SEC Phase 2-7D Compliance Officer / Associated Person (CO/AP) Exam — Philippines

Under Section 8 of the Securities Regulation Code (SRC) of the Philippines, what is the general rule regarding the sale or distribution of securities?

• ASecurities cannot be sold or offered for sale without a registration statement filed with…
• BSecurities can be sold freely provided the issuer is a registered corporation with the SE…
• CRegistration is only required if the securities are sold to more than 100 retail investor…
• DSecurities of private corporations are exempt from registration, while public corporation…

Which of the following is classified as an 'Exempt Security' under Section 9 of the Securities Regulation Code (SRC) and is therefore exempt from SEC registration?

• AA bond issued by a private real estate developer listed on the PSE.
• BA security issued or guaranteed by the Government of the Philippines.
• CCommon shares of stock issued by a newly incorporated local manufacturing company.
• DDebentures issued by an investment house for public distribution.

Under Section 9.1 of the SRC, which of the following banks' securities is exempt from registration requirements?

• AAny security issued by a bank except its own shares of stock.
• BCommon shares issued by a commercial bank to increase its capital.
• CBonds issued by a foreign bank's parent company abroad.
• DPreferred shares issued by a thrift bank to the public.

Which transaction is classified as an 'Exempt Transaction' under Section 10.1 of the Securities Regulation Code, requiring no prior registration of the securities sold?

• AThe public offering of mutual fund shares by an investment company.
• BA sale of securities by an executor or administrator at a judicial sale.
• CAn online public subscription campaign for corporate bonds.
• DA commercial distribution of convertible debentures to retail investors.

Under Section 10.1(k) of the SRC, the sale of securities to qualified buyers is an exempt transaction. Who among the following is NOT automatically considered a qualified buyer?

• AA registered investment company (mutual fund).
• BA licensed insurance company.
• CAn individual retail investor with a net worth of Php 5 million.
• DA licensed bank or trust company.

What is the limit on the number of non-qualified buyers to whom securities may be sold in the Philippines within a 12-month period to maintain the private placement exemption under Section 10.1(i) of the SRC?

• AFewer than 20 persons
• BFewer than 50 persons
• CFewer than 100 persons
• DThere is no limit, provided no commission is paid to sales agents.

Under SEC Memorandum Circular No. 11, Series of 2025, which of the following is true regarding transactions falling under Section 10.1 of the SRC?

• AFiling a notice of exemption or paying exemption fees is no longer required to claim the…
• BA formal written application for exemption must be approved by the SEC before executing t…
• CThe issuer must pay a fee equal to 1% of the total transaction value.
• DNo notice is required, but a 10% withholding tax on the issued securities is automaticall…

Under the Securities Regulation Code, what is the definition of an 'Investment Contract' as established by jurisprudence in the Philippines?

• AA contract where a person invests money in a common enterprise and is led to expect profi…
• BAny agreement between two parties for the purchase of real estate assets.
• CA contract of deposit with a commercial bank that pays a fixed interest rate.
• DA partnership agreement where all partners actively manage the day-to-day business.

Which of the following describes a 'Firm Commitment' underwriting agreement under Philippine SEC rules?

• AThe underwriter commits to purchasing all unsold shares from the issuer, taking on the in…
• BThe underwriter only commits to using its best efforts to sell the securities, returning…
• CThe underwriter guarantees the stock price will rise by at least 10% in the secondary mar…
• DThe issuer commits to paying the underwriter a fixed fee regardless of how many shares ar…

Under the SRC, who is considered an 'Insider' in relation to a material non-public information?

• AOnly the directors and the chief executive officer of the issuer.
• BThe issuer, directors, officers, controlling persons, or anyone who receives material non…
• CAny retail shareholder who owns at least 100 shares of the issuer.
• DOnly exchange officials and SEC commissioners who have regulatory access to corporate rec…

What makes information 'material' under the insider trading provisions of the SRC?

• AIf it has been published on a major social media platform by any employee.
• BIf its disclosure would likely affect the market price of the security or influence an in…
• CIf it has been discussed during an informal meeting of the Board of Directors.
• DIf it involves a financial transaction exceeding Php 1 million.

Under Section 23.2 of the SRC, any profit realized by a beneficial owner, director, or officer from any purchase and sale (or sale and purchase) of any equity security of the issuer within any period of less than six months must be recovered by the issuer. This is known as:

• AShort-swing profit rule
• BFront-running recovery
• CTender offer rebate
• DChump-change disgorgement

A broker-dealer's client wants to solicit proxies for an upcoming annual stockholders' meeting. Under SEC rules, when must the proxy solicitation materials be filed with the SEC and the stock exchange?

• AAt least ten (10) business days before the proxy materials are first sent to security hol…
• BWithin five (5) calendar days after the stockholders' meeting has concluded.
• COn the day of the stockholders' meeting itself.
• DNo filing is required if the solicitation is done by a non-controlling shareholder.

Under the SRC proxy rules, what is the maximum validity period for any proxy executed by a shareholder for a stockholders' meeting?

• AFive (5) years, unless a shorter period is specified in the proxy.
• BOne (1) year, with no option to renew.
• CTen (10) years, provided it is notarized.
• DProxies are valid indefinitely unless revoked in writing.

Under the mandatory tender offer rules of the SRC, a person or group must make a tender offer to all stockholders if they intend to acquire at least what percentage of the outstanding equity shares of a public company?

• A35%
• B20%
• C51%
• D10%

What is 'Creeping Acquisition' in the context of the Philippine tender offer rules?

• AThe gradual acquisition of shares in the open market that eventually crosses the 35% mand…
• BA broker-dealer buying shares for its proprietary account ahead of public customers.
• CA hostile takeover accomplished entirely through private block sales without public discl…
• DAn issuer repurchasing its own shares slowly to avoid tax liabilities.

Which of the following activities constitutes the manipulative practice of 'Wash Sales' under Section 24 of the SRC?

• AEntering buy and sell orders of the same security with no change in beneficial ownership,…
• BSelling securities at a loss to offset capital gains tax liabilities at the end of the ye…
• CExecuting trades for a client who has not settled their prior transactions within T+2.
• DPurchasing shares in the open market to stabilize the price during an initial public offe…

A group of traders coordinates to execute a series of transactions in a PSE-listed stock to make it appear heavily traded, thereby attracting retail buyers. This specific manipulative practice is known as:

• APainting the tape
• BFront-running
• CMarking the close
• DChalking the board

What is the manipulative practice of 'Marking the Close' under Section 24 of the SRC?

• AExecuting transactions at or near the close of the trading day to artificially raise, low…
• BMarking customer confirmation invoices with the closing price of the previous day.
• CFailing to close out a short position within T+2 settlement limits.
• DEntering orders during the pre-open session and canceling them immediately before market…

Under the margin trading rules of the Philippines, what is the standard initial margin requirement for purchase of securities on credit by a customer?

• A50% of the purchase price
• B30% of the purchase price
• C75% of the purchase price
• D10% of the purchase price

A customer's margin account value drops due to falling stock prices. Under Philippine rules, what is the maintenance margin requirement below which the broker-dealer must issue a margin call?

• A30% of the current market value of the securities
• B50% of the current market value of the securities
• C20% of the current market value of the securities
• D15% of the current market value of the securities

What is the primary enforcement tool used by the SEC to immediately halt transactions or operations that are deemed fraudulent or injurious to the public interest?

• ACease and Desist Order (CDO)
• BNotice of Deficiency
• CMemorandum of Disapproval
• DLetter of Cautionary Advice

Which body is responsible for monitoring, investigating, and disciplining trading participants of the Philippine Stock Exchange (PSE) to ensure compliance with trading rules?

• ACapital Markets Integrity Corporation (CMIC)
• BBangko Sentral ng Pilipinas (BSP)
• CAnti-Money Laundering Council (AMLC)
• DPhilippine Deposit Insurance Corporation (PDIC)

A Compliance Officer identifies a material breach of the Securities Regulation Code within their brokerage firm. To whom must the Compliance Officer report this breach under SEC guidelines?

• ADirectly to the Board of Directors of the firm, and simultaneously to the SEC and the Exc…
• BOnly to the direct manager of the employee who committed the breach.
• CTo the public media via a press release to ensure transparency.
• DOnly to the external auditing firm during the annual audit cycle.

Under the SRC, a broker-dealer is prohibited from purchasing or selling securities for its own account ahead of executing a customer's order for the same security. This unethical practice is called:

• AFront-running
• BChurning
• CBack-ending
• DFree-riding

Under the SRC, what is the consequence if a person is convicted of a criminal violation of the Securities Regulation Code or its rules?

• AA fine of not less than Php 50,000 nor more than Php 5 million, and/or imprisonment of 7…
• BA maximum fine of Php 10,000 and mandatory community service.
• CSuspension of voting rights in any public corporation for 1 year.
• DThe SEC can only levy administrative suspensions; criminal penalties are not applicable t…

Under the SRC, who is the regulator empowered to suspend the registration of a broker-dealer after notice and hearing?

• ASecurities and Exchange Commission (SEC)
• BPhilippine Stock Exchange (PSE) Board
• CCapital Markets Integrity Corporation (CMIC)
• DDepartment of Finance (DOF)

Section 28 of the SRC mandates registration for market professionals. Which roles must be individually registered with the SEC to operate in a brokerage firm?

• ASalesmen, Associated Persons, and Securities Traders
• BOnly the Managing Partner or Chief Executive Officer
• COnly the back-office settlement clerks
• DNo individual registration is required if the corporate entity is registered.

Which of the following is a key requirement for the Written Supervisory Procedures (WSP) of a broker-dealer under SEC guidelines?

• AIt must outline the specific internal control procedures, identify the person responsible…
• BIt must be published on the firm's public website for client review.
• CIt must be drafted by an external legal counsel and kept confidential from internal emplo…
• DIt is only required if the broker-dealer has more than 50 employees.

Under the SRC, what is the 'Chinese Wall' (Information Barrier) concept in a financial institution?

• APolicies and physical barriers that prevent the sharing of material non-public informatio…
• BA software firewall that blocks foreign IP addresses from accessing PSE trading systems.
• CA structural separation of customer funds from the broker's proprietary cash reserves.
• DThe physical separation of the compliance officer's desk from the CEO's office.

What is the standard Static Price Ceiling for a stock traded on the Philippine Stock Exchange (PSE)?

• A50% above the reference price
• B30% above the reference price
• C100% above the reference price
• D20% above the reference price

What is the current Static Price Floor for a stock traded on the PSE, as adjusted by regulators to prevent extreme market drops?

• A30% below the reference price
• B50% below the reference price
• C10% below the reference price
• D20% below the reference price

In the PSE trading system, what is the role of a 'Dynamic Threshold'?

• AIt checks the price deviation between consecutive trades to prevent sudden, rapid price d…
• BIt adjusts the margin requirements of trading participants hourly.
• CIt dynamically limits the volume of shares a broker can trade based on net capital.
• DIt changes the commission rates based on the overall market volume.

For a highly active stock traded more than 500 times in the last six months (Cluster C), what is the allowable dynamic threshold percentage?

• A10%
• B15%
• C20%
• D5%

What is the minimum value required for a transaction to be executed as a 'Block Sale' on the PSE?

• APhp 20 million
• BPhp 50 million
• CPhp 10 million
• DPhp 5 million

What is the current standard clearing and settlement cycle (T+N) for trades executed on the PSE?

• AT+2 (Trade date plus two business days)
• BT+3 (Trade date plus three business days)
• CT+1 (Trade date plus one business day)
• DT+0 (Same-day settlement)

Under the PSE Short Selling Program, which of the following is true regarding securities lending?

• AA trader must have a valid Securities Borrowing and Lending (SBL) agreement in place, and…
• BNaked short selling is allowed for PSEi index stocks only.
• CA broker can lend customer shares without a written agreement, provided they are replaced…
• DSBL is only required for retail accounts; institutional clients can execute short sales w…

Which securities are eligible for short selling under the PSE's Short Selling Program?

• AConstituents of the PSEi, selected MidCap Index stocks, Dividend Yield Index stocks, and…
• BAny stock listed on the PSE Main Board.
• COnly stocks of companies with a market capitalization exceeding Php 100 billion.
• DOnly non-voting preferred shares and debt warrants.

What is the maximum limit of outstanding short positions for any eligible security under PSE rules before it becomes ineligible for further short selling?

• A10% of the company's outstanding shares
• B5% of the company's outstanding shares
• C25% of the company's outstanding shares
• D50% of the company's outstanding shares

Under the PSE short selling guidelines, what is the 'Uptick Rule'?

• AShort sale orders can only be executed at a price higher than the last trade price (or eq…
• BShort sale orders must be executed at least 5% higher than the previous day's closing pri…
• CThe broker must charge an extra uptick fee on every short position.
• DTraders must buy back shares immediately if the stock price rises by 10% in one session.

What is the Circuit Breaker rule implemented by the PSE to manage extreme market-wide panic?

• AA 10% drop in the PSEi index triggers a 20-minute trading halt.
• BA 5% drop in the PSEi index triggers a 10-minute trading halt.
• CA 20% drop in the PSEi index shuts down trading for the remainder of the day.
• DA trading halt is triggered only if 5 index stocks hit their static floor limits.

Under what circumstance will the PSE implement a 'Trading Halt' on an individual stock?

• AUpon the release of material corporate disclosures, or if there is unusual price volatili…
• BWhenever a broker-dealer's proprietary account trades more than 5% of the daily volume.
• CIf the company fails to pay its annual listing fee on the due date.
• DWhen the company's Board of Directors has an emergency meeting.

What is a 'Cross Transaction' (Cross Trade) on the PSE?

• AA transaction where a single broker acts as the broker for both the buyer and the seller…
• BA trade executed across two different regional stock exchanges.
• CA transaction involving the swap of Philippine stocks for foreign shares.
• DAn unauthorized trade matching a client's sell order with a broker's proprietary buy orde…

How does the PSE determine the order matching priority for orders entered into the trading system?

• APrice priority first, then Time priority.
• BTime priority first, then Price priority.
• CPriority is given to institutional clients over retail clients.
• DPriority is determined by the size of the order, with larger orders matched first.

What is the PSE 'Board Lot' rule?

• AIt dictates the minimum block size and price ticks based on the price range of the stock.
• BIt is the governing board of directors that manages the exchange lot allocations.
• CIt refers to the physical office space assigned to brokers on the trading floor.
• DIt represents the maximum amount of margin loan permitted per security.

What is an 'Odd Lot' on the PSE?

• AAn order size that is smaller than the standard board lot size designated for that stock…
• BA stock that has an unusual or low trading volume.
• CA transaction executed after regular trading hours.
• DA stock that does not pay regular dividends.

During the 'Pre-Open' session on the PSE, how are order prices matched?

• AThe system calculates an Opening Price that maximizes the volume of executable shares, ma…
• BOrders are matched continuously in price-time priority as soon as they are entered.
• CNo matching takes place; orders are only queued for matching at regular open.
• DOrders are matched at the previous day's closing price only.