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The Revised Securities Act (RSA) Full Disclosure Rules (the Rules) became effective on October 7 1996. The Rules establish an integrated disclosure system for registration statements (RS) and other reports which must be filed with the Philippine Securities and Exchange Commission (SEC) and distributed to the investing public.

The Rules apply only to 'public companies' which are defined as:

  • companies that have registered their shares for sale to the public;
  • companies whose securities are listed on the stock exchange; and
  • companies that have Ps500 million (US$17.24 million) in assets, and at least 200 shareholders each holding 100 or more shares.

The rules revolve around two core rules which are:

  • RSA Rule 3-3, on requirements for filings under the RSA and the Corporation Code of the Philippines, or the non-financial aspects of filings; and
  • RSA Rule 48, on requirements on the form and content of financial statements.

Rule 3-3 governs the content of the non-financial matters required to be included in the RS and other reports to be filed with the SEC. Among other things, Rule 3-3 provides for the following requirements:

  • publication requirements;
  • description of the business and securities of the registrant;
  • management discussions and analysis or plan operation;
  • detailed information regarding the presentation of the RS and prospectus and items to be included therein; and
  • various pieces of information to be appended to the RS.

Rule 48 governs the financial disclosures to be made by the registrant in relation to the RS and other reports to be filed with the SEC. Among other things, Rule 48 provides for the following:

  • general guidelines for the preparation of financial statements;
  • qualifications and reports of independent auditors;
  • requirements for consolidated financial statements, interim financial statements, and form and content of schedules.

However, the SEC has decided that until the substantive rules governing long-term and short-term commercial papers, warrants and asset-backed securities have been reviewed, these securities should not be incorporated into the integrated disclosure system, and Rule 3-3 will not apply to them. These securities will continue to be governed by the SEC's current rules.

The Rules provide for major changes to the prospectus to make it more readable and more easily understood by the investing public. The summary pages of the prospectus can be used by issuers and underwriters for the offering and to disseminate information to would-be investors.

A new process for registration of public offerings to be listed on the Philippine Stock Exchange (PSE) is established under the Rules. The issuer must file its RS with the SEC, and simultaneously file an application with the PSE for listing. The SEC and PSE will then review the filings concurrently.

When the review of the RS is completed, and the SEC is satisfied with the disclosures, the issuer will then file its final amendment to the RS. When the RS has been declared effective by the SEC, the entire offering must commence within two business days. The listing on the PSE should also occur within the same time period.

If the issuer and the underwriters are not ready to start the offering, the SEC will delay declaring the registration effective until the issuer and underwriters are ready. In the intervening period, the issuer must keep the RS current. The issuers and underwriters will have to time the filing of the RS with the SEC carefully.

Tadeo Hilado and Angela Ylagan

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