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SECURITIES AND REGULATION CODE (SRC)

I. Nature

The SRC is the law which regulates the securities (its issuance, distribution, and sale) and the person who deals
with such securities. It also serves to protect investors, promote investor confidence, and stabilize the financial
markets. The law ensures that there will be fair and full disclosure of information regarding securities so that the
investor could make an informed judgment.

II. Securities Required to be Registered

Securities are shares, participation, and interest in a commercial enterprise evidenced by a certificate, contract,
or instrument. It includes (DO DIET):

A. Debt Instrument - bonds, debentures, notes, evidences of indebtedness, asset-backed securities


B. Other Instruments as may in the future be determined by SEC
C. Derivatives – Options and Warrants
D. Investments Instruments – Investment Contracts, Fractional undivided interests in oil, gas or other
mineral rights

SEC vs Prosperity.Com Inc, GR No. 164197, 25 January 2012


Howey Test Network Marketing

For an investment contract to exist, the following It is a scheme adopted by companies for getting people to
elements must concur: buy their products outside the usual retail system where
(1) a contract, transaction, or scheme; products are bought from the store’s shelf. Under this
(2) an investment of money; scheme, adopted by most health product distributors, the
(3) investment is made in a common enterprise; buyer can become a down-line seller. The latter earns
(4) expectation of profits; and commissions from purchases made by new buyers whom he
(5) profits arising primarily from the efforts of others. refers to the person who sold the product to him. The
network goes down the line where the orders to buy come.

E. Equity Instruments – Shares of Stocks, certificates of interest or participation in a profit sharing


agreement, certifies of deposit for a future subscription, and Proprietary or nonproprietary membership
certificates in corporations
F. Trust Instruments - Certificates of assignments, certificates of participation, trust certificates, voting trust
certificates or similar instruments

GR: Securities are required to be registered and approved by SEC before sale and offered for distribution.
XPN: Exempt Securities and Securities sold in Exempt Transactions
XPN to XPN: Resale of Securities previously sold in an exempt transactions are required to be registered.

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