A. Able Corporation sold securities to 21 non-qualified buyers during a 15-month period, without registering the securities with the Securities and Exchange Commission. Did Able Corporation violate the Securities Regulation Code? Explain. (2%)
B. Securities issued by the Philippine government are “exempt securities” and, therefore, need not be registered with the Securities and Exchange Commission prior to their sale or offering to the public in the Philippines. What is the rationale behind this exemption? (2%)
C. Why is the Securities Regulation Code called a “truth in securities law”? (2%)
Suggested answer only. Not an official answer and not legal advice.
Yes, Able Corporation violated the Securities Regulation Code. Government securities are exempt because the state is presumed solvent. The Code is called a truth in securities law because it requires full disclosure and penalizes fraud. Under
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Quick check
Under Section 8 of the Securities Regulation Code, when does a sale of securities require prior registration with the SEC?
Selling securities to twenty or more non-qualified buyers within twelve months constitutes a public offering requiring SEC registration.
Why are securities issued or guaranteed by the Philippine government classified as exempt securities under Section 9 of the SRC?
Government securities are exempt because state solvency and taxing power protect public investors without requiring SEC registration.
Why is the Securities Regulation Code commonly referred to as a 'truth in securities law'?
The SRC is called a truth in securities law because it mandates full disclosure of material facts to enable informed investor decisions.
Under Section 10 of the Securities Regulation Code, which transaction qualifies as an exempt transaction not requiring SEC registration?
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Which primary statute governs securities registration, public disclosure, and capital market regulation in the Philippines?
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Learn more about these topics
1. Securities Registration Requirement
Under Section 8 of the Securities Regulation Code (Republic Act Number 8799), securities shall not be sold or offered for sale or distribution within the Philippines without a registration statement duly filed with and approved by the Securities and Exchange Commission. A sale of securities to twenty or more non-qualified buyers within any twelve-month period constitutes a public offering requiring registration. Exceeding twenty non-qualified buyers or extending sales beyond the twelve-month statutory window removes the private placement exemption and renders the unregistered distribution a direct violation of the Securities Regulation Code.
2. Exempt Securities Rationale
Under Section 9 of the Securities Regulation Code (Republic Act Number 8799), securities issued or guaranteed by the Government of the Philippines or any of its political subdivisions or agencies are classified as exempt securities. The primary rationale underlying this exemption is the legal presumption of governmental solvency and financial integrity. Because public interest and investor safety are inherently safeguarded by the full faith, credit, and taxing power of the sovereign state, requiring government securities to undergo administrative registration with the Securities and Exchange Commission is deemed unnecessary.
3. Truth in Securities
The Securities Regulation Code (Republic Act Number 8799) is known as a "truth in securities law" because its overarching statutory policy relies on mandatory full and fair disclosure rather than state merit regulation. The law requires issuers to disclose all material facts regarding securities offerings so that prospective investors can make informed commercial judgments. By compelling full disclosure and penalizing fraudulent practices, misrepresentations, and deceptive schemes, the law protects the investing public and maintains market transparency and investor confidence.