SRC Rule10.1

Rule 10.
1 – Exempt Transactions
10.1.1. Disclosure to Investors
Any person claiming exemption under Section 10.1 of the Code shall
provide to any party to whom it offers or sells securities in reliance on such
exemption a written disclosure containing the following information:
10.1.1.1. The specific provision of Section 10.1 of the Code on which

the exemption from registration is claimed; and
10.1.1.2. The following statement in bold face:
THE SECURITIES BEING OFFERED OR SOLD HEREIN

HAVE NOT BEEN REGISTERED WITH THE SECURITIES
AND EXCHANGE COMMISSION UNDER THE
SECURITIES REGULATION CODE. ANY FUTURE OFFER
OR SALE OF THE SECURITIES IS SUBJECT TO THE
REGISTRATION REQUIREMENTS UNDER THE CODE
UNLESS SUCH OFFER OR SALE QUALIFIES AS AN
EXEMPT TRANSACTION.
10.1.2. Restrictions for Transactions under Section 10.1(k) of the

Code
10.1.2.1. Sections 8 and 12 of the Code are violated if (a) the number
of persons holding the exempt security under Section 10.1(k) exceeds
nineteen (19) within a twelve (12) month period or (b) the sale, offer for sale,
or distribution of a security, which is not exempt or which does not fall under
an exempt transaction, is actively solicited from or marketed to non-qualified
buyers in the Philippines by any entity, including its agents, representatives,
employees or any person acting on its behalf.
In proper cases, the issuer of the security and its directors and officers
shall be held liable.
10.1.2.2. A prima facie presumption of circumvention of Sections 8

and 12 of the Code shall arise when the number of non-qualified investors
shall exceed nineteen (19) within one (1) year. The issuer shall be liable for
penalty in accordance with the Scale of Fines of the Commission, without
prejudice to other actions which may be taken against the issuer.
If the original purchaser/s shall resell said securities resulting in more

than nineteen (19) holders, Sections 8 and 12 of the SRC shall apply,
notwithstanding the exemption of their issuances, unless such succeeding sale
shall qualify as an exempt transaction.
10.1.2.3. Debt instruments issued by companies without quasi-banking

licenses in excess of One Hundred Fifty Million Pesos (PhP 150,000,000) or
such higher amount as the Commission may prescribe shall require prior
approval by the Commission.
10.1.2.4. A confirmation of exemption made under Section 10.1(k),

shall be subject to the following terms and conditions:
10.1.2.4.1. The Issuer or seller claiming relief shall not engage in any
form of general solicitation or advertising in that connection;
10.1.2.4.2. Securities sold in any such transaction may only be sold to

persons purchasing for their own account;
10.1.2.4.3. The sale may be made to not more than nineteen (19)
buyers. A corporation, partnership or other entity shall be counted as one
buyer; Provided, that if the entity is organized for the specific purpose of
acquiring the securities offered and is not a qualified buyer under Section
10.1(l) of the Code, or under these rules, then each beneficial owner of equity
securities in the entity shall be counted as a separate buyer under this Rule;
10.1.2.4.4. The issuer or seller provides any person to whom it offers

for sale or sells securities the following information in writing:
10.1.2.4.4.1. Name of the issuer or seller and its or his predecessor, if

any;
10.1.2.4.4.2. Address of its principal executive office;
10.1.2.4.4.3. Place of incorporation;
10.1.2.4.4.4. Title and class of the security;
10.1.2.4.4.5. Par or issue value of the security;
10.1.2.4.4.6. Number of shares or total amount of securities

outstanding as of the end of the issuer’s most recent fiscal year;
10.1.2.4.4.7. Name and address of the transfer agent;
10.1.2.4.4.8. Nature of the Issuer’s business;

10.1.2.4.4.9. Nature of products or services offered;
10.1.2.4.4.10. Nature and extent of the Issuer’s facilities;
10.1.2.4.4.11. Name of the chief executive officer and members of the

board of directors;
10.1.2.4.4.12. The Issuer’s most recent financial statements for the two
preceding fiscal years or such shorter period as the issuer (including its
predecessor) if it has been in existence;
10.1.2.4.4.13. Whether the person offering or selling the securities is

affiliated, directly or indirectly, with the Issuer;
10.1.2.4.4.14. Whether the offering is being made directly or indirectly

on behalf of the Issuer, or any director, officer or person who owns directly or
indirectly more than ten percent (10%) of the outstanding shares of any equity
security of the Issuer and, if so, the name of such person; and
10.1.2.4.4.15. Information required under SRC Rule 10.1.1; Provided,

however, that if the Issuer is a reporting company under Section 17 of the
Code, a copy of its most recent annual report may be used to provide the
required information.
10.1.3. Offer or Sale of Securities to Qualified Buyers under

Section 10.1(l) of the Code.
Section 8 and 12 shall not likewise apply to evidence of indebtedness

issued and sold to the following qualified buyers:
10.1.3.1. Bank;
10.1.3.2. Registered investment house;
10.1.3.3. Insurance company;
10.1.3.4. 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 BSP to engage in trust
functions;
10.1.3.5. Investment company; or

10.1.3.6. Such other person as the 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
amount of assets under management.
10.1.4. Issuance of Evidence of Indebtedness to Primary

Institutional Lenders
Section 8 and 12 shall not likewise apply to issuance of evidence of
indebtedness to the following primary institutional lenders: banks, including
their trust accounts wherein the bank-trustee is granted discretionary powers in
the investment disposition of the trust funds, investment houses including their
trust accounts wherein the investment house-trustee is granted discretionary
powers in the investment disposition of the trust funds, trust companies,
financing companies, investment companies, pre-need companies, non-stock
savings and loan associations, building and loans associations, venture capital
corporation, insurance companies, government financial institutions,
pawnshops, pension and retirement funds approved by the BIR, educational
assistance funds established by the national government and other entities that
may be classified as primary institutional lenders by the BSP, in consultation
with the SEC; provided that all such evidence of indebtedness shall only be
negotiated or assigned to any of the aforementioned primary institutional
lenders or the Development Bank of the Philippines with respect to private
development banks in relation with their rediscounting privileges; provided
further that in case of non-banks without underwriting licenses, such
negotiation or assignment shall be through banks or non-banks licensed to be
an underwriter or a securities dealer; provided finally, that in no case shall said
instrument be negotiated or assigned to non-qualified investors.
10.1.5 Application for Confirmation or Declaration of Exemption
10.1.5.1. If the Issuer wants a confirmation of exemption under Section

10.1 of the Code, it shall file SEC Form 10-1 with the Commission.
10.1.5.2. In cases involving the distribution of securities through stock

dividends, the Commission shall determine the sufficiency of the retained
earnings of the Issuer prior to issuing a confirmation of exemption.
10.1.5.3. If the consideration for the offered securities is other than

cash, except in the case of issuance of shares by way of stock dividends, a
request for confirmation of exemption from registration shall be filed with the
Company Registration and Monitoring Department of the Commission and
shall be deemed to include an application for approval of valuation required
under Section 62 of the Corporation Code and vice versa.
10.1.6. Exempt Commercial Paper Transactions
An Issuer of commercial papers in an exempt transaction shall:
10.1.6.1. File a Notice or Application for Confirmation of Exemption

(SEC Form 10-1) prior to issuance. The application shall make a disclosure of
the following financial ratios:
Current Ratio = Current Assets

Current Liabilities
Debt to Equity Ratio = Total Liabilities

Stockholders’ Equity
10.1.6.2. Indicate in bold letters on the face of the instrument the

words:
NON-NEGOTIABLE/NON-ASSIGNABLE
10.1.6.3. The Issuer of outstanding commercial papers shall also file

the prescribed disclosure statement and pay the corresponding fee.
10.1.7. Isolated Transactions under Section 10.1(c)
10.1.7.1. A request for confirmation of exemption under Section

10.1(c) of the Code shall be available to issuers and sellers.
10.1.7.2. The Commission may take any action it may deem

appropriate in an application for confirmation even if it is filed after the offer
or sale of the securities without prejudice to the imposition of penalties if
warranted.
10.1.8. Burden of Proof on the Availability of Exemption
Unless a confirmation of exemption is issued under this Rule, any

person claiming exemption under Section 10 of the Code has the burden of
proof, if challenged, of showing that it is entitled to the exemption. The
Commission may challenge such exemption any time.
10.1.9. Exempt from Registration, But Not From Other

Requirements and Liabilities
Notwithstanding that a particular class of securities issued under
Section 10.1 is exempt from registration, the conduct by any person in the
purchase, sale, distribution of such securities, settlement and other post-trade
activities shall comply with the provisions of the Code and the rules issued
thereunder.
Moreover, the sale or offer for sale of a security in an exempt

transaction under Section 10 of the Code shall not be exempt from civil
liability and other related liabilities and other applicable provisions of the
Code on fraud, among others.
Consistent with public interest and for the protection of investors, the
Commission, may require an Issuer of a class of securities exempted from
registration, to make available to investors and file with the Commission
periodic disclosures regarding the Issuer, its business operations, its financial
condition, its governance principles and practices, its use of investor funds,
and other appropriate matters, and may also provide for suspension and
termination of such requirement with respect to such Issuer.
10.1.10. Exemption Not Available For Scheme To Evade

Compliance
A request for confirmation of exemption under Section 10 of the Code

shall not be available to any Issuer or other persons to any transaction or chain
of transactions that, although it may appear to be in compliance with the Code
and these Rules, is a part of a plan or scheme to evade compliance with the
registration requirements of the Code. In such cases, registration shall be
mandatory.
10.1.11. Qualified Buyers
10.1.11.1 For purposes of Section 10 of the Code, a natural person

shall be considered a qualified individual buyer if he has registered as such
with entities that are authorized by the Commission to act as registrar of
qualified buyers pursuant to the rules provided under SRC Rule 39.1.4.
A natural person must possess the following qualifications:
10.1.11.1.1. Has an annual gross income of at least Ten Million Pesos

(Php10,000,000.00) at least two (2) years prior to registration, or a total
portfolio investment in securities registered with the Commission of at least
Ten Million Pesos (Php10,000,000.00), or a personal net worth of not less than
Thirty Million Pesos (Php30,000,000.00); and
10.1.11.1.2. Has been engaged in securities trading personally or
through a fund manager for a minimum period of one (1) year, or has held for
at least two (2) years a position of responsibility in any professional business
entity that requires knowledge or expertise in securities trading, such as, legal
consultant, financial adviser, sales person, or associated person of a broker-
dealer, bank finance or treasury officer, trust officer or other similar executive
officers.
10.1.11.2. If the buyer is a juridical person, it shall, at the time of

registration with an authorized registrar, (i) have gross assets of at least One
Hundred Million Pesos (Php100,000,000.00) or (ii) a total portfolio
investment in securities registered with the Commission or financial
instruments issued by the government of at least Sixty Million Pesos (Php
60,000,000.00).
10.1.11.3. All persons registering as qualified buyers shall, in addition,

show proof that they possess the above-enumerated qualifications and submit
under oath certified copies of the documents or their equivalent that show the
following matters:
10.1.11.3.1. Total portfolio of securities;
10.1.11.3.2. Annual gross income;
10.1.11.3.3. Their net worth; and
10.1.11.3.4. Threshold risk (low, medium, high risk).
10.1.11.4. The registration as qualified buyers shall be valid for 3 years

if the qualifications provided for in 10.1.10.1 and 10.1.10.2 above are
continuously complied with. Any application for renewal shall be subject to
new evaluation by the registrar and accompanied by updated information
sheets. For this purpose, the registrar shall maintain a registry book of
qualified buyers that shall be open for inspection by the Commission.

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Rule 10.

10.1.1. Disclosure to Investors

10.1.1.1. The specific provision of Section 10.1 of the Code on which

10.1.1.2. The following statement in bold face:

THE SECURITIES BEING OFFERED OR SOLD HEREIN

10.1.2. Restrictions for Transactions under Section 10.1(k) of the

10.1.2.2. A prima facie presumption of circumvention of Sections 8

If the original purchaser/s shall resell said securities resulting in more

10.1.2.3. Debt instruments issued by companies without quasi-banking

10.1.2.4. A confirmation of exemption made under Section 10.1(k),

10.1.2.4.2. Securities sold in any such transaction may only be sold to

10.1.2.4.4. The issuer or seller provides any person to whom it offers

10.1.2.4.4.1. Name of the issuer or seller and its or his predecessor, if

10.1.2.4.4.2. Address of its principal executive office;

10.1.2.4.4.3. Place of incorporation;

10.1.2.4.4.4. Title and class of the security;

10.1.2.4.4.5. Par or issue value of the security;

10.1.2.4.4.6. Number of shares or total amount of securities

10.1.2.4.4.7. Name and address of the transfer agent;

10.1.2.4.4.8. Nature of the Issuer’s business;

10.1.2.4.4.10. Nature and extent of the Issuer’s facilities;

10.1.2.4.4.11. Name of the chief executive officer and members of the

10.1.2.4.4.13. Whether the person offering or selling the securities is

10.1.2.4.4.14. Whether the offering is being made directly or indirectly

10.1.2.4.4.15. Information required under SRC Rule 10.1.1; Provided,

10.1.3. Offer or Sale of Securities to Qualified Buyers under

Section 8 and 12 shall not likewise apply to evidence of indebtedness

10.1.3.2. Registered investment house;

10.1.3.3. Insurance company;

10.1.3.4. Pension fund or retirement plan maintained by the

10.1.3.5. Investment company; or

10.1.4. Issuance of Evidence of Indebtedness to Primary

10.1.5 Application for Confirmation or Declaration of Exemption

10.1.5.1. If the Issuer wants a confirmation of exemption under Section

10.1.5.2. In cases involving the distribution of securities through stock

10.1.5.3. If the consideration for the offered securities is other than

An Issuer of commercial papers in an exempt transaction shall:

10.1.6.1. File a Notice or Application for Confirmation of Exemption

Current Ratio = Current Assets

Debt to Equity Ratio = Total Liabilities

10.1.6.2. Indicate in bold letters on the face of the instrument the

10.1.6.3. The Issuer of outstanding commercial papers shall also file

10.1.7. Isolated Transactions under Section 10.1(c)

10.1.7.1. A request for confirmation of exemption under Section

10.1.7.2. The Commission may take any action it may deem

10.1.8. Burden of Proof on the Availability of Exemption

Unless a confirmation of exemption is issued under this Rule, any

10.1.9. Exempt from Registration, But Not From Other

Moreover, the sale or offer for sale of a security in an exempt

10.1.10. Exemption Not Available For Scheme To Evade

A request for confirmation of exemption under Section 10 of the Code

10.1.11. Qualified Buyers

10.1.11.1 For purposes of Section 10 of the Code, a natural person

A natural person must possess the following qualifications:

10.1.11.1.1. Has an annual gross income of at least Ten Million Pesos

10.1.11.2. If the buyer is a juridical person, it shall, at the time of

10.1.11.3. All persons registering as qualified buyers shall, in addition,

10.1.11.3.1. Total portfolio of securities;

10.1.11.3.2. Annual gross income;