Definition and characterization of terms as used in the Securities Regulation Code (Republic Act No. 8799), the “2015 Implementing Rules and Regulations of the Securities Regulation Code” (2015 SRC Rules) and other related issuances, including the Rules and Regulations Governing Crowdfunding (CF). This is a work in progress.
Associated person of a broker or dealer
An employee therefor whom, directly exercises control of supervisory authority, but does not include a salesman, or an agent or a person whose functions are solely clerical or ministerial.
Beneficial owner or beneficial ownership means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power (which includes the power to vote or direct the voting of such security) and/or investment returns or power (which includes the power to dispose of, or direct the disposition of such security). [See Concept of beneficial owner under the Securities Regulation Code]
Bill of Exchange
Bill of Exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to order or to bearer.
Books and Records Rule
A Broker Dealer shall make, keep current and maintain in its principal office a list of books and records relating to its business. [See Books and Records Rule for Broker Dealer]
A person engaged in the business of buying and selling securities for the account of others. [See also Dealer and Broker Dealer]
Any entity that buys or sells securities for its own and customers’ account and who shall be registered with the Securities and Exchange Commission (SEC). [See also Broker and Dealer]
Any person who acts as intermediary in making deliveries upon payment effect settlement in securities transactions. A clearing agency is any entity that provides a facility for the performance of the following activities: (a) Make deliveries of securities and/or payments in connection with transactions in securities; (b) Reduce the number of settlements of securities transactions or allocate settlement responsibilities in accordance with the rules issued by the Securities and Exchange Commission or the Exchange; and/or (c) Provide the means for the central handling of securities so that transfers, loans, pledges and similar transactions can be made by bookkeeping entry; or otherwise facilitate the settlement of securities transactions without physical delivery of securities certificates.
An evidence of indebtedness of any person with a maturity of three hundred and sixty-five (365) days or less.
Control is the power to determine the financial and operating policies of an entity in order to benefit from its activities. It is presumed to exist when the parent entity owns, directly or through subsidiaries and/or associates, more than 50% of the voting power of an entity. It also exists when the parent entity owns 50% or less of the voting power of an entity, but has any of the following powers: (1) Over more than 50% of the voting rights by virtue of an agreement with other investors; (2) To govern the financial and operating policies of the entity under a statute or agreement; (3) To appoint or remove the majority of the members of the board of directors or equivalent governing body; or (4) To cast the majority of votes at meetings of the board of directors or equivalent governing body.
The offer or sale of securities of a limited scale usually for start-ups, micro, small and medium enterprises (MSMEs) done through an online electronic platform. [See Introduction to crowdfunding]
A registered broker, investment house, or funding portal which mediates offer and sale of crowdfunding securities through it online electronic platform. [See Registration of intermediaries]
A program or application accessible via the Internet or other similar electronic communication medium through which a registered broker or a registered funding portal acts as an intermediary in a transaction involving the offer or sale of securities. [See also Crowdfunding transactions]
A Customer’s Ledger, which is a required book to be maintained by a Broker Dealer, sets forth the itemized account activity and the securities positions and money balances (beginning and ending positions and balances) of the customer. [See Books and Records Rule]
The term shall be understood to be calendar days, unless the rules specifically state “business days” which shall be computed according to the number of working days of the Securities and Exchange Commission.
Any person who buys or sells securities for his/her own account in the ordinary course of business. [See also Broker and Broker Dealer]
A financial instrument whose value changes in response to changes in a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, credit rating or credit index, or similar variable or underlying factor. It is settled at a future date. This term shall include, but not limited, to options and warrants.
Debt securities/ instruments
Debt securities/instruments include any evidence of indebtedness such as bonds, notes, debentures, commercial papers, treasury bills, treasury bonds and other similar instruments as may be determined by the Securities and Exchange Commission.
Under the Implementing Guidelines on Securities Borrowing and Lending (SBL) and Short Selling, “eligible securities” are securities of listed companies in the Philippine Stock Exchange and exchange traded funds. Short selling of non-eligible securities is strictly prohibited. [See Short sales (short selling)]
Equity securities include shares of stock in a corporation.
An organized marketplace or facility that brings together buyers and sellers, and executes trades of securities and/or commodities.
Same as Expiry date.
The predetermined future date by which the option, warrant or other derivatives have to be exercised or fulfilled.
Same with Strike price.
As used in the 2015 SRC Rules, it includes a clearing agency‘s systems, processes or services and all the properties necessary to operate such systems, processes or services, whether within or outside its specific physical location, for the performance of any or all its authorized activities.
An intermediary organized and registered as a corporation to facilitate transactions involving the offer or sale of CF securities through online electronic platform. Funding portal does not: (a) Offer investment advice or recommendations; (b) Solicit purchases, sales or offers to buy the securities displayed on its platform; (c) Compensate employees, agents, or other persons for such solicitation or based on the sale of securities displayed or referenced on its platform; or (d) Hold, manage, possess, or otherwise handle investor funds or securities. [See Registration of funding portals]
A General Ledger of a Broker Dealer reflects 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. [See Books and Records Rule]
Hype and dump
A buying activity at increasingly higher prices and then selling securities in the market at the higher prices. It is also called “pump and dump”. [See Price manipulation in securities]
Improper matched orders
Transactions where both the buy and sell orders are entered at the same time with the same price and quantity by different but colluding parties. [See Price manipulation in securities]
Means (a) the issuer; (b) a director or officer (or any person performing similar functions) of, or a person controlling the issuer; (c) a person whose relationship or former relationship to the issuer gives or gave him access to material information about the issuer or the security that is not generally available to the public; (d) A government employee, director, or officer of an exchange, clearing agency and/or self-regulatory organization who has access to material information about an issuer or a security that is not generally available to the public; or (e) a person who learns such information by a communication from any forgoing insiders.
There is insider trading when an insider sells or buys 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. Insider trading is unlawful under the Securities Regulation Code. [See Insider trading prohibited under the Securities Regulation Code]
Under the rules on crowdfunding, intermediary refers to a Crowdfunding intermediary.
The originator, maker, obligor, or creator of the security. The issuer refers to any entity authorized by the Securities and Exchange Commission to offer to sell, sell or promote the sale to the public of its equity, bonds, instruments of indebtedness and other forms of securities.
For purposes of crowdfunding, issue refers to the originator, maker, obligor, or creator of the security which shall be registered with the intermediary. [See Registration of issuer]
Enterprises engaged in the underwriting of securities of another person or enterprise, including securities of government and its instrumentalities, among others.
Any person or entity that seek to make, are making, or have made an investment in an investment vehicle with the expectation of achieving profit. In crowdfunding, an investor may be a Retail investor or a Qualified investor.
Holding Long securities.
Securities purchased in the concept of an owner, as opposed to Short securities.
Marking the close
Buying and selling securities at the close of the market in an effort to alter the closing price of the security. [See Price manipulation in securities]
See Material information.
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. [See Material information under the Securities Regulation Code]
Material nonpublic information
It is material information that: (a) has not been generally disclosed to the public and would likely affect the market price of the security after being disseminated to the public and the lapse of a reasonable time for the market to absorb the information; or (b) would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sell or hold a security. [See Concept of material information and Insider trading prohibited under the Securities Regulation Code]
As defined in Republic Act No. 9501 or the Magna Carta for MSMEs, is “any activity or enterprise engaged in industry, agribusiness, and/or services, whether single proprietorship, cooperative, partnership or corporation whose total assets, inclusive of those arising from loans but exclusive of the land on which the particular business entity’s office, plant and equipment are situated, shall have value falling under the following categories: (a) Micro, not more than P3,000,000; (b) Small, P3,000,001 – P15,000,000; and (c) Medium, P15,000,001 – P100,000,000.
Naked short selling
It is an illegal short selling activity wherein the seller does not borrow or arrange to borrow the securities in time to make delivery to the buyer. The Securities Regulation Code provides that no person shall effect a short sale where the seller does not intend or is unable to make delivery of the securities within the prescribed settlement period (see Short sales (short selling) under the Securities Regulation Code). The Implementing Guidelines on Securities Borrowing and Lending (SBL) and Short Selling requires the execution of borrowing arrangements prior to entering a short sale transaction (see SBL and short selling guidelines).
Non-proprietary share or certificate
An evidence of interest, participation or privilege over a specific property of a corporation that allows the holder of the share or certificate to use such property under certain terms and conditions. The holder, however, shall not be entitled to dividends from the corporation or to its assets upon its liquidation.
Nonresident funding portal
A funding portal incorporated in or organized under the laws of a jurisdiction outside of the Republic of the Philippines, or having its principal place of business in a place not located in the Republic of the Philippines.
Contract that give the buyer the right, but not the obligation, to buy or sell an underlying security at a strike price or expiry date. An option is a derivative.
An exchange, an over-the-counter market, alternative trading system, or otherwise recognized as such by the Securities and Exchange Commission, and governed by, among others, transparent and binding rules and market conventions on membership, trading, price transparency, trade reporting, market monitoring and orderly conduct or operation of the market which are enforceable on the members and participants.
Same as “Organized market”.
Persons associated with a crowdfunding intermediary
Any partner, officer, director or manager of a crowdfunding intermediary (or any person occupying a similar status or performing similar functions), any person directly or indirectly controlling or controlled by such crowdfunding intermediary, or any employee of a crowdfunding intermediary, except that any person associated with a crowdfunding intermediary whose functions are solely clerical or ministerial shall not be included in the meaning of such term.
Refers to a Crowdfunding platform.
Contracts which provide for the performance of future services of or the payment of future monetary considerations at the time actual need, for which plan holders pay in cash or installment at stated prices, with or without interest or insurance coverage and includes life, pension, education, interment, and other plans which the Securities and Exxhange Commission may from time to time approve.
A person who, acting alone or with others, takes initiative in founding and organizing the business or enterprise of the issuer and receives consideration therefor.
The document made by or an behalf of an issuer, underwriter or dealer to sell or offer securities for sale to the public through registration statement filed with the Securities and Exchange Commission.
Any corporation with a class of equity securities listed on an Exchange, or with assets in excess of Fifty Million Pesos (P50,000,000) and has two hundred (200) or more holders each holding at least one hundred (100) shares of a class of its equity securities.
Any offering of securities to the public or to anyone, whether solicited or unsolicited. Any solicitation or presentation of securities for sale through any of the following modes shall be presumed to be a public offering:
1. Publication in any newspaper, magazine or printed reading material which is distributed within the Philippines;
2. Presentation in any public or commercial place;
3. Advertisement or announcement on radio, television, telephone, electronic communications, information communication technology or any other forms of communication; or
4. Distribution and/or making available flyers, brochures or any offering material in a public or commercial place or to prospective purchasers through the postal system, information communication technology and other means of information distribution.
A Qualified Buyer refers to a: (a) Bank; (b) Registered investment house; (c) Insurance company (d) Pension fund or retirement plan maintained by the Government of the Philippines or any political subdivision thereof or managed by a bank or other persons authorized by the Bangko Sentral ng Pilipinas to engage in trust functions; (e) Investment company; or (f) Such other person as the Securities and Exchange Commission may by rule determine as qualified buyers, on the basis of such factors as financial sophistication, net worth, knowledge, and experience in financial and business matters, or amounts of assets under management. Such other persons that the SEC may by rule determine as qualified buyers shall comply with the requirements of the 2015 SRC Rule 10.1.11.
In crowdfunding, a qualified investor is a person who is a Qualified Buyer, as defined under the 2015 SRC IRR Rule. Any person is not a qualified investor is considered a Retail investor. [See also Introduction to crowdfunding]
For purposes of short selling, 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 Securities and Exchange Commission. [See also Eligible securities]
Records Retention Rule
Every Broker Dealer shall preserve for a period of not less than 5 years, the first 2 years in an easily accessible place, all required books and records, including those required under the Books and Records Rule. [See Records Retention Rule for Broker Dealer]
An issuer of securities with respect to which a registration statement, or required issuer report has been or is to be filed.
In general, a “registered person” refers to any Broker Dealer, Associated Person or salesman of a Broker Dealer.
For purposes of crowdsourcing, registered persons are entities such as brokers and investment houses with fiduciary responsibilities engaged in buying and selling of securities for the account of others.
The application for the registration of securities required to be filed with the Securities and Exchange Commission.
Registrar of qualified buyers
Authorized registers which have been granted the appropriate secondary license by the Securities and Exchange Commission to act as Registrar upon proper application and compliance with registration requirements under the 2015 SRC Rules.
A corporation that has sold a class of its securities pursuant to a registration under Section 12 of the Securities Regulation Code, or a public company.
In crowdfunding, a retail investor is a person who is not a Qualified investor. [See also Introduction to crowdfunding]
A natural person, employed as such as an agent, by a dealer, issuer or broker to buy and sell securities.
Securities are shares, participation or interests in a corporation or in a commercial enterprise or profit-making venture and evidenced by a certificate, contract, instruments, whether written or electronic in character. It includes: (a) Shares of stocks, bonds, debentures, notes evidences of indebtedness, asset-backed securities; (b) Investment contracts, certificates of interest or participation in a profit sharing agreement, certifies of deposit for a future subscription; (c) Fractional undivided interests in oil, gas or other mineral rights; (d) Derivatives like option and warrants; (e) Certificates of assignments, certificates of participation, trust certificates, voting trust certificates or similar instruments (f) Proprietary or nonproprietary membership certificates in corporations; and (g) Other instruments as may in the future be determined by the Securities and Exchange Commission, as defined under Section 3 of the Securities Regulation Code. [See Securities covered by the Securities Regulation Code]
It holds securities accounts, provides central safekeeping and asset services, which may include the administration of corporate actions and redemptions, and plays an important role in helping to ensure the integrity of securities issues (that is, securities are not accidentally or fraudulently created or destroyed or their details changed).
Securities Record or Ledger
Securities record or ledger or position book, which must be maintained by a Broker Dealer, states 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. [See Books and Records Rule]
Self-Regulatory Organization (SRO)
An organized Exchange, registered clearing agency, organization or association registered as an SRO under Section 39 of the Securities Regulation Code, and which has been authorized by the Securities and Exchange Commission to: (1) enforce compliance with relevant provisions of the Securities Regulation Code and rules and regulations adopted thereunder; (2) promulgate and enforce its own rules which have been approved by the Securities and Exchange Commission, by their members and/or participants, and; (3) enforce fair, ethical and efficient practices in the securities and commodity futures industries including securities and commodities exchanges.
Sensitive personal information
Information that can be used to distinguish or trace an individual’s identity, either alone or when combined with other personal or identifying information that is linked or linkable to a specific individual.
Short and distort
Selling at lower prices and then buying at such lower prices. [See Price manipulation in securities]
A position in trading involving Short securities.
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. [See Short sales (short selling) under the SRC]
Securities sold in the concept of a borrower, as opposed to Long securities. The holder sells a stock which he/she/it does not own. [See Short sale]
See Short sale.
Squeezing the float
Taking advantage of a shortage of securities in the market by controlling the demand side and exploiting market congestion during such shortages in a way as to create artificial prices. [See Price manipulation in securities]
An organization, company, venture or project which is at the initial phase of a business cycle.
The predetermined price at which a derivative contract can be bought or sold. Synonymous with Exercise price.
An entity, including an unincorporated entity such as partnership that is controlled by another entity (known as the parent).
A publicly announced intention by a person acting alone or in concert with other persons to acquire outstanding equity securities of a public company, or outstanding equity securities of an associate or related company of such public company which controls the said public company.
The person making the tender offer.
Any broker dealer who has the right, pursuant to the rules of the Exchange or any organized market, to trade in that Exchange or organized market.
Any person who performs on behalf of an Issuer or by itself as Issuer any of the following activities: (1) Countersigns, when applicable, certificates of securities upon their issuance; (2) Monitors the issuance of securities to prevent unauthorized issuances; (3) Registers the transfer of such securities; (4) Exchanges or converts such securities; (5) Records the ownership of securities by bookkeeping entry without physical issuance of securities certificates.
A security evidenced by electronic or similar records.
A person who guarantees on a firm commitment and/or declared best effort basis the distribution and sale of securities of any kind by another company.
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. [See Short selling under the SRC and Short selling implementing guidelines]
For purposes of the rules on crowdfunding, users mean issuers, investors, potential investors who have the authority to use or access a crowdfunding intermediary’s platform.
A right or contract to subscribe or purchase new or existing shares in a company on or before a predetermined date or expiry date. A warrant is a derivative.
Transactions in which there is no change in beneficial ownership of a security. [See Price manipulation in securities]
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