SECURITIES REGULATION CODE (R.A.

8799)
DECLARATION OF STATE POLICIES (SEC. 2)
The State shall
1. Establish a socially conscious, free market that regulates itself,
2. Encourage the widest participation of ownership in enterprises,
3. Enhance the democratization of wealth,
4. Promote the development of the capital market,
5. Protect investors,
6. Ensure full and fair disclosure about securities,
7. Minimize if not totally eliminate insider trading and other fraudulent
or manipulative devices and practices which create distortions in the
free market.
DEFINITION OF SECURITIES (SEC. 3)
"Securities" are shares, participation or interests in a corporation or in a
commercial enterprise or profit-making venture and evidenced by a
certificate, contract, instruments, whether written or electronic in
character. It includes:
(a) Shares of stocks, bonds, debentures, notes evidences of
indebtedness, asset-backed securities;
(b) Investment contracts, certificates of interest or participation in a
profit sharing agreement, certifies of deposit for a future subscription;
(c) Fractional undivided interests in oil, gas or other mineral rights;
(d) Derivatives like option and warrants;
(e) Certificates of assignments, certificates of participation, trust
certificates, voting trust certificates or similar instruments
(f) Proprietary or nonproprietary membership certificates in
corporations; and
(g) Other instruments as may in the future be determined by the
Commission.
SECURITIES AND EXCHANGE COMMISSION (SEC. 4)
-a Collegial body, composed of a chairperson and (4) Commissioners,
appointed by the President for a term of (7) seven years each and who
shall serves as such until their successor shall have been appointed and
qualified.
-A Commissioner appointed to fill a vacancy occurring prior to the
expiration of the term for which his/her predecessor was appointed,
shall serve only for the unexpired portion of their terms under

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Presidential Decree No. 902-A. Unless the context indicates otherwise,
the term "Commissioner" includes the Chairperson.
POWERS AND FUNCTIONS OF THE SEC ( SEC. 5)
(a) Have jurisdiction and supervision over all corporations, partnership
or associations who are the grantees of primary franchises and/or a
license or a permit issued by the Government;
(b) Formulate policies and recommendations on issues concerning the
securities market, advise Congress and other government agencies on all
aspect of the securities market and propose legislation and amendments
thereto;
(c) Approve, reject, suspend, revoke or require amendments to
registration statements, and registration and licensing applications;
(d) Regulate, investigate or supervise the activities of persons to ensure
compliance; (
(e) Supervise, monitor, suspend or take over the activities of exchanges,
clearing agencies and other SROs;
(f) Impose sanctions for the violation of laws and rules, regulations and
orders, and issued pursuant thereto;
(h) Enlist the aid and support of and/or deputized any and all
enforcement agencies of a the Government, civil or military as well as
any private institution, corporation, firm, association or person in the
implementation of its powers and function under its Code;
(i)Issue cease and desist orders to prevent fraud or injury to the
investing public;
(j) Punish for the contempt of the Commission, both direct and indirect,
in accordance with the pertinent provisions of and penalties prescribed
by the Rules of Court;
(k) Compel the officers of any registered corporation or association to
call meetings of stockholders or members thereof under its supervision;
(l) Issue subpoena duces tecum and summon witnesses to appear in any
proceedings of the Commission and in appropriate cases, order the
examination, search and seizure of all documents, papers, files and
records, tax returns and books of accounts of any entity or person under
investigation as may be necessary for the proper disposition of the cases
before it, subject to the provisions of existing laws;
(m) Suspend, or revoke, after proper notice and hearing the franchise or
certificate of registration of corporations, partnership or associations,
upon any of the grounds provided by law; and
(n) Exercise such other powers as may be provided by law as well as
those which may be implied from, or which are necessary or incidental
to the carrying out of, the express powers granted the Commission to
achieve the objectives and purposes of these laws.

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REQUIREMENTS FOR THE REGISTRATION OF SECURITIES ( SEC. 8)
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 Commission. Prior to such sale, information on the
securities, in such form and with such substance as the Commission may
prescribe, shall be made available to each prospective purchaser. (8.1)
The Commission may conditionally approve the registration statement
under such terms as it may deem necessary.
THE HOWEY TEST
The Howey Test is used in order to determine if a particular transaction
is an investment contract that requires registration.The SRC treats
investment contracts as a securities that must be registered with the SEC
before they can be distributed and sold.
Elements of an Investment contract
1.An investment of money
2.In a common enterprise
3. With expectation of profits
4.Primarily from the efforts of others (Power Homes Unlimited Corp v
SEC and Manero)
EXEMPT SECURITIES ( SEC. 9)
The requirement of registration shall not as a general rule apply to any
of the following classes of securities:
(a) Any security issued or guaranteed by the Government of the
Philippines, or by any political subdivision or agency thereof, or by any
person controlled or supervised by, and acting as an instrumentality of
said Government.
(b) Any security issued or guaranteed by the government of any country
with which the Philippines maintains diplomatic relations, or by any
state, province or political subdivision thereof on the basis of reciprocity:
Provided, That the Commission may arequire compliance with the form
and content for disclosures the Commission may aprescribe.
(c) Certificates issued by a receiver or by a trustee in bankruptcy duly
approved by the proper adjudicatory body.
(d) Any security or its derivatives the sale or transfer of which, by law, is
under the supervision and regulation of the Office of the Insurance
Commission, Housing and Land Use Rule Regulatory Board, or the
Bureau of Internal Revenue.
(e) Any security issued by a bank except its own shares of stock.
EXEMPT TRANSACTIONS ( SEC. 10)

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The requirement of registration shall not apply to the sale of any
security in any of the following transactions:
(a) At any judicial sale, or sale by an executor, administrator, guardian or
receiver or trustee in insolvency or bankruptcy.
(b) By or for the account of a pledge holder, or mortgagee or any of a
pledge lien holder selling of offering for sale or delivery in the ordinary
course of business and not for the purpose of avoiding the provision of
this Code, to liquidate a bonafide debt, a security pledged in good faith
as security for such debt.
(c) An isolated transaction in which any security is sold, offered for sale,
subscription or delivery by the owner therefore, or by his representative
for the owner’s account, such sale or offer for sale or offer for sale,
subscription or delivery not being made in the course of repeated and
successive transaction of a like character by such owner, or on his
account by such representative and such owner or representative not
being the underwriter of such security.
(d) The distribution by a corporation actively engaged in the business
authorized by its articles of incorporation, of securities to its
stockholders or other security holders as a stock dividend or other
distribution out of surplus.
(e) The sale of capital stock of a corporation to its own stockholders
exclusively, where no commission or other remuneration is paid or given
directly or indirectly in connection with the sale of such capital stock.
(f) The issuance of bonds or notes secured by mortgage upon real estate
or tangible personal property, when the entire mortgage together with
all the bonds or notes secured thereby are sold to a single purchaser at a
single sale.
(g) The issue and delivery of any security in exchange for any other
security of the same issuer pursuant to a right of conversion entitling the
holder of the security surrendered in exchange to make such conversion:
Provided, That the security so surrendered has been registered under
this Code or was, when sold, exempt from the provision of this Code,
and that the security issued and delivered in exchange, if sold at the
conversion price, would at the time of such conversion fall within the
class of securities entitled to registration under this Code. Upon such
conversion the par value of the security surrendered in such exchange
shall be deemed the price at which the securities issued and delivered in
such exchange are sold.
(h) Broker’s transaction, executed upon customer’s orders, on any
registered Exchange or other trading market.
(i) Subscriptions for shares of the capitals stocks of a corporation prior to
the incorporation thereof or in pursuance of an increase in its authorized
capital stocks under the Corporation Code, when no expense is incurred,
or no commission, compensation or remuneration is paid or given in
connection with the sale or disposition of such securities, and only when
the purpose for soliciting, giving or taking of such subscription is to
comply with the requirements of such law as to the percentage of the

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capital stock of a corporation which should be subscribed before it can
be registered and duly incorporated, or its authorized, capital increase.
(j) The exchange of securities by the issuer with the existing security
holders exclusively, where no commission or other remuneration is paid
or given directly or indirectly for soliciting such exchange.
(k) The sale of securities by an issuer to fewer than twenty (20) persons
in the Philippines during any twelvemonth period.
(l) The sale of securities to any number of the following qualified buyers:
(i) Bank;
(ii) Registered investment house;
(iii) Insurance company;
(iv) Pension fund or retirement plan maintained by the Government of
the Philippines or any politicalsubdivision thereof or manage by a bank
or other persons authorized by the Bangko Sentral to engage in trust
functions;
(v) Investment company or;
(vi) Such other person as the Commission may rule by determine as
qualified buyers, on the basis ofsuch factors as financial sophistication,
net worth, knowledge, and experience in financial and business matters,
or amount of assets under management.

PROCEDURE OF REGISTRATION SECURITIES ( SEC. 12)

All securities required to be registered shall be registered through the
filing by the issuer in the main office of the Commission, of a sworn
registration statement with the respect to such securities, in such form
and containing such information and document as the Commission
prescribe.
The registration statement shall include any prospectus required or
permitted to be delivered.
REVOCATION AND REJECTION OF REGISTRATION OF SECURITIES ( SEC.
13)
The Commission may reject a registration statement and refuse
registration of the security there-under, or revoke the affectivity of a
registration statement and the registration of the security there-under
after the due notice and hearing by issuing an order to such effect,
setting forth its finding in respect thereto, if it finds that:
(a) The issuer:
(i) Has been judicially declared insolvent;
(ii) Has violated any of the provision of this Code, the rules promulgate
pursuant thereto, or any order of the Commission of which the issuer

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has notice in connection with the offering for which a registration
statement has been filed
(iii) Has been or is engaged or is about to engage in fraudulent
transactions;
(iv) Has made any false or misleading representation of material facts in
any prospectus concerning the issuer or its securities;
(v) Has failed to comply with any requirements that the Commission may
impose as a condition for registration of the security for which the
registration statement has been filed; or
(b) The registration statement is on its face incomplete or inaccurate in
any material respect or includes any untrue statements of a material fact
required to be stated therein or necessary to make the statement
therein not misleading; or
(c) The issuer, any officer, director or controlling person performing
similar functions, or any under writer has been convicted, by a
competent judicial or administrative body, upon plea of guilty, or
otherwise, of an offense involving moral turpitude and /or fraud or is
enjoined or restrained by the Commission or other competent or
administrative body for violations of securities, commodities, and other
related laws.
PROTECTION OF SHAREHOLDERS INTERESTS TENDER OFFER RULE
Tender Offer is a publicly announced intention by a person acting alone
or in a concert with other persons to acquire:
1.Outstanding equity securities of a public company
2.Outstanding equity securities of an associate or related company of
such public company which controls the said public company.
A public company means any corporation:
1.With a class of equity securities listed on an Exchange (PSE)
2. With assets in excess of P50 Million and having 200 or more
shareholders each holding at least 100 shares of a class of its equity
securities.
When tender offer mandatory?
1.Acquire fifteen percent (15%) of equity securities in a public company
in one or more transactions within a period of 12 months
2. Acquire thirty five percent (35%) or more of the outstanding voting
shares of such outstanding voting shares that are sufficient to gain
control of the board in a public company in one or more transactions
within a period of 12 months;
3. Acquire thirty five percent (35%) or more of the outstanding voting
shares of such outstanding voting shares that are sufficient to gain

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control of the board in a public company directly from in one or more
stockholders;
4. Acquire any number of shares that would result in ownership of over
fifty percent (50%) of the total outstanding equity securities of a public
company.
PROHIBITION ON FRAUD, MANIPULATION AND INSIDE TRADING
Manipulation of Security Prices, Devices and Practices
It shall be unlawful for any person acting for himself or through a dealer
or broker, directly or indirectly:
(a) To create a false or misleading appearance of active trading in any
listed security traded in an Exchange of any other trading market
(i) By effecting any transaction in such security which involves no change
in the beneficial ownership thereof; (Wash Sale)
(ii) By entering an order or orders for the purchase or sale of such
security with the knowledge that a simultaneous order or orders of
substantially the same size, time and price, for the sale or purchase of
any such security, has or will be entered by or for the same or different
parties; (Matched Orders) or
(iii) By performing similar act where there is no change in beneficial
ownership (Market Rigging or Jiggling)
(b) To affect, alone or with others, a securities or transactions in
securities that:
(I) Raises their price to induce the purchase of a security, whether of the
same or a different class of the same issuer or of controlling, controlled,
or commonly controlled company by others; or
(II) Depresses their price to induce the purchase of a security, whether of
the same or a different class of the same issuer or of controlling,
controlled, or commonly controlled company by others
(III) Creates active trading to induce such a purchase or sale through
manipulative devices such as marking the close, painting the tape,
squeezing the float, hype and dump, boiler room operations and such
other similar devices.
(c) To circulate or disseminate information that the price of any security
listed in an Exchange will or is likely to rise or fall because of
manipulative market operations of any one or more persons conducted
for the purpose of raising or depressing the price of the security for the
purpose of inducing the purpose of sale of such security.
(d) To make false or misleading statement with respect to any material
fact, which he knew or had reasonable ground to believe was so false or
misleading, for the purpose of inducing the purchase or sale of any
security listed or traded in an Exchange.

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(e) To effect, either alone or others, any series of transactions for the
purchase and/or sale of any security traded in an Exchange for the
purpose of pegging, fixing or stabilizing the price of such security; unless
otherwise allowed by this Code or by rules of the Commission.
FRAUDULENT TRANSACTIONS (SEC. 26)
It shall be unlawful for any person, directly or indirectly, in connection
with the purchase or sale of any securities to:
1. Employ any device, scheme, or artifice to defraud;
2. Obtain money or property by means of any untrue statement of a
material fact of any omission to state a material fact necessary in order
to make the statements made, in the light of the circumstances under
which they were made, not misleading; or
3. Engage in any act, transaction, practice or course of business which
operates or would operate as a fraud or deceit upon any person.
INSIDE TRADING
"Insider" means
(a) the issuer;
(b) a director or officer (or any person performing similar functions) or a
person controlling the issuer;
(c). A person whose relationship or former relationship gives or gave him
access to material information about the issuer or the security that is not
generally available to the public;
(d) A government employee, director, or officer of an exchange, clearing
agency and/or self-regulatory organization who has access to material
information about an issuer or a security that is not generally available
to the public; or
(e) a person who learns such information by a communication from any
forgoing insiders. Issuer is the originator, maker, obligor, or creator of
the security.
Material Nonpublic Information
(a) 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 and the lapse of a reasonable time for the market to absorb the
information; or
(b) would be considered by a reasonable person important under the
circumstances in determining his course of action whether to buy, sell or
hold a security.
THE GENERAL BANKING LAW OF 2000 (R.A. NO. 8791)
DECLARATION OF STATE POLICIES (SEC. 2)

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The State recognizes the vital role of banks providing an environment
conducive to the sustained development of the national economy and
the fiduciary nature of banking that requires high standards of integrity
and performance. In furtherance thereof, the State shall promote and
maintain a stable and efficient banking and financial system that is
globally competitive, dynamic and responsive to the demands of a
developing economy
DEFINITION AND CLASSIFICATION OF BANKS (SEC. 3)
3.1. "Banks" shall refer to entities engaged in the lending of funds
obtained in the form of deposits. (2a)
3.2. Banks shall be classified into:
(a) Universal banks;
Universal banks may, in addition to the powers granted to a commercial
bank,
invest in the equities of non-allied enterprises (e.g enterprises engaged
in agricultural
mining, quarrying, public utilities). It also has the power as an
investment house.
(b) Commercial banks;
Commercial banks are banks which shall have all the powers, in addition
to the
general powers incident to corporations, necessary to carry on the
business of
commercial banking such as accepting drafts and issuing letters of credit,
discounting
of notes, bills of exchange and other evidence of debt, accepting and
creating demand
deposits, buying and selling foreign exchange)
(c) Thrift banks,
Any bank corporation that may be organized for the following purposes:
a. accumulating savings of the depositors, investing them for personal or
household finance or in financing for home building and home
development
b. provide short-term working capital, medium and long term financing
to business engaged in agriculture services, industry and housing
c. provide diversified financial and allied services for its chosen market
and constituent entities especially for small and medium enterprises and
individuals

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(d) Rural banks as defined in Republic Act No. 73S3 (hereafter the "Rural
Banks Act");
Banks that extended loan primarily for the purpose of meeting the
normal credit needs of framers, fisherman or farm families, owning or
cultivating land dedicated to agricultural production.
(e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the
"Cooperative Code");
(e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the
"Cooperative Code");
Cooperative banks are organized by the majority shares of which is
owned & controlled by cooperatives primarily to provide financial and
credit services to cooperatives
(f) Islamic banks as defined in Republic Act No. 6848, otherwise known
as the "Charter of Al Amanah Islamic Investment Bank of the
Philippines"; created to promote and accelerate the socio-economic
development of theARMM by performing banking, financing &
investment operations by performing banking, financing & investment
operations & to establish & participate in agricultural commercial &
industrial ventures based on the Islamic concept of banking and
(g) Other classifications of banks as determined by the Monetary Board
of the Bangko Sentral ng Pilipinas. (6-Aa)
DEFINITION AND CLASSIFICATION OF BANKS (SEC. 3)
(g) Other classifications of banks as determined by the Monetary Board
of the Bangko
Sentral ng Pilipinas.
Ex. Government-owned banks are owned and controlled by the national
government for public purpose.
 Land Bank of the Philippines
 Development Bank of the Philippines
Supervisory Powers.
The operations and activities of banks shall be subject to supervision of
the Bangko Sentral. ”
Supervision" shall include the following:
4.1. The issuance of rules of, conduct or the establishment standards of
operation for uniform application to all institutions or functions covered,
taking into consideration the distinctive character of the operations of
institutions and the substantive similarities of specific functions to which
such rules, modes or standards are to be applied;
4.2 The conduct of examination to determine compliance with laws and
regulations if the circumstances so warrant as determined by the
Monetary Board;

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4.3 Overseeing to ascertain that laws and regulations are complied with;
4.4 Regular investigation which shall not be oftener than once a year
from the last date of examination to determine whether an institution is
conducting its business on a safe or sound basis: Provided, That the
deficiencies/irregularities found by or discovered by an audit shall be
immediately addressed;
4.5 Inquiring into the solvency and liquidity of the institution (2-D); or
4.6 Enforcing prompt corrective action. (n)
NATURE OF BANK FUNDS AND BANK DEPOSITS
Banks deposits are governed by the law on loans. A debtor and creditor
relationship is created between the bank and its depositors
The fiduciary nature of a bank-depositor relationship does not convert
the contract between them from a loan to a trust agreement.Failure by
the bank to pay the depositor is failure to pay a simple loan and not a
breach of trust.
9. BANK DEPOSITS AND BANK SUBSTITUTES
Banks deposits are funds obtained by a bank from the public which are
relent by such bank to its own borrowers. They give rise to creditor-
debtor relationship between the bank as debtor and the depositors as
creditors.
Deposit substitutes are alternative forms of obtaining funds from the
public, other than deposits, through the issuance, endorsement, or
acceptance of debt instruments for the own account of the borrower,
for the purpose of relending or purchasing of receivables and other
obligations
REQUIRED DILIGENCE OF BANKS
The diligence required of banks is more than that of the diligence of a
good father of a family where the fiduciary nature of their relationship
with their depositors is concerned.
The highest degree of diligence is based on the General Banking Law
which requires banks to exercise the highest standards of integrity and
performance because the transaction and business is imbued with public
interest.
LIMITATIONS ON THE POWER OF THE BANK TO GRANT LOANS
1. Single-Borrower’s Limit (Sec. 35, GBL)
Except as the Monetary Board may otherwise prescribe for reasons of
national interest, the total amount of loans, credit accommodations and
guarantees as may be defined by the Monetary Board that may be
extended by a bank to any person, partnership, association, corporation
or other entity shall at no time exceed twenty-five percent (25%) of the
net worth of such bank.

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2. DOSRI Rules and Regulations (Sec. 36, GBL)
Loans granted to directors, officers, stockholders and their related
interest must conform to certain procedural and substantive
requirements, otherwise, criminal sanctions may be imposed.
LIMITATIONS ON THE POWER OF THE BANK TO GRANT LOANS
3. Loans and Other Credit Accommodations Against Real Estate. (Sec. 37,
GBL)
Except as the Monetary Board may otherwise prescribe, loans and other
credit accommodations against real estate shall not exceed seventy-five
percent (75%) of the appraised value of the respective real estate
security, plus sixty percent (60%) of the appraised value of the insured
improvements, and such loans may be made to the owner of the real
estate or to his assignees.
4. Loans And Other Credit Accommodations on Security of Chattels and
Intangible Properties (Sec 38, GBL)
Except as the Monetary Board may otherwise prescribe, loans and other
credit accommodations on security of chattels and intangible properties
such as, but not limited to, patents, trademarks, trade names, and
copyrights shall not exceed seventyfive percent (75%) of the appraised
value of the security, an such loans and other credit accommodation
may be made to the title-holder of the chattels and intangible properties
or his assignees.
WHEN MAY THE SINGLE BORROWER’S LIMIT BE INCREASED
The total amount of loans, credit accommodations and guarantees
prescribed in the preceding paragraph may be increased by an additional
ten percent (10%) of the net
worth of such bank provided the additional liabilities of any borrower
are adequately secured by trust receipts, shipping documents,
warehouse receipts or other similar documents transferring or securing
title covering readily marketable, non-perishable goods which must be
fully covered by insurance.
RESTRICTION ON BANK EXPOSURE TO DIRECTORS, OFFICERS,
STOCKHOLDERS AND THEIR RELATED INTERESTS (SEC 36, GBL)
No director or officer of any bank shall, directly or indirectly, for himself
or as the representative or agent of others, borrow from such bank nor
shall he become a guarantor, endorser or surety for loans from such
bank to others, or in any manner be an obligor or incur any contractual
liability to the bank except with the written approval of the majority of
all the directors of the bank, excluding the director concerned: Provided,
That such written approval shall not be required for loans, other credit
accommodations and advances granted to officers under a fringe benefit
plan approved by the Bangko Sentral. The required approval shall be
entered upon the records of the bank and a copy of such entry shall be
transmitted forthwith to the appropriate supervising and examining

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department of the Bangko Sentral. The outstanding loans, credit
accommodations and guarantees which a bank may extend to each of its
stockholders, directors, or officers and their related interests, shall be
limited to an amount equivalent to their respective unencumbered
deposits and book value of their paid-in capital contribution in the bank:
Provided, however, That loans, credit accommodations and guarantees
secured by assets considered as nonrisk by the Monetary Board shall be
excluded from such limit: Provided, further, That loans, credit
accommodations and advances to officers in the form of fringe benefits
granted in accordance with rules as may be prescribed by the Monetary
Board shall not be subject to the individual limit.
PROHIBITED TRANSACTIONS (SEC 55, GBL)
55.1. No director, officer, employee, or agent of any bank shall -
(a) Make false entries in any bank report or statement or participate in
any fraudulent transaction, thereby affecting the financial interest of, or
causing damage to, the bank or any person;
(b) Without order of a court of competent jurisdiction, disclose to any
unauthorized person any information relative to the funds or properties
in the custody of the bank belonging to private individuals, corporations,
or any other entity: Provided, That with respect to bank deposits, the
provisions of existing laws shall prevail;
(c) Accept gifts, fees, or commissions or any other form of remuneration
in connection with the approval of a loan or other credit accommodation
from said bank;
(d) Overvalue or aid in overvaluing any security for the purpose of
influencing in any way the actions of the bank or any bank; or
(e) Outsource inherent banking functions.
55.2. No borrower of a bank shall -
(a) Fraudulently overvalue property offered as security for a loan or
other credit accommodation from the bank;
(b) Furnish false or make misrepresentation or suppression of material
facts for the purpose of obtaining, renewing, or increasing a loan or
other credit accommodation or extending the period thereof;
(c) Attempt to defraud the said bank in the event of a court action to
recover a loan or other credit accommodation; or
(d) Offer any director, officer, employee or agent of a bank any gift, fee,
commission, or any other form of compensation in order to influence
such persons into approving a loan or other credit accommodation
application
55.3 No examiner, officer or employee of the Bangko Sentral or of any
department, bureau, office, branch or agency of the Government that is
assigned to supervise, examine, assist or render technical assistance to

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any bank shall commit any of the acts enumerated in this Section or aid
in the commission of the same.
The making of false reports or misrepresentation or suppression of
material facts by personnel of the Bangko Sental ng Pilipinas shall be
subject to the administrative and criminal sanctions provided under the
New Central Bank Act.
55.4. Consistent with the provisions of Republic Act No. 1405, otherwise
known as the Banks Secrecy Law, no bank shall employ casual or non
regular personnel or too lengthy probationary personnel in the conduct
of its business involving bank deposits.
SECRECY OF BANK DEPOSITS
(R.A. 1405 AS AMENDED BY P.D. NO. 1792)
PURPOSE (SEC. 1, RA 1405)
It is hereby declared to be the policy of the Government to
1. give encouragement to the people to deposit their money in banking
institutions and
2. discourage private hoarding so that the same may be properly utilized
by banks in authorized loans to assist in the economic development of
the country
PROHIBITED ACTS (SEC 3, 1405 AS AMENDED)
It shall be unlawful for any official or employee of a banking institution
to disclose or allow the examination or inquiry by any person,
government official, bureau or office, other than those expected by law,
any information concerning Philippine currency bank deposits of
whatever nature and kind, as well as investment in government
securities.
DEPOSITS COVERED (SEC 2, 1405 AS AMENDED)
All deposits of whatever nature with banks or banking institutions in the
Philippines
including investments in bonds issued by the Government of the
Philippines, its political
subdivisions and its instrumentalities,
EXCEPTIONS FROM COVERAGE
1.Written permission of the depositor;
2.In case of impeachment;
3.In case or order of a competent court in any of the following cases:
a. in case of bribery or dereliction of duty of public officials;
b. where the subject matter of the litigation is the money deposited;

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c. prosecution for unexplained wealth
d. prosecution for violation of the anti-graft and corrupt practices act;
e. in case of violation of the anti-money laundering law; and
f. garnishment of bank deposits (only the peso deposit, not the foreign
currency. Also, the disclosure in this case is only incidental to the
execution process.)
Foreign Currency Deposit (REPUBLIC ACT No. 6426)
AN ACT INSTITUTING A FOREIGN CURRENCY DEPOSIT SYSTEM IN THE
PHILIPPINES, AND FOR OTHER PURPOSES.
Section 1. Title.– This act shall be known as the "Foreign Currency
Deposit Act of the Philippines."
Section 2. Authority to deposit foreign currencies. – Any person, natural
or juridical, may, in accordance with the provisions of this Act, deposit
with such Philippine banks in good standing, as may, upon application,
be designated by the Central Bank for the purpose, foreign currencies
which are acceptable as part of the international reserve, except those
which are required by the Central Bank to be surrendered in accordance
with the provisions of Republic Act Numbered two hundred sixty-five
(Now Rep. Act No. 7653 as amended).
Section 3. Authority of banks to accept foreign currency deposits. – The
banks designated by the Central Bank under Section two hereof shall
have the authority:
(1) To accept deposits and to accept foreign currencies in trust Provided,
That numbered accounts for recording and servicing of said deposits
shall be allowed;
(2) To issue certificates to evidence such deposits;
(3) To discount said certificates;
(4) To accept said deposits as collateral for loans subject to such rules
and regulations as may be promulgated by the Central Bank from time
to time; and
(5) To pay interest in foreign currency on such deposits.
Section 4. Foreign currency cover requirements. – Except as the
Monetary Board may otherwise prescribe or allow, the depository banks
shall maintain at all times a one hundred percent foreign currency cover
for their liabilities, of which cover at least fifteen percent shall be in the
form of foreign currency deposit with the Central Bank, and the balance
in the form of foreign currency loans or securities, which loans or
securities shall be of short term maturities and readily marketable. Such
foreign currency loans may include loans to domestic enterprises which
are export-oriented or registered with the Board of Investments, subject
to the limitations to be prescribed by the Monetary Board on such loans.
Except as the Monetary Board may otherwise prescribe or allow, the
foreign currency cover shall be in the same currency as that of the

15
corresponding foreign currency deposit liability. The Central Bank may
pay interest on the foreign currency deposit, and if requested shall
exchange the foreign currency notes and coins into foreign currency
instruments drawn on its depository banks. (As amended by PD No.
1453, June 11, 1978.)
Depository banks which, on account of networth, resources, past
performance, or other pertinent criteria, have been qualified by the
Monetary Board to function under an expanded foreign currency deposit
system, shall be exempt from the requirements in the preceding
paragraph of maintaining fifteen percent (15%) of the cover in the form
of foreign currency deposit with the Central Bank. Subject to prior
Central Bank approval when required by Central Bank regulations, said
depository banks may extend foreign currency loans to any domestic
enterprise, without the limitations prescribed in the preceding
paragraph regarding maturity and marketability, and such loans shall be
eligible for purposes of the 100% foreign currency cover prescribed in
the preceding paragraph. (As added by PD No. 1035.)
Section 5. Withdrawability and transferability of deposits. – There shall
be no restriction on the withdrawal by the depositor of his deposit or on
the transferability of the same abroad except those arising from the
contract between the depositor and the bank.
Section 6. Tax exemption. – All foreign currency deposits made under
this Act, as amended by PD No. 1035, as well as foreign currency
deposits authorized under PD No. 1034, including interest and all other
income or earnings of such deposits, are hereby exempted from any and
all taxes whatsoever irrespective of whether or not these deposits are
made by residents or nonresidents so long as the deposits are eligible or
allowed under aforementioned laws and, in the case of nonresidents,
irrespective of whether or not they are engaged in trade or business in
the Philippines. (As amended by PD No. 1246, prom. Nov. 21, 1977.)
Section 7. Rules and regulations. – The Monetary Board of the Central
Bank shall promulgate such rules and regulations as may be necessary to
carry out the provisions of this Act which shall take effect after the
publications in the Official Gazette and in a newspaper of national
circulation for at least once a week for three consecutive weeks. In case
the Central Bank promulgates new rules and regulations decreasing the
rights of depositors, rules and regulations at the time the deposit was
made shall govern.
Section 8. Secrecy of foreign currency deposits. – All foreign currency
deposits authorized under this Act, as amended by PD No. 1035, as well
as foreign currency deposits authorized under PD No. 1034, are hereby
declared as and considered of an absolutely confidential nature and,
except upon the written permission of the depositor, in no instance shall
foreign currency deposits be examined, inquired or looked into by any
person, government official, bureau or office whether judicial or
administrative or legislative, or any other entity whether public or
private; Provided, however, That said foreign currency deposits shall be
exempt from attachment, garnishment, or any other order or process of
any court, legislative body, government agency or any administrative

16
body whatsoever. (As amended by PD No. 1035, and further amended
by PD No. 1246, prom. Nov. 21, 1977.) *
Section 9. Deposit insurance coverage. – The deposits under this Act
shall be insured under the provisions of Republic Act No. 3591, as
amended (Philippine Deposit Insurance Corporation), as well as its
implementing rules and regulations: Provided, That insurance payment
shall be in the same currency in which the insured deposits are
denominated.
Section 10. Penal provisions. – Any willful violation of this Act or any
regulation duly promulgated by the Monetary Board pursuant hereto
shall subject the offender upon conviction to an imprisonment of not
less than one year nor more than five years or a fine of not less than five
thousand pesos nor more than twenty-five thousand pesos, or both such
fine and imprisonment at the discretion of the court.
Section 11. Separability clause. – The provisions of this Act are hereby
declared to be separable and in the event one or more of such
provisions are held unconstitutional, the validity of other provisions shall
not be affected thereby.
Section 12. Repealing clause. – All acts, executive orders, rules and
regulations, or parts thereof, which are inconsistent with any provisions
of this Act are hereby repealed, amended or modified accordingly,
without prejudice, however, to deposits made thereunder.
Section 12-A. Amendatory enactments and regulations. – In the event a
new enactment or regulation is issued decreasing the rights hereunder
granted, such new enactment or regulation shall not apply to foreign
currency deposits already made or existing at the time of issuance of
such new enactment or regulation, but such new enactment or
regulation shall apply only to foreign currency deposits made after its
issuance. (As added by PD No. 1246, prom. Nov. 21, 1977.)
Section 13. Effectivity. – This Act shall take effect upon its approval.
Approved, April 4, 1974
* RA 6426 is a special law designed especially for foreign currency
deposits in the Philippines. RA 1405 which covers all bank deposits in the
Philippines is the general law which does not nullify the special law on
foreign currency deposits. The surety which issued a bond to secure the
obligation of the principal debtor cannot inquire into the foreign
currency deposits of the debtor even if its purpose is to determine
whether or not the loan proceeds were used for the purpose specified in
the surety agreement. The foreign currency deposits cannot be
examined without the written consent of the depositor. The subpoena
issued by the bank should be quashed because foreign currency deposits
are not subject to court order except for violation of the anti-money
laundering law (GSIS v. Court of Appeals GR 189206, June 8, 2011, in
Divina, 2014).
Unclaimed Balance Law
PRESIDENTIAL DECREE No. 679 April 2, 1975

17
AMENDING ACT NUMBERED THIRTY NINE HUNDRED AND THIRTY SIX,
AN ACT REQUIRING BANKS, TRUST CORPORATIONS, AND BUILDING AND
LOAN ASSOCIATIONS, TO TRANSFER UNCLAIMED BALANCES HELD BY
THEM TO THE TREASURER OF THE PHILIPPINES AND FOR OTHER
PURPOSES.
WHEREAS, Act No. 3936 requires the publication of a sworn statement
of unclaimed balances in banks once a week of three consecutive weeks
in at least two newspapers of general circulation in the locality where
the banks are situated, if there be any, and if there is none, in the City of
Manila, one in English and one in Spanish, the cost of which shall be paid
by the Bureau of Treasury, which shall be reimbursed out of the
escheated funds;
WHEREAS, the law also provides for the publication of summons and a
notice upon the commencement of the prescribed judicial proceedings
for the escheat of unclaimed balances;
WHEREAS, past experience has shown that the cost of publication
required by law, the increase of which has been substantial the past few
years, is more than the aggregate amount of the unclaimed balances to
be escheated, the average amount of which is small;
WHEREAS, there is a felt need to simplify the procedure for the escheat
of unclaimed balances for the purpose of reducing the expenses
therefor;
NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the
Philippines, by virtue of the powers in me vested by the Constitution, do
hereby decree and order:
Section 1. Sections 1, 2, 3, 4, and 5 of Act No. 3936 are hereby amended
to read as follows:
"Sec. 1. "Unclaimed balances", within the meaning of this Act, shall
include credits or deposits of money, bullion, security or other evidence
of indebtedness of any kind, and interest thereon with banks, buildings
and loan associations, and trust corporations, as hereinafter defined, in
favor of any person known to be dead or who has not made further
deposits or withdrawals during the preceding ten years or more. Such
unclaimed balances, together with the increase and proceeds thereof,
shall be deposited with the Treasurer of the Philippines to the credit of
the Government of the Republic of the Philippines to be used as the
National Assembly may direct.
"Banks", "building and loan associations" and "trust corporations",
within the meaning of this Act, shall refer to institutions defined under
Section two, thirty-nine and fifty-six, respectively, of Republic Act
Numbered Three Hundred Thirty Seven, otherwise known as the General
Banking Act, as amended, whether organized under special charters or
not.
"Sec. 2. Immediately after the taking effect of this Act and within the
month of January of every odd year, all banks, building and loan
associations, and trust corporations shall forward to the Treasurer of the
Philippines a statement, under oath, of their respective managing

18
officers, of all credits and deposits held by them in favor of persons
known to be dead, or who have not made further deposits or
withdrawals during the preceding ten years or more, arranged in
alphabetical order according to the names of creditors and depositors,
and showing:
"(a) The names and last known place of residence or post office
addresses of the persons in whose favor such unclaimed balances stand;
"(b) The amount and the date of the outstanding unclaimed balance and
whether the same is in money or in security, and if the latter, the nature
of the same;
"(c) The date when the person in whose favor the unclaimed balance
stands died, if known, or the date when he made his last deposit or
withdrawal; and
"(d) The interest due on such unclaimed balance, if any, and the amount
thereof.
"A copy of the above sworn statement shall be posted in a conspicuous
place in the premises of the bank, building and loan association, or trust
corporation concerned for at least sixty days from the date of filing
thereof: Provided, That immediately before filing the above sworn
statement, the bank, building and loan association, and trust corporation
shall communicate with the person in whose favor the unclaimed
balance stands at his last known place of residence or post office
address.
"It shall be the duty of the Treasurer of the Philippines to inform the
Solicitor General from time to time the existence of unclaimed balances
held by banks, building and loan associations, and trust corporations.
"Sec. 3. Whenever the Solicitor General shall be informed of such
unclaimed balances, he shall commence an action or actions in the name
of the People of the Republic of the Philippines in the Court of First
Instance of the province or city where the bank, building and loan
association or trust corporation is located, in which shall be joined as
parties the bank, building and loan association or trust corporation and
all such creditors or depositors. All or any of such creditors or depositors
or banks, building and loan association or trust corporations may be
included in one action. Service of process in such action or actions shall
be made by delivery of a copy of the complaint and summons to the
president, cashier, or managing officer of each defendant bank, building
and loan association or trust corporation and by publication of a copy of
such summons in a newspaper of general circulation, either in English, in
Filipino, or in a local dialect, published in the locality where the bank,
building and loan association or trust corporation is situated, if there be
any, and in case there is none, in the City of Manila, at such time as the
court may order. Upon the trial, the court must hear all parties who have
appeared therein, and if it be determined that such unclaimed balances
in any defendant bank, building and loan association or trust corporation
are unclaimed as hereinbefore stated, then the court shall render
judgment in favor of the Government of the Republic of the Philippines,
declaring that said unclaimed balances have escheated to the

19
Government of the Republic of the Philippines and commanding said
bank, building and loan association or trust corporation to forthwith
deposit the same with the Treasurer of the Philippines to credit of the
Government of the Republic of the Philippines to be used as the National
Assembly may direct.
"At the time of issuing summons in the action above provided for, the
clerk of court shall also issue a notice signed by him, giving the title and
number of said action, and referring to the complaint therein, and
directed to all persons, other than those named as defendants therein,
claiming any interest in any unclaimed balance mentioned in said
complaint, and requiring them to appear within sixty days after the
publication or first publication, if there are several, of such summons,
and show cause, if they have any, why the unclaimed balances involved
in said action should not be deposited with the Treasurer of the
Philippines as in this Act provided and notifying them that if they do not
appear and show cause, the Government of the Republic of the
Philippines will apply to the court for the relief demanded in the
complaint. A copy of said notice shall be attached to, and published with
the copy of, said summons required to be published as above, and at the
end of the copy of such notice so published, there shall be a statement
of the date of publication, or first publication, if there are several, of said
summons and notice. Any person interested may appear in said action
and become a party thereto. Upon the publication or the completion of
the publication, if there are several, of the summons and notice, and the
service of the summons on the defendant banks, building and loan
associations or trust corporations, the court shall have full and complete
jurisdiction in the Republic of the Philippines over the said unclaimed
balances and over the persons having or claiming any interest in the said
unclaimed balances, or any of them, and shall have full and complete
jurisdiction to hear and determine the issues herein, and render the
appropriate judgment thereon.
"Sec. 4. If the president, cashier or managing officer of the bank, building
and loan association, or trust corporation neglects or refuses to make
and file the sworn statement required by this action, such bank, building
and loan association, or trust corporation shall pay to the Government
the sum of five hundred pesos a month for each month or fraction
thereof during which such default shall continue.
"Sec. 5. Any bank, building and loan association or trust corporation
which shall make any deposit with the Treasurer of the Philippines in
conformity with the provisions of this Act shall not thereafter be liable to
any person for the same and any action which may be brought by any
person against in any bank, building and loan association, or trust
corporation for unclaimed balances so deposited with the Treasurer of
the Philippines shall be defended by the Solicitor General without cost to
such bank, building and loan association or trust corporation."
Section 2. This Decree shall take effect immediately.
DONE in the City of Manila, this 2nd day of April, in the year of Our Lord,
nineteen hundred and seventy-five.

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