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RSA Rule 3-2 Ethical Standards Rules - A broker or dealer, or associated person or salesman of a broker or dealer, in the conduct of his business, shall observe high standards of commercial honor and just and equitable principles of trade.

RSA Rule 19-8 Delivery of Customer's Securities - Except as herein otherwise provided, a broker, or dealer shall on demand deliver to its customers the securities to which they are entitled unless prevented by circumstances beyond its control. (Amends Rule B.15 of the 1938 Rules)

RSA Rule 19-11 Suitability Rule - (a) In recommending to a customer the purchase, sale or exchange of any security, a broker or dealer, or an associated person or salesman of a broker or dealer, shall have reasonable grounds for believing that the recommendation is suitable for such cus­tomer upon the basis of the facts, if any, disclosed by such customer as to his other security holdings and as to his financial situation and needs.

(b) Prior to the execution of a transaction recommended to a non-institutional customer, reasonable efforts shall be made to obtain information concerning:

1. the customer's financial status;

2. the customer's tax status;

3. the customer's investment objectives; and

4. such other information used or considered to be reasonable by such broker or dealer, or associated person or salesman of the broker or dealer, in making recommendations to the customer.

RSA Rule 19-12- Influencing or Rewarding Employees of Others - (a) No broker or dealer, or associated person or salesman of a broker or dealer, shall, directly or indirectly, give or permit to be given anything of value, including gratuities, in excess of P10.000 per individual per year to any person, principal, proprietor, employee, agent or representative of another person where such payment or gratuity is in relation to the business of the employer of the recipient of the payment or gratuity. A gift of any kind is considered a gratuity.

(b) A separate record of all payments or gratuities in any amount known to the broker or dealer shall be retained by the broker or dealer for the period of three years.

RSA Rule 19-13 Charges for Services Performed - Charges by a broker or dealer, if any, for services performed, including miscellaneous services such as collection of monies due for principal, dividends, or interest; exchange or transfer of securities; appraisals, safekeeping or custody of securities, and other services, shall be reasonable and not unfairly discriminatory between customers.

RSA Rule 19-14 Supervision - (a) Every broker or dealer shall establish and maintain a system to supervise the activities of all persons employed by it who are directly or indirectly related to the conduct of its securities business. The supervisory system shall be reasonably designed to achieve compliance with applicable securities laws and regulations and with the rules of the self regulatory organizations of which the firm is a member. Final responsibility for proper supervision shall rest with the firm. A firm's supervisory system shall include at least the following:

1. the establishment and maintenance of written supervisory procedures;

2. the designation of one or more officials with the authority and responsibility to carry out the supervision of each type of business in which it engages;

3. the titles, registration status and locations of the required supervisory personnel and the responsibilities of each supervisory person as these relate to the types of business engaged in;

4. written documentation of reasonable efforts to determine that all supervisory personnel are qualified by virtue of experience or training to carry out their assigned supervisory responsibilities; and

5. written documentation of the participation of each person engaged in securities transactions, either collectively or individually, no less than annually, in an  interview or meeting conducted by supervisory persons designated by the firm at which compliance matters relevant to the actitivies of those persons are discussed and of prompt notification in writing to each such person of new or modified compliance obligations.

(b) Each broker or dealer firm shall notify the Commission, or the self regulatory organizations of which it is a member, of the names of the persons assigned supervisory responsibility and who have authority to recommend to senior management of the firm appropriate action reasonably designed to achieve compliance with appropriate securities laws and regulations and with the rules of the self-regulatory organizations of which it is a member.

RSA Rule 21-1. Trading Limited to Listed Securities Registered under the RSA - No member, broker or dealer shall effect any transaction in any security (other than an exempted security) on the floor of a securities exchange, unless registration under the Revised Securities Act and listing on such securities exchange are effective as to such security. (Amends Rule A. 17 of the 1938 Rules).

RSA Rule 22 (a)-6 Fictitious Transactions - A securities exchange shall impose no penalty less than suspension or expulsion for members who have made fictitious sales or fictitious bids or offers on the floor of the exchange. (Re­numbers Rule A. 13 of the 1938 Rules).

RSA Rule 22 (a)-7 Wash Sates - A member of a securities exchange or a partner or representative for a member of such exchange who gives or executes an order for the purchase or sale of securities which would involve no change of ownership, shall be immediately expelled by the exchange. (Renumbers Rule A.14 of the 1938 Rules).

RSA Rule 22 (a)-8 Suspension of Trading by the Commission - The Commission reserves the right pursuant to its authority under the Revised Securities Act to suspend trading in any security on its own motion. No broker or dealer, or associated person or salesman of a broker or dealer, shall, directly or indirectly, effect any transaction in a security as to which a suspension is currently in effect.

RSA Rule 22(a)-10 -Front Running Rule - (a) No broker or dealer shall (1) purchase or sell a security for his own account, or (2) if such broker or dealer is a corporation or partnership, purchase or sell security for its own account or for any account in which an officer, director, partner, or employee thereof has a direct or indirect financial interest, under the following conditions:

(1) the broker or dealer holds an unexecuted market or limit order to buy or sell the same security for a customer; and

(2) the broker or dealer knows that the price at which the transaction will be executed for his or its account, or for the account of any officer, director, partner or employee is equal to or better than the price obtainable for the customer's order.

(b) This rule shall not apply (1) to any purchase or sate of any security in an amount less than the unit of trading made by an odd-lot deafer on a securities exchange to offset odd-Lot orders of customers or (2) to any purchase or sale of any security upon terms for delivery other than those specified in such unexecuted market or limited price order. (Amends Rule A. 30 of the 1938 Rules)

RSA Rule 26 (a) (4) -1 Advertisements and Communications with the Public - (a) All communications by brokers or dealers, or associated persons or salesmen of brokers or dealers, with the public shall be based on principles of fair dealing and good faith and should provide a sound basis for evaluating the facts in regard to any particular security or securities or type of security, industry discussed, or service offered. No material fact or qualification may be omitted if the omission, in the light of the context of the material presented, would cause the advertising or sales literature to be misleading.

(b) Exagerrated. unwarranted or misleading statements or claims are prohibited in all public communications of brokers or dealers, or of communications of associated persons or salesman of brokers or dealers. In preparing such literature, it must be borne in mind by such persons that inherent in investment are the risks of fluctuating prices and the uncertainty of dividends, rates of return and yield, and no such person shall, directly or indirectly, publish, circulate or distribute any public communication that person knows, or had reason to know, contains any untrue statement of a material fact or is otherwise false or misleading.

(c) Communications with the public must not contain promises of specific results, exagerrated or unwarranted claims or unwarranted superlatives, opinions for which there is no reasonable basis, or forecasts of future events which are unwarranted, or which are not clearly labelled as forecasts.

(d) In judging whether a communication or a particular element of a communication may be misleading, several factors should be considered, including but not limited to:

(1) the overall context in which the statement or statements are made. A statement made in one context may be misleading even though such a statement could be perfectly appropriate in another context. An essential test in this regard is the balance of treatment of risks and potential benefits.

(2) the audience to which the communication is directed. Different levels of explanation or detail may be necessary depending on the audience to which a communication is directed and the ability of the broker or dealer given the nature of the media used, to restrict the audience appropriately. If the statements made in a communication would be applicable only to a limited audience, or if additional information might be necessary for other audiences, it should be kept in mind that it is not always possible to restrict the readership of a particular communication.

(3) the overall clarity of the communication. A statement or disclosure made in an unclear manner obviously can result in a lack of understanding of the statement, or in a serious misunderstanding. A complex or overly technical explanation may be worse than too little information. Likewise material disclosure relegated to legends or footnotes realistically may not enhance the reader's understanding of the communication.

RSA Rule 26 (a) (4) -2 Publication of Transactions and Quotations - No broker or dealer, or associated person or salesman of a broker or dealer, shall publish or circulate, or cause to be published or circulated, any notice, circular, advertisement, newspaper article, investment service, or communication of any kind which purports to report any transaction as a purchase or sale of any security unless such person believes that such transaction was a bona fide purchase or sale of such security; or which purports to quote the bid price or asked price for any security, unless such person believes that such quotation represents a bona fide bid for, or offer of. such security.

RSA Rule 26 (a) (4) - 3 Payment to influence Market Prices - No broker or dealer shall, directly or indirectly, give, permit to be given, or offer to give, anything of value to any person for the purpose of influencing or rewarding the action of such person in connection with the publication or circulation in any newspaper, investment service, or similar publication, of any matter which has. or is intended to have, an effect upon the market price of any security, provided that this rule shall not be construed to apply lo matter which is clearly distinguishable as paid advertising.

RSA Rule 27 (a) -1 Short Sales - (a) Definition of Short Sale - The term "short sale" shall mean 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. 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, lo purchase it and has not yet received it; (3) he owns a security convertible into or exchangeable for its and has tendered such security for conversion or exchange; (4) he has an option lo 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.

(b) Determination of Good Delivery -  No broker or dealer shall accept a long safe order from a customer unless he has made a determination that the customer owns the security and with deliver it in good deliverable form within three (3) business days of the execution of the order. The determination must include a notation on the order ticket at the time the order is taken which reflects the conversation with the customer as to the present location of the securities, whether they are in good deliverable form, and the customer's ability to make delivery.

(c) Execution of Short Sale - 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 last sale if and only if that price is above the next preceding different sale price on such day.

(d) Failure to Deliver - 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 docs not intend to make delivery of the securities within a period specified in the contract. Failure on the part of the seller to make delivery on such date will be taken by the Commission as prima facie evidence of the lack of intention on his part to make such delivery.

(e) Mandatory Close-Out - A contract involving a short sale which has not resulted in delivery by the broker or dealer representing the seller within 10 business days after the normal settlement date must be closed by the broker or dealer representing the seller by purchasing for cash or guaranteed delivery securities of like kind and quantity.

(f) Directors, Officers or Principal Stockholders – 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.

(g) Order for Short Sale - Upon receiving an order to sell short, the term ' short ' should be indicated on the selling order and throughout at! the records pertinent to the sale. Prior to acceptance of any short sale order, the broker or dealer shall arrange to borrow the securities to make delivery by settlement date.

(h) Exempt Transactions - Paragraph (c) hereof shall not apply to any short safe (1) by an odd-lot dealer to offset the odd-lot orders of customers and (2) by an odd-lot dealer to liquidate a long position which is less than the unit of trading; Provided, however, that the net change in the position of such odd-lot dealer after any such sale is not more than the unit of trading in such security.

(i) Prohibition of Short Sale - This rule notwithstanding, a securities exchange may prohibit short selling in the exchange indefinitely or for such period of time as it may deem necessary or advisable for the protection of investors, and the Commission may also prohibit short selling on any exchange as an emergency measure or whenever the same is necessary or appropriate in the public interest or for the protection of investors.

(j) Penalties for Violations - Any person who violates this rule shall be penalized by a fine of not more than Fifty Thousand P50.QO0 for each order or transaction; Provided, that where a broker or dealer has been found to have violated this rule twice, his license as broker or dealer may, at the discretion of the Commission, be suspended. (Amends Rule A.27of the 1938RuIes).

RSA Rule 29 (a) (3) -1 Use of Information Obtained in Fiduciary Capacity - A broker or dealer, or associated person or salesman of a broker or dealer, a paying agent, transfer agent, trustee or any other person acting in a similar fiduciary capacity, who has received information as to the ownership of securities, shall not make use of such information for the purpose of soliciting or making purchases, sales or exchanges of securities or provide such information to any person who does not need such information to fulfill his responsibilities under the Act.

RSA Rule 31 (a) - 3 Prohibited Transactions in Securities Where Broker or Dealer and Issuer are Linked - (a) No broker or dealer shall deal in or otherwise buy or sell, for its own account or for the account of customers, securities listed on an Exchange issued by any corporation where any stockholders, directors, associated person or salesman, or authorized clerk of said broker or dealer is at the time holding office in said issuer corporation as a director, president, vice-president, manager, treasurer, comptroller, secretary or any other office of trust and responsibility, or is a controlling person of the issuer.

(b) Every broker or dealer covered by paragraph (a) hereof shall submit to the Commission within ten (10)) days after every annual stockholders' meeting of the issuer corporation, an inventory of the long position on the issue concerned held for its own account and for the account of its customers.

(c) Any violation of these rules shall subject the offending person to a fine of not more than Fifty Thousand (P50,000) Pesos and a suspension appropriate to the egregiousness of the violation as the Commission shall determine.

(d) Any broker or dealer, any stockholder, director, associated person, salesman, or authorized clerk of said broker or dealer who shall be found to have employed another person to act in his stead or as his dummy in the board or management of any company whose share are listed in the exchange thereby allowing the broker or dealer to deal on or otherwise buy or sell securities of said company, shall be jointly and severally liable with the broker or deafer under paragraph (c) hereof in addition to the sanctions provided for under Section 61 of the Revised Securities Act. (Amends BED Rule No. 902-A Prohibiting Brokers From Dealing in or otherwise Buying or Selling Securities, etcetera, issued Jan. 18, 1978)

F-RSA Rule 34(b) - 2 Consent of Customer for Use of Proxy - No broker or dealer shall give any proxy, consent or authorization, in respect of any security carried for the account of a customer, to a person other than the customer, without the express .written authorization of such customer. (Amends Rule A. 16 of the 1938 Rules).

RSA Rule 35-1 Fair Prices, Commissions and Charges - In transactions in securities, if a broker or dealer buys for his own account from his customer, or sells for his own account to his customer, he shall buy or sell at a price which is fair, taking into consideration all relevant circumstances. If a broker or dealer acts as agent for his customer in any such transaction, he shall not charge his customer more than a fair commission or other charge or fee, taking into consideration all relevant circumstances.

RSA Rule 35-2 Best Execution - In any transaction for or with a customer, a broker or dealer shall use reasonable diligence to ascertain the best available price for the secu­rity and buy or sel! at that price so that the resultant price to the customer is as favorable as possible under the prevailing market conditions.

Old Rules Rescinded by the Commission

"Extreme Quotations", Rule A.12 of the 1938 Rules. "Suspension of Trading", Rule A.20 of the 1938 Rules.

"Suspension of Trading by the Commission", Rule A.21 of the 1938 Rules.

"Contract Slips", Rule A.28 of the 1938 Rules.

"Transactions Opposite Customer's Orders", Rule B.10 of the 1938 Rules.

"Broker's Fee", Rule B.13 of the 1938 Rules. "Transfer Fee", Rule B.14 of the 1938 Rules.

"Broker Acting as Agent of Buyer and Seller on the Over-the-Counter Market", Rule B.21 of the 1938 Rules.

"Amended Rule Regulating Trading by Broker or Dealer Who is a Director or Officer of the Issuer of a Listed Secu­rity" dated January 29, 1973.

SEC-BED Memorandum Circular No. 8, Series of 1988, entitled Rules Prohibiting Brokers from Dealing on or Otherwise Buying or Selling Securities of Listed Companies Where any of its Directors or Officers of such Listed Companies are also Directors or Officers of such Listed Companies (January 18, 1978); Rules Regulating Trading by Broker or Dealer Who is a Director or Officer of the Issuer of a Listed Security (January 29,1973); BED Circular No. 1. Series of 1988 re: Partners/Executive Officers Representing a Brokerage Firm on the Floor of the Exchange Must Register as Salesman (January 14,1988) dated August 15, 1988.

Effective Date of the New Rules

These rules shall take effect fifteen (15) days after its publication in two (2) newspapers of general circulation in the Philippines.

RECOMMENDING APPROVAL:

(SGD.) PERFECTO R. YASAY, JR.
Acting Chairman
Securities and Exchange Commission

APPROVED BY:

(SGD.) ROBERTO F. DE OCAMPO
Secretary
Department of Finance