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Public offering of securities

In Opinion Number 09-04, dated February 16 2009, the Office of the General Counsel of the Securities and Exchange Commission ruled that whether or not a securities offering is public (and, therefore, must comply with the registration requirements under the Securities Regulation Code or SRC) depends on the surrounding circumstances. The test, according to the Opinion should be: "Is there a sufficient subsisting connection between the company or the person making the offer and the persons to whom the offer is made as friends, customers, or co-adventurers or are the persons mere outsiders? If they are mere outsiders the offer is made to the public, and in such case the fact that the offer is made to a limited class, for example to the members of a single company (not being the company offering its shares), or to the members of a few companies, or to the members of a particular profession, or to the investors in a particular class of companies, does not make it less an offer to the public."

The test appears to be a departure from SRC Rule 3(1)(N), which defines "public offering" as "a random or indiscriminate offering of securities in general to anyone who will buy, whether solicited or unsolicited." Under this SRC Rule, any solicitation or presentation of securities for sale is presumed to be a public offering, if made through any of the following modes: "(i) publication in any newspaper, magazine or printed reading material which is distributed within the Philippines or any part thereof; (ii) presentation in any public or commercial place; (iii) advertisement or announcement in any radio or television, or in any online or e-mail system; or (iv) distribution and/or making available flyers, brochures or any offering material in a public or commercial place, or mailing the same to prospective purchasers."

No securities are to be sold or offered for sale or distribution to the public within the Philippines, unless a registration is duly filed and approved by the Securities and Exchange Commission. Excluded from registration are (a) exempt securities, (b) securities sold in exempt transactions, and (c) offshore securities offerings.

Rafael A Morales

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