[Full text of Securities Regulation Code (Republic Act No. 8799; Chapter I; Chapter II; Chapter III; Chapter IV; Chapter V; Chapter VI; Chapter VII; Chapter VIII; Chapter IX; Chapter X; Chapter XI; Chapter XII; Chapter XIII]
REGISTRATION, RESPONSIBILITIES AND OVERSIGHT OF SELF- REGULATORY ORGANIZATIONS
Section 39. Associations of Securities Brokers, and Dealers, and Other Securities Related Organizations. – 39.1. The Commission shall have the power to register as a self-regulatory organization, or otherwise grant
licenses, and to regulate, supervise, examine, suspend or otherwise discontinue, as a condition for the operation of organizations whose operations are related to or connected with the securities market such as but not limited to associations of brokers and dealers, transfer agents, custodians, fiscal and paying agents, computer services, news disseminating services, proxy solicitors, statistical agencies, securities rating agencies, and securities information processor which are engaged in business of: (a) Collecting, processing, or preparing for distribution or publication, or assisting, participating in, or coordinating the distribution or publication of, information with respect to transactions in or quotations for any security; or (b) Distributing or publishing, whether by means of a ticker tape, a communications network, a terminal display device, or otherwise, on a current and continuing basis, information with respect to such transactions or quotations. The Commission may prescribe rules and regulations which are necessary or appropriate in the public interest or for the protection of investors to govern self-regulatory organizations and other organizations licensed or regulated pursuant to the authority granted in Subsection 39.1 including the requirement of cooperation within and among, and electronic integration of the records of, all participants in the securities market to ensure transparency and facilitate exchange of information.
39.2. An association of brokers and dealers may be registered as a securities association pursuant to Subsection 39.3 by filing with the Commission an application for registration in such form as the Commission, by rule, may prescribe containing the rules of the association and such other information and documents as the Commission, by rule, may prescribe as necessary or appropriate in the public interest or for the protection of investors.
39.3. An association of brokers and dealers shall not be registered as a securities association unless the Commission determines that:
(a) The association is so organized and has the capacity to be able to carry out the purposes of this Code and to comply with, and to enforce compliance by its members and persons associated with its members, with the provisions of this Code, the rules and regulations thereunder, and the rules of the association.
(b) The rules of the association, notwithstanding anything in the Corporation Code to the contrary, provide that:
(i) Any registered broker or dealer may become a member of the association;
(ii) There exist a fair representation of its members to serve on the Board of Directors of the association and in the administration of its affairs, and that may any natural person associated with a juridical entity that is a member shall himself be deemed to be a member for this purpose;
(iii) The Board of Directors of the association includes in its composition:
(a) The president of the association and
(b) Person who represent the interests of the issuer and public investors and are not associated with any broker or dealer or member of the association; that the president and other management of the association not be a member or associated with any broker, dealer or member of the association;
(iv) For the equitable allocation of reasonable dues, fees, and other charges among member and issuers and other persons using any facility or system which the association operates or controls;
(v) For the prevention of fraudulent and manipulative acts and practices, the promotion of just and equitable principles of trade, and, in general, the protection of investors and the public interest;
(vi) That its members and persons associated with its members shall be appropriately disciplined for violation of any provision of this Code, the rules and regulations thereunder, or the rules of the association;
(vii) That a fair procedure for the disciplining of members and persons associated with members, the denial of membership to any person seeking membership therein, the barring of any person from becoming associated with a member thereof, and the prohibition or limitation by the association of any person with respect to access to services offered by the association or a member thereof.
39.4. (a) A registered securities association shall deny membership to any person who is not a registered broker or dealer.
(b) A registered securities association may deny membership to, or condition the membership of, a registered broker or dealer if such broker or dealer:
(i) Does not meet the standards of financial responsibility, operational capability, training, experience or competence that are prescribe by the rules of the association; or
(ii) Has engaged, and there is a reasonable likelihood it will again engage, in acts or practices inconsistent with just and equitable principles of fair trade.
(c) A registered securities association may deny membership to a registered broker or dealer not engage in a type of business in which the rules of the association require members to be engaged: Provided, however, That no registered securities association may deny membership to a registered broker or dealer by reason of the amount of business done by the broker or dealer.
A registered securities association may examine and verify the qualifications of an applicant to become a member in accordance with procedure established by the rules of the association.
(d) A registered securities association may bar a salesman or person associated with a broker or dealer from being employed by a member or set conditions for the employment of a salesman or associated if such person:
(i) Does not meet the standards of training, experience, or competence that are prescribe by the rules of the association; or
(ii) Has engage, and there is a reasonable likelihood he will again engage, in acts or practices inconsistent with just and equitable principles of fair trade.
A registered securities association may examine and verify the qualifications of an applicant to become a salesman or associated person employed by a member in accordance with the procedures establish by the rules of the association. A registered association also may require a salesman or associated person employed by a member to be registered with the association in accordance with the procedures prescribed in the rules of the association.
39.5. In any proceeding by a registered securities association to determine whether a person shall be denied membership, or barred from association with a member, the association shall provide notice to the person under review of the specific grounds being considered for denial, afford him an opportunity to defend against the allegations, and keep a record of the proceedings. A determination by the association to deny membership shall be supported by a statement setting forth the specific grounds on which the denial is based.
Section 40. Powers with Respect to Self-Regulatory Organizations. – 40.1. Upon the filing of an application for registration as an Exchange under Section 33, a registered securities association under Section 39, a registered clearing agency under Section 42, or other self-regulatory organization under this Section, the Commission shall have ninety (90) days within which to either grant registration should be denied. In the event proceedings are instituted, the Commission shall have two hundred seventy (270) days within which to conclude such proceedings at which time it shall, by order, grant or deny such registration.
40.2. Every self-regulatory organization shall comply with the provision of this Code, the rules and regulations thereunder, and its own rules, and enforce compliance therewith, notwithstanding any provisions of the Corporation Code to the contrary, by its members, persons associated with its members of its participants.
40.3. (a) Each self-regulatory organization shall submit to the Commission for prior approval any proposed rule or amendment thereto, together with a concise statement of the reason and effect of the proposed amendment
(b) Within sixty (60) days after submission of a proposed amendment, the Commission shall, by order, approve the proposed amendment. Otherwise, the same may be made effective by the self-regulatory organization.
(c) In the event of an emergency requiring action for the protection of investors, the maintenance of fair and orderly markets, or the safeguarding of securities and funds, a self-regulatory organization may put a proposed amendment into effect summarily; Provided
however, That the copy of the same shall be immediately submitted to the Commission.
40.4. The Commission is further authorized, if after making appropriate request in writing to a self-regulatory organization that such organization effect on its own behalf specified changes in its rules and practices and, after due to notice and hearing it determines that such changes have not been effected, and that such changes are not necessary, by the rule or regulation or by order, may alter, abrogate or supplement the rules of such self-regulatory organization in so far as necessary or appropriate to effect such changes in respect of such matters as:
(a) Safeguards in respect of the financial responsibility of members and adequate provision against the evasion of financial responsibility through the use of corporate forms or special partnerships;
(b) The supervision of trading practices;
(c) The listing or striking from listing of any security;
(d) Hours of trading;
(e) The manner, methods, and place of soliciting business;
(f) Fictitious accounts;
(g) The time and method of making settlements, payments, and deliveries, and of closing accounts;
(h) The transparency of securities transactions and prices;
(i) The fixing of reasonable rates of fees, interest, listing and other charges, but not rates of commission;
(j) Minimum units of trading;
(k) Odd-lot purchases and sales;
(l) Minimum deposits on margin accounts; and
(m) The supervision, auditing and disciplining of members or participants.
40.5. The Commission, after due notice and hearing, is authorized, in the public interest and to protect investors:
(a) To suspend for a period not exceeding twelve (12) months or to revoke the registration of a self-regulatory organization, or to censure or impose limitations on the activities, functions, and operations of such self-organization, if the Commission finds that such a self-regulatory organization has willfully violated or is unable to comply with any provision of this Code or of the rules and regulations thereunder, or its own or has failed to enforce compliance therewith by a member of, person associated with a member, or a participant in such self- regulatory organization;
(b) To expel from a self-regulatory organization any member thereof or any participant therein who is subject to an order of the Commission under Section 29 of this Code or is found to have willfully violated any provision of this Code or suspend for a period not exceeding twelve (12) months for violation of any provision of this Code or any other laws administered by the Commission, or rules and regulations thereunder, or effected, directly or indirectly, any transaction for any person who, such member or participant had reason to believe, was violating in respect of such transaction any of such provisions; and
(c) To remove from the office or censure any officer or director of a self- regulatory organization if it finds that such officer or director has violated any provision of this Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of such self-regulatory organization, abused his authority, without reasonable justification or excuse has failed to enforce compliance with any of such provisions.
40.6. (a) A self-regulatory organization is authorized to discipline a member of or participant in such self-regulatory organization, or any person associated with a member, including the suspension or expulsion of such member or participant, and the suspension or bar from being associated with a member, if such person has engage in acts or practices inconsistent with just and equitable principles of fair trade or in willful violation of any provision of the Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of the self-regulatory organization. In any disciplinary proceeding by a self-regulatory organization (other than a summary proceeding pursuant to paragraph (b) of this subsection) the self-regulatory organization shall bring specific charges, provide notice to the person charged, afford the person charged with an opportunity to defend against the charges, and keep a record of the proceedings. A determination to impose a disciplinary sanction shall be supported by a written statement of the offenses,
a summary of the evidence presented and a statement of the sanction imposed.
(b) A self-regulatory organization may summarily: (I) Suspend a member, participant or person associated with a member who has been or is expelled or suspended from any other self-regulatory organization; or (ii) Suspend a member who the self-regulatory organization finds to be in such financial or operating difficulty that the member or participant cannot be permitted to continue to do business as a member with safety to investors, creditors, other members, participants or the self-regulatory organization: Provided, That the self-regulatory organization immediately notifies the Commission of the action taken. Any person aggrieved by a summary action pursuant to this paragraph shall be promptly afforded an opportunity for a hearing by the association in accordance with the provisions of paragraph (a) of this subsection. The Commission, by order, may stay a summary action on its own motion or upon application by any person aggrieved thereby, if the Commission determines summarily or after due notice and hearing (which hearing may consist solely of the submission of affidavits or presentation of oral arguments) that a stay is consistent with the public interest and the protection of investors.
40.7. A self-regulatory organization shall promptly notify the Commission of any disciplinary sanction on any member thereof or participant therein, any denial of membership or participation in such organization, or the imposition of any disciplinary sanction on a person associated with a member or a bar of such person from becoming so associated. Within thirty (30) days after such notice, any aggrieved person may appeal to the Commission from, or the Commission from, or the Commission on its own motion within such period, may institute review of, the decision of the self-regulatory organization, at the conclusion of which, after due notice and hearing (which may consist solely of review of the record before the self-regulatory organization), the Commission shall affirm, modify or set aside the sanction. In such proceeding the Commission shall determine whether the aggrieved person has engaged or omitted to engage in the acts and practices as found by the self-regulatory organization, whether such acts and practices constitute willful violations of this Code, any other law administered by the Commission, the rules or regulations thereunder, or the rules of the self-regulatory organization as specified by such organization, whether such provisions were applied in a manner consistent with the purposes of this Code, and whether, with due
regard for the public interest and the protection of investors the sanction is excessive or oppressive.
40.8. The powers of the Commission under this Section shall apply to organized exchanges and registered clearing agencies.
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