Financial Regulations & Reporting

Holders of Secondary Licenses

• Large entities hold secondary licenses

Medium-Sized Entities

• Medium-sized entities possess total assets ranging from ₱100 million to ₱350 million
• The total liabilities are between ₱100 million and ₱250 million

Submission of Annual Financial Statements

• Organizations with fiscal years ending on dates other than December 31 must submit annual financial statements within 120 days

Materiality Threshold

• An error impacting related accounts is considered material if it increases or decreases them by 10% or more

Financial Reporting Framework Options for Entities

• Micro Entities can use either the income tax basis or PFRS for SES as their financial reporting framework

Reconciliation Schedule

• A reconciliation schedule should be attached to financial statements to show the differences between presentation, recognition, and measurement of PFRSs and BSP's financial reporting framework

Internal Auditors

• Internal auditors are employees who provide independent and objective assurance and consulting services.
• These services are designed to improve an organization’s operations

External Auditors

• External auditors are independent professionals hired to give an unbiased opinion on the fairness and accuracy of financial statements

Responsibility for Financial Statement Fairness

• The company's management has the primary responsibility for the fairness of representations in financial statements filed with the Commission

Statement of Management's Responsibility (SMR)

• The SMR must be signed by the Chairman of the Board, the Chief Executive Officer, and the Chief Financial Officer (or their equivalents)

Independent Auditor's Responsibility

• The independent auditor must express an opinion on the financial statements they have audited

Record Retention for Publicly-Listed Companies

• Publicly-listed companies are required to keep copies of all records and documents supporting the preparation of their financial statements for ten years.
• The retention period extends if there is a pending investigation or case

Validity of Proxy Solicitations

• Proxy solicitations are valid for 5 years once issued

Filing of Proxy Solicitations

• Proxy solicitations must be filed before the scheduled meeting

Maximum Fee Rate for Filings

• The maximum fee rate that the Commission may require for filings related to tender offers or proxy solicitations under Section 20 is no more than one-tenth of one percent (0.1%) of the proposed aggregate purchase price

Importance of Detailed Records and Controls

• Issuers must maintain detailed records and internal accounting controls to ensure the reliability and integrity of financial information, prevent unauthorized transactions, and comply with regulatory requirements

Section 23 Filings

• Those required to file statements under Section 23 include any person who directly or indirectly owns more than 10% of any class of equity securities.
• Also any director or officer of the issuer

Prohibited Action Under Section 19

• Making untrue statements or omitting material facts is prohibited

Required Information in Registration Statement

• The registration statement for securities must contain detailed information about the securities, business, management, and terms of the offering

Where to File Registration Statements

• The registration statement for securities must be filed at the SEC's main office

SEC Review Duration

• The SEC review for a registration statement lasts 45 days, or a later agreed date

Document Provided to Investors

• A prospectus is provided to investors detailing the offering

Illegal Insider Trading

• Trading based on non-public information without disclosure or authorization constitutes illegal insider trading

Consequences of Insider Trading

• Consequences for violations related to insider trading include fines, imprisonment, and reputational damage

Primary Purpose of Securities

• The primary purpose of securities is to raise capital for firms

Trading Venues for Securities

• Securities are typically traded in exchange markets

Instruments Considered Securities

• The SEC determines what instruments are considered securities in the future

Government Securities

• Government securities are issued by governments

Gross Negligence Defined

• Gross Negligence: Wanton disregard of the duty of due care in complying with Philippine standards on auditing

Definition of Issuer

• Issuer: Any entity authorized by the Commission to offer to sell, sell, or promote the sale to the public of its equity, bonds, instruments of indebtedness, and other forms of securities

Significant and Continuing factors

• The determination shall be based on management's judgement taking into consideration relevant qualitative and quantitative factors

SEC Oversight Assurance Review (SOAR) Inspection Program

• SEC Oversight Assurance Review (SOAR) Inspection Program: A review of the quality control policies and procedures of accredited auditing firms auditing companies with equity or debt securities listed in an Exchange

The Board of Accountancy of the Professional Regulation Commission (PRC)

• The Board of Accountancy (BOA) of the Professional Regulation Commission (PRC) is responsible for registering and licensing independent auditors

Quality Assurance Manual (QAM)

• Quality Assurance Manual (QAM) outlines the quality control procedures that an independent auditor must have in place

Corporate Clients Required for Group B Accreditation

-Three (3) is the minimum number of corporate clients an applicant for Group B accreditation must have

SOAR Inspection Program

• SOAR Inspection Program is the Commission's program that involves the inspection of the audit work of accredited auditing firms engaged by publicly listed companies

Restrictions on Broker-Dealers

• Brokers and dealers cannot vote or authorize proxies for securities held on behalf of customers without the customer's written consent

Securities Taken Up Pro Rata

• Securities are taken up pro rata when the number offered exceeds what the offeror is willing to purchase under Section 19

Registration Statement

• Registration Statement is the document that must be signed by key officers during securities registration

Regulatory Body for Securities Registration

• The SEC (Securities and Exchange Commission) is the regulatory body responsible for reviewing securities registration statements

Definition of Fraud

• Fraud is using deceitful practices to influence securities transactions

Definition of a Prospectus

• Prospectus: A legal document provided to investors detailing an offering

Requirement to Maintain Accurate Records

• Section 22 requires issuers to maintain accurate records and internal accounting controls for the protection of shareholders' interests

Definition of Securities

• Securities are tradable financial instruments issued by a firm or the government that grants ownership, debt, or the ability to purchase, sell, or trade an option

Exchange Markets

• Exchange Markets is where securities are typically traded

Securities and Ownership

• Stocks represent ownership

Securities and Debt

• Bonds represents debt

Enumerated Corporations Imbued with Public Interest

• Corporations the Commission may consider in the future as imbued with public interest:
• Those grantees of legislative franchises
• Those engaged in nationalized or partly nationalized activities
• Those grantees or recipients of public funds

Categories of Entities Requiring Independent Auditors

• The categories of entities that must have independent auditors accredited by the Commission are Group A, Group B, and Group C

Documents to Include in Independent Auditor's File

• An independent auditor's file with a company must include:
• A copy of their PRC license
• A BOA Accreditation Certificate
• The Commission's Certificate of Accreditation

Items to Include in an Auditor's Report

• An auditor's report should include the date, the signature of the certifying independent auditor, and identification of the financial statements covered by the report

Procedures for Registration of Securities

• The initial steps for registration of securities are preparation of the Registration Statement, filing with the SEC and notice of Filing