Frequently Asked Questions
Provided below are several questions frequently asked about CMIC and the securities laws it enforces, together with the corresponding answers that are based on pertinent rules, including the Securities Regulation Code and its Implementing Rules and Regulations, the Revised Trading Rules of the Philippine Stock Exchange and its Implementing Guidelines, and the CMIC Rules.1
CMIC is a self-regulatory organization (SRO) which acts as the independent regulatory arm of the Philippine Stock Exchange (PSE) tasked to perform the audit, surveillance and compliance monitoring of the activities of market participants.
CMIC shall have the authority to investigate and resolve all violations of the securities laws or the CMIC Rules by Trading Participants (TPs) and trading-related irregularities and unusual trading activities involving issuers based on any complaints, findings, reports or determinations.2
TPs refer to all brokers and/or dealers duly licensed by the Securities and Exchange Commission (SEC) and authorized to exercise a trading right pursuant to the rules of the PSE. Generally, the term TPs includes directors, officers, Associated Persons (AP), salesmen, and other agents of the TPs.3
The investor or any party of interest may file a written complaint (by personal filing or mail, either registered or electronic) with CMIC against any TP violations of the securities laws, or against any issuer for trading-related irregularities and unusual trading activities, within six (6) months from knowledge of the commission of the violations, stating the grounds for the complaint and attaching supporting documents thereto.4
It must be noted that CMIC shall assume jurisdiction and commence investigation if the complaint against the issuer alleges or involves trading-related irregularities and unusual trading activities. Otherwise, or if the complaint alleges violations by issuers of the disclosure requirements under the securities laws and the continuing listing requirements of the PSE, CMIC may endorse the complaint to the proper entity such as the PSE and/or the SEC.5
CMIC shall conduct the audit in accordance with the audit program, which is approved by the SEC, to verify and ensure a TP's compliance with the securities laws. Before the conclusion of the audit, CMIC shall prepare its initial examination findings, if any, on the TP. Thereafter, CMIC shall hold an exit conference with the TP to discuss the initial examination findings and to give the latter an opportunity to comment thereon. CMIC shall then render a decision based on its examination findings.6
A report (incident report) shall be made by CMIC upon monitoring that transactions of a TP possibly constitute unusual trading activities or trading-related irregularities. Should CMIC find cause to investigate the noted transactions, it shall obtain additional information from the TP and prepare a preliminary report thereon. CMIC shall then cause further investigation or terminate the case based on the merits of the Preliminary Report.7
Yes. CMIC's investigations involving manipulative activity may originate not only from the surveillance system, but also through other means, including: written complaints filed directly with CMIC by customers, TPs, or any aggrieved party for alleged violation of the securities laws; examination findings of CMIC based on regular annual examinations or for cause examinations of TPs; and reports of trading-related irregularities or unusual trading activities. CMIC may also act on anonymous complaints or referrals provided these contain sufficient leads or particulars to enable the taking of further action.8
CMIC decides all cases based solely on the evidence presented or gathered in the course of its investigation, examination, audit or other proceedings. CMIC weighs evidence for or against a party in accordance with the rule on substantial evidence in administrative investigations. Substantial evidence means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.9
CMIC imposes disciplinary sanctions for minor violations, which shall be immediately executory, while appropriate sanctions, after due investigation, are imposed for major and grave violations.10
Any aggrieved party may file a request for reconsideration of the resolution of CMIC to the Board of Directors of CMIC (CMIC Board) within ten (10) business days from receipt thereof; provided, however, that if the decision is a summary action under the pertinent securities laws, the period of appeal shall be five (5) business days from receipt of the decision.11
Generally speaking, an associated person of one brokerage firm cannot simultaneously act as the associated person of another brokerage firm.12 However, if an exemptive relief is obtained from the Securities and Exchange Commission, an associated person of a brokerage firm can be affiliated with another.
Yes, TPs are not precluded from having more than one AP.13 However, all such APs should be properly registered with and certified by the Securities and Exchange Commission. Moreover, they cannot perform functions other than those prescribed by the securities laws.
No, TPs are not required to submit all information relative to a block sale; however, within five (5) trading days from the execution date of a block sale, the executing TPs shall disclose to CMIC the identity of all clients who transacted on the security from the time the block sale request was filed with the PSE.14
No, TPs are not required to print all the working papers on weekly reserve requirement and daily risk-based capital adequacy (RBCA) computations, but separate soft copies of these working papers should be maintained and, upon request by CMIC, made readily available.15
Under the relevant securities laws, TPs shall comply or cause compliance with any order of CMIC for them to attend, provide information, and/or produce records and other documents under the control of the TPs at any investigation or other proceedings of CMIC in connection with any matter within CMIC's jurisdiction to investigate and resolve or CMIC's enforcement of the securities laws.16 Further, TPs, including their directors, officers, employees and duly authorized agents shall exercise utmost professionalism in dealing with CMIC. Thus, the TPs and their representatives shall be held liable for any unprofessional behavior or conduct towards any member, employee or duly authorized agent of CMIC, such as non-cooperation in providing the required documents and/or information.17
2Article II, Section 1 of the CMIC Rules.
3Article I, Section 2 of the CMIC Rules.
4Article II, Sections 1 and 3 of the CMIC Rules, in relation to Article II, Section 4 of the CMIC Rules.
5Article II, Sections 1 and 3 of the CMIC Rules.
6Article II, Section 5 of the CMIC Rules.
7Article II, Section 6 of the CMIC Rules.
8Article II, Section 1 of the CMIC Rules.
9Article III, Section 3 of the CMIC Rules.
10Article III, Section 5 of the CMIC Rules.
11Article III, Section 6 of the CMIC Rules.
12Rule 22.214.171.124.2 of the 2015 Implementing Rules and Regulations of the Securities Regulation Code.
13Article VI, Section 2 (b) (ii) of the CMIC Rules.
14Implementing Guidelines of the PSE Revised Trading Rules, XVIII-13.
15Article I, Sections 5 and 6 of the CMIC Rules, in relation to Article V, Section 12 of the CMIC Rules, among other securities laws.
16Article II, Section 2 of the CMIC Rules.
17Article V, Section 12 of the CMIC Rules.