly done via the investment bankers, private placement, or direct sale by a company to individual investors. New issues are never traded through the security exchanges.
• Secondary Market


  Created for seasonal securities. These are securities which have passed the test of public acceptance.
• Underwriter


  A bank or financial institution that pledges to buy all the unsold shares in an issue of new shares.
• Underwriter syndicate


  A temporary group of banks and broker-dealers who come together to sell new offerings of equity or debt securities to investors.
• Buying and selling orders

  1. The order to buy or sell may either be at the market price basis or a limit order

  2. The limit order specifies a maximum order price

  3. Trading in the exchange is a continuing auction sale

  4. Brokers with buy orders compete with each other in purchasing the stocks at the lowest bid price

  5. Brokers compete with each other in selling the stocks at the highest asked price

  6. The market price is dictated by supply and demand conditions and the continuous bargaining between buyers and sellers

  7. PSE controls price behavior imposing minimum fluctuations for each security in accordance with its respective range
• Investment House


  An intermediary between the sources of capital, the investors, and its users, the business firm. The primary business of the investment house is the marketing of financial instruments.
• Margin trading


  • An investor may pay in full for the security he buys or he may just put up a portion of the purchase price
  • Margin trading refers to the purchase of securities where the buyer only pays a part of the purchase price with the balance usually advance by the broker, payable at specified future time