Category Archives: Securities & FinTech

Real Estate Investment Trust (REIT) in the Philippines: Introduction and Salient Points

A Real Estate Investment Trust (“REIT”) is a stock corporation established principally for the purpose of owning income-generating real estate assets. For purposes of clarity, a REIT, although designated as a “trust”, does not have the same technical meaning as “trust” under existing laws and regulations but is used for the sole purpose of adopting the internationally accepted description of the company in accordance with global best practices. 

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Securities Borrowing and Lending (SBL) and Short Selling in the Philippines: Implementing Guidelines

The SEC announced that in its en banc meeting on 17 December 2019, it approved the Implementing Guidelines on Securities Borrowing and Lending (SBL) and Short Selling issued by the PSE’s Capital Markets Integrity Corporation (CMIC). The Securities Regulation Code and the 2015 SRC Rules provide for the general regulations on short selling. The salient features of the Implementing Guidelines on SBL and short selling, which took effect on 25 February 2020, are as follows:

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Insider Trading in the Philippines: Prohibited under the Securities Regulation Code

Insider trading is illegal in the Philippines. Section 27 of the Securities Regulation Code provides that: “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.” This, in essence, is the definition of insider trading. It has three elements: (1) the person must be an insider; (2) the insider sells or buys the security of the issuer; and (3) the insider is in possession of material nonpublic information with respect to the issuer or its security. These are discussed in seriatim below.

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Unregistered Cryptocurrency Investments: SEC Advises Public to be Wary

The Securities and Exchange Commission (SEC) advised the public not to invest or stop investing in schemes or initial coin offerings and digital asset trading which are not compliant with the guidelines of the Bangko Sentral ng Pilipinas (BSP) and SEC. The SEC, through its Enforcement and Investor Protection Department, recently issued a number of advisories warning the public about the activities of certain entities, including the following:

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Material Information: Concept / Treatment under the Securities Regulation Code of the Philippines

A material fact or information, as defined in the 2015 SRC Rules, refers to any fact or information that may result in a change in the market price or value of any of the Issuer’s securities, or may potentially affect the investment decision of an investor. Material information shall include, but not be limited to, the following: 

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Implementing Rules and Regulations of Republic Act No. 9856, otherwise known as the Real Estate Investment Trust (REIT) Act of 2009: Table of Contents, Full Text

SEC Memorandum Circular No. 1, series of 2020, containing “The Implementing Rules and Regulations of Republic Act No. 9856, otherwise known as the Real Estate Investment Trust (REIT) Act of 2009, was published at the PDI and Philippine Star, and filed with the UP Law Center, on 23 January 2020. The REIT Rules took effect on 7 February 2020. See Introduction / Salient Points. The full text is available by clicking the link to each item of the Table of Contents:

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Short Sales (Short Selling) under the Securities Regulation Code

The Securities Regulation Code provides that the Securities and Exchange Commission (SEC) 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 SEC 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. 

[See Securities Borrowing and Lending (SBL) and Short Selling: Implementing Guidelines]

Under the SRC and its IRR, the term “short sale” means 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. 


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 SEC. 

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. 


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. 


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 SEC. [See also Eligible securities]


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 SEC, 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. 


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 SEC as prima facie evidence of the lack of intention on his part to make such delivery. 


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 SEC, or in accordance with rules of the clearing agency that shall clear and settle the transactions. 


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. 


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 SEC.