It may be a case where a person, whose relationship or former relationship to the issuer gives or gave him access to a fact of special significance about the issuer or the security that is not generally available, or a person, who learns such a fact from any of the insiders, with knowledge that the person from whom he learns the fact, is such an insider.
a. YES, the information that the corporation has just been awarded a P 5 billion construction contract by a reputable private company is material nonpublic information. It has not been generally disclosed to the public and would likely affect the market price of the security after being disseminated to the public or would be considered by a reasonable person important under the circumstances in determining his course of action whether to buy, sell or hold the security. (Section 27.2 of the Securities Regulation Code)
b. P is liable for insider trading because he bought shares of the company, through his broker, while in the possession of material non-public information.
B is also liable for insider trading. B became an insider after having received by communication a material non-public information from P, who as President of JKL is an actual insider (Sections 3.8 and 27 of Securities Regulation Code). B is liable because he bought the shares of JKL while in the possession of material non-public information.
YES. The multi-level marketing scheme constitutes an “investment contract” under the SRC. An “investment contract” is a contract, transaction or scheme:
a. Involving an investment of money,
b. In a common enterprise,
c. With expectation of profits,
d. Primarily from the efforts of others.
Before the investment contract is sold or offered for sale or distribution to the public in the Philippines, it should be registered with the SEC in accordance with Section 8 of the SRC.
The failure to follow this procedure has criminal consequences (i.e., upon conviction, a fine P50,000 to P5 M and/or imprisonment of 7-12 years). It carries also civil liabilities in that the purchaser can recover from the seller (i) the consideration paid with interest thereon, less the amount of any income received on the purchased securities, upon the tender of such securities, or (ii) damages if the purchaser no longer owns such securities. Furthermore, the SEC may issue a cease-and-desist order.
YES. ABC Corporation violated the provisions of the Securities Regulation Code that prohibits sale of securities to the public, like promissory notes, without a registration statement filed with and approved by the Securities and Exchange Commission.
Tender offer means a publicly announced intention by a person acting alone or in concert with other persons to acquire equity securities of a public company. It is also an offer by the acquiring person to stockholders of a public company for them to tender their shares therein on the terms specified in the offer. Tender offer is in place to protect their minority shareholders against any scheme that dilutes the share value of any investments. It gives the minority shareholders the chance to exit the company under reasonable terms, giving them opportunity to sell their shares at the same price as those of the majority shareholders. (CEMCO HOLDINGS, INC. v. National Life Insurance Company, Inc. G.R. No. 171815, August 7, 2007)
1. Any person or group of persons acting in concert, who intends to acquire thirty- five percent (35%) or more of equity shares in a public company. They must however, disclose the intention to acquire the shares contemporaneously with the tender offer.
2. Any person or group of persons acting in concert, who intends to acquire thirty-five percent (35%) or more of equity shares in a public company in one or more transactions within a period of twelve (12) months, shall be required to make a tender offer to all holders of such class for the number of shares so acquired within the said period.
3. If any acquisition of even less than thirty- five percent (35%) would result in ownership of over fifty-one percent (51%) of the total outstanding equity securities of a public company, the acquirer shall be required to make tender offer for all the outstanding equity securities to all remaining stockholders of the said company at a price supported by a fairness opinion provided by an independent financial advisor or equivalent third party. The acquirer in such a tender offer shall be required to accept any and all securities thereof.
YES, the proposed acquisition is subject to mandatory tender offer rule. A tender offer is a publicly announced intention by a person (acting alone or in concert with other persons) to acquire shares of a public company. A tender offer is meant to protect minor stockholders against any scheme that dilutes the share value of their investments. It gives them the chance to exit the company under the same terms offered to the majority stockholders.
Under the SRC and its implementing rules, a mandatory tender offer is required:
a. When at least 35% of the outstanding shares of a public company is to be acquired in one transaction or a series of transaction during a 12-month period, or
b. Even if any acquisition is less than 35% threshold but the result thereof is the ownership of more than 51% of the total outstanding shares of a public company. The mandatory offer rule also applies to share acquisition meeting the threshold, which is done at the level of the holding or parent corporation controlling a public company.
In this case, Union Mines is clearly a public company, since it has a total asset of P60M with 210 stockholders holding at least 100 shares each. A public company is defined as a corporation listed on the stock exchange, or a corporation with assets exceeding P50M and with 200 or more stockholders at least 200 of them holding not less than 100 share of such corporation.
XYZ’s acquisition of shares of Acme, Inc. and Golden Boy, Inc., taken separately, does not reach 35% threshold. If taken collectively, the two acquisitions total only 50%. However, when the acquisitions are added to XYZ’s existing shares in Union Mines, they meet the more- than-51% threshold for mandatory tender offer.
