THIRTEENTH CONGRESS OF THE REPUBLI 
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OF THE PHILIPPINES 
1 
First Regular Session 
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S E N A T E  
S. No. 
Introduced by Senator S. R. OsmeAa 111 
EXPLANATORY NOTE 
The American corporate world was rocked with scandals when several 
corporations were found to have defrauded the public. Enron, a huge energy 
trading company, was accused of using partnerships to hide losses and selling 
millions in company stock while prohibiting employees from unloading their 
shares, among others. Arthur Andersen, the accounting firm handling the Enron 
account, was drawn into the mess because of allegations that it made big bucks 
consulting for Enron while serving as its auditor. A jury subsequently found 
Anderson guilty of obstructing justice when it destroyed documents relating to 
Enron. 
At WorldCom, its former Chief Executive Officer Bernie Ebbers borrowed 
more than $1 billion against his stock then got the company to bail him out after 
the company's collapse. He resigned before the company admitted to inflating its 
revenues. And most recently Adelphia, once the sixth biggest telecom company 
in America, filed for Chapter 11 bankruptcy protection, after founder and former 
CEO John Rigas and his two sons were arrested on charges that they had 
defrauded investors by using the company as their personal piggy bank. 
Overnight, Dow Jones fell and investors panicked, and thousands of jobs 
were lost in the process. 
In the Philippines, the BW Resources scandal of recent memory still 
lingers. At present, several educational pre-need companies are in the red. 
Even GSlS and SSS are not spared. It is estimated that the two social security 
systems will soon be unable to finance their members' needs due in part, to 
mismanagement of its funds and resources. 
This bill seeks to address these corporate abuses by: 
I. 
prohibition accounting firms from providing most consulting services to 
companies they are auditing. 
2. requiring the rotation of an accounting partner overseeing the audits of 
a specific company every five years. 
3. requiring the company's chief executive officer to certify to the 
accuracy of their financial reports under threats of punishment. 


4. prohibiting the grant of loans to executives of publicly listed companies 
or companies imbued with public interests such as pension and 
educational pre-need companies, 
5. defining and crirninalizing securities fraud. 
6. prohibiting the shredding or altering records of corporations under 
investigation. 
Early approval of this bill is urgently requested. 
S E ~ G I O  
OSMENA I I I  
Senator 


*G4 .iid 38 P 2  :38 
THIRTEENTH CONGRESS OF THE REPUBLIC 
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OF THE PHILIPPINES 
f . 9  
First Regular Session 
S E N A T E  
S. No. 20 
Introduced by Senator S. R. Osmeria 111 
AN ACT 
PROVIDING FOR CORPORATE ACCOUNTABILITY, FIXING THE PENALTIES 
FOR ANY VIOLATION THEREOF, APPROPRIATING FUNDS THEREFOR 
AND FOR OTHER PURPOSES. 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Cong ress assembled: 
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TITLE I - GENERAL PROVISIONS 
SECTION 1. Short Title, - This Act shall be known as the "Corporate 
Reform Act of 2004". 
SEC. 2. Definitions. -- For purposes of this Act, the following terms 
shall be defined as follows:: 
a. 
Appropriate Regulatory Authority shall mean the State agency or 
other authority responsible for the licensure or other regulation of the practice of 
accounting with respect to the matter in question. 
b. 
Audit shall mean an examination of the financial statements of any 
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issuer by an independent public accounting firm in accordance with the rules of 
the Board or the Commission as defined hereunder, in accordance with then- 
applicable generally accepted auditing and related standards for such purposes, 
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Audit Committee shall mean a committee (or equivalent body) 
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established by and amongst the board of directors of an issuer for the purpose of 
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overseeing the accounting and financial reporting processes of the issuer and 
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audits of the financial statements of the issuer: Provided, That if no such 
for the purpose of expressing an opinion on such statements. 
c. 


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committee exists with respect to an issuer, the entire board of directors of the 
issuer shall be the Audit Committee. 
d. 
Audit Report shall mean a document or other record-- 
1. prepared following an audit performed for purposes of 
compliance by an issuer with the requirements of the securities laws; and 
2. in which a public accounting firm either -- 
a) sets forth the opinion of that firm regarding a financial 
statement, report, .or other documents; or 
b) asserts that no such opinion can be expressed 
e. 
Board shall mean the Public Company Accounting Oversight Board 
(PCAOB) established under Section 4. 
f. 
Commission shall mean the Securities and Exchange Commission. 
g. 
Issuer shall mean an issuer, the securities of which are registered 
with national security exchanges, or that is required to file reports under this Act 
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or the securities laws. The term shall also apply to a company imbued with 
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public interest, as those dealing with pre-need, pension and retirement plans, 
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and other similar activities. 
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h. 
Non-Audit Service shall mean any professional service provided to 
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an issuer by a registered public accounting firm, other than those provided to an 
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issuer. 
issuer in connection with an audit or a review of the financial statements of an 
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i. 
Person Associated With A Public Accounting Firm shall mean any 
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individual proprietor, partner, shareholder, principal, accountant, or other 
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professional employee of a public accounting firm, or any other independent 
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audit report -- 
contractor or entity that, in connection with the preparation or issuance of any 
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I. 
shares in the profits of, or receives compensation in any other 
form from, that firm; or 


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2. participates as agent or otherwise on behalf of such accounting 
firm in any activity of that firm. 
Provided, That the Board shall, by rule, exempt persons engaged only in 
ministerial tasks from the above definition to the extent that the Board determines 
that any such exemption is consistent with the purposes of this Act, the public 
interest, or the protection of investors. 
j. Professional Standards shall mean 
I, accounting principles that are -- 
a) established by the State's standard setting body; 
b) relevant to audit reports for particular issuers, or dealt with in 
the quality control system of a particular registered public 
accounting firm; and 
2. 
auditing standards, standards for attestation engagements, 
quality control policies and procedures, ethical and competency 
standards, and independence standards (including rules implementing 
Title Ill) that the Board or the Commission determines are-- 
a) related to the preparation or issuance of audit reports for 
issuers; and 
b) established or adopted by the Board or are promulgated as 
rules of the Commission. 
Public Accounting Firm shall mean 
I. 
a 
proprietorship, 
partnership, 
incorporated 
association, 
corporation, limited liability company, limited liability partnership, or other 
legal entity that is engaged in the practice of public accounting or 
preparing or issuing audit reports; and 
k. 
2. 
to the extent so designated by the rules of the Board, any 
associated person of any entity described in subparagraph 9 (a). 
I. Registered Public Accounting Firm shall mean a public accounting firm 
registered with the Board in accordance with this Act. 


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SEC. 3. 
a. Regulatory Action - The Commission shall promulgate such rules and 
regulations, as may be necessary or appropriate in the public interest or for the 
protection of investors, and in furtherance of this Act. 
Commission Rules and Enforcement. 
b. 
Enforcement - Any person who violates any provision of this Act, 
any rule or regulation of the Commission issued under this Act, or any rule of the 
Board shall be treated for all purposes in the same manner as a violation of the 
Revised Securities Act or the rules and regulations issued thereunder consistent 
with the provisions of this Act, and any such person shall be subject to the same 
penalties, and to the same extent as to the violation of that Act or such rules or 
regulations. 
1. 
Cease-And-Desist Proceedings - The Commission may 
issue a cease-and-desist order with respect to public accounting firms. 
C. 
Effect on Commission Authority - Nothing in this Act or the rules of 
the Board shall be construed to impair or limit -- 
I. the authority of the Commission to regulate the accounting 
profession, accounting firms, or persons associated with such firms for 
purposes of enforcement of the securities laws; 
2. 
the authority of the Commission to set standards for 
accounting or auditing practices or auditor independence, derived from 
other provisions of the securities laws or the rules or regulations 
thereunder, for purposes of the preparation and issuance of any audit 
report, or otherwise under applicable law; or 
3. 
the ability of the Commission to take, on the initiative of the 
Commission, legal, administrative, or disciplinary action against any 
registered accounting firm or any associated person thereof. 
TITLE II - PUBLIC COMPANY ACCOUNTING OVERSIGHT BOARD 
SEC. 4. 
Establishment; Administrative Provisions. 


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a. Establishment of the Board - There is hereby established the Public 
Company Accounting Oversight Board, hereinafter referred to as the Board, to 
oversee the audit of public companies that are subject to securities laws, and 
related matters, in order to protect the interests of investors and further the public 
interest in the preparation of informative, accurate, and independent audit reports 
for companies the securities of which are sold to, and held by, and for, public 
investors or companies otherwise imbued with public interest. The Board shall 
be a body corporate, which shall operate as a nonprofit corporation, and have 
rights of succession until dissolved by an act of Congress. 
b. Status - The Board shall not be an agency or establishment of the 
Government, and, except as otherwise provided in this Act, shall be subject to, 
have all the powers conferred upon a nonprofit corporation by the Government. 
No member or person employed by, or agent for, the Board shall be deemed to 
be an officer or employee of, or agent for the Government by reason of such 
service. 
c. 
Duties of the Board - The Board shall, subject to approval by the 
Commission and once a determination is made by the Commission under 
subsection (d) of this section -- 
I. Register public accounting firms that prepare audit reports for 
issuers, in accordance with Section 5; 
2. Establish or adopt, or both, by rule, auditing, quality control, 
ethics, independence, and other standards relating to the preparation of 
audit reports for issuers, in accordance with Section 7; 
3. Conduct inspections of registered public accounting firms, in 
accordance with this Act and the rules of the Board; 
2. Conduct investigations and disciplinary proceedings concerning, 
and impose appropriate sanctions where justified upon, registered public 
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accounting firms and associated persons of such firms, in accordance with 
this Act; 


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3. Perform such other duties or functions as the Board (or the 
Commission, by rule or order) determines are necessary or appropriate to 
promote high professional standards among, and improve the quality of 
audit services offered by, registered public accounting firms and 
associated persons thereof, or otherwise to carry out this Act, in order to 
protect investors, or to further the public interest; 
4. Enforce compliance with this Act, the rules of the Board, 
professional standards, and the securities laws relating to the preparation 
and issuance of audit reports and the obligations and liabilities of 
accountants with respect thereto, by registered public accounting firms 
and associated persons thereof; and 
5. Set the budget and manage the operations of the Board and the 
staff of the Board. 
d. Commission Determination - The members of the Board shall take 
such action (including hiring of staff, proposal of rules, and adoption of initial 
and transitional auditing and other professional standards) as may be necessary 
or appropriate to enable the Commission to determine, not later than one 
hundred twenty (120) days after the enactment of this Act, that the Board is so 
organized and has the capacity to carry out the requirements of this title, and to 
enforce compliance with this title by registered public accounting firms and 
associated persons thereof. The Commission shall be responsible, prior to the 
appointment of the Board, for the planning for the establishment and 
administrative transition to the Board's operation. 
e. 
Board Membership - 
1. 
Composition - The Board shall have five (5) members, 
appointed from among prominent individuals of integrity and reputation 
who have a demonstrated commitment to the interest of investors and the 
public, and an understanding of the responsibilities for and nature of 
financial disclosures required of issuers under the securities laws and the 


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obligations of accountants with respect to the preparation and issuance of 
audit reports with respect to such disclosures. 
2. 
Limitation - Only two members of the Board shall be or 
have been certified public accountants: Provided, that, if one of the two 
members is the chairperson, he or she should not have been a practicing 
certified public accountant for at least five years prior to his or her 
appointment to the Board. 
3. 
Full-Time Independent Service - Each member of the 
Board shall serve on a full-time basis, and shall not, concurrent with 
service on the Board, be employed by any other person or engage in any 
other professional or business activity. No member of the Board shall 
share in any of the profits of, or receive payments from, a public 
accounting firm (or any other person, as determined by rule of the 
Commission), other than fixed continuing payments, subject to such 
conditions as the Commission shall impose, under standard arrangements 
for the retirement of members of public accounting Firms. 
4. 
Appointment Of Board Members - Not later than ninety 
(90) days after the effectivity of this Act, the Commission, after 
consultation with the Chairman of the Monetary Board and the Secretary 
of Finance, shall appoint the chairperson and other initial members of the 
Board, and shall designate a term of service for each. 
Any vacancy on the Board shall be filled in the same manner as 
provided for in the preceding paragraph. 
5. 
Term Of Service - The term of service of each Board 
member shall be five years, and until a successor is appointed: Provided, 
That the terms of office of the initial Board members (other than the 
chairperson) shall expire in annual increments, one on each of the first 
four (4) anniversaries of the initial date of appointment: Provided, further, 
That any Board member appointed to fill a vacancy occurring before the 


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expiration of the term for which the predecessor was appointed shall be 
appointed only for the remainder of that term: Provided, finally, That no 
person shall serve as a member of the Board, or as chairperson of the 
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consecutive. 
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in any court; 
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2. 
to conduct its operations and maintain offices, and to 
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exercise all other rights and powers authorized by this Act, without regard 
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to any qualification, licensing, or other provision of law; 
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any property, wherever situated; 
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4. 
to appoint such employees, accountants, attorneys, and 
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other agents as may be necessary or appropriate, and to determine their 
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qualifications, define their duties, and fix their salaries or other 
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compensation (at a level that is comparable to private sector self- 
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regulatory, 
accounting, 
technical, 
supervisory, 
or other 
staff 
or 
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management positions); 
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5. 
to allocate, assess, and collect accounting support fees 
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established for the Board, and other fees and charges imposed under this 
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title; and 
Board, for more than two terms, whether or not such terms of service are 
6. 
Removal From Office - A member of the Board may be 
removed by the Commission from office, for good cause shown before the 
expiration of the term of that member. 
f. 
Powers of the Board - In addition to any authority granted to the 
Board under this Act, the Board shall have the power; 
1. 
to sue and be sued, complain and defend, in its corporate 
name and through its own counsel, with the approval of the Commission, 
3. 
to lease, purchase, accept gifts or donations of or otherwise 
acquire, improve, use, sell, exchange, or convey, all of or an interest in 


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to enter into contracts, execute instruments, incur liabilities, 
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and do any and all other acts and things necessary, appropriate, or 
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incidental to the conduct of its operations and the exercise of its 
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obligations, rights, and powers imposed or granted by this title. 
g. 
Rules of the Board - The rules of the Board shall, subject to the 
6 approval of the Commission -- 
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provide for the operation and administration of the Board, the 
exercise of its authority, and the performance of its responsibilities under 
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this Act; 
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2. permit, as the Board determines necessary or appropriate, 
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delegation by the Board of any of its functions to an individual member or 
employee of the Board, or to a division of the Board, including functions 
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with respect to hearing, determining, ordering, certifying, reporting, or 
otherwise acting as to any matter: Provided, That the Board shall retain 
the discretionary right to review any action pursuant to any such delegated 
function, upon its own motion: Provided, further, That a person shall be 
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entitled to a review by the Board with respect to any matter so delegated, 
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and the decision of the Board upon such review shall be deemed to be the 
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action of the Board for all purposes (including appeal or review thereof); 
Provided, finally, That if the right to exercise a review is declined, or if no 
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such review is sought within the time stated in the rules of the Board, then 
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the action taken by the holder of such delegation shall for all purposes, 
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including appeal or review thereof, be deemed to be the action of the 
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Board; 
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3. establish ethics rules and standards of conduct for Board 
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members and staff, including a bar on practice before the Board (and the 
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Commission, with respect to Board-related matters) of one year for former 
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members of the Board, and appropriate periods (not to exceed one year) 
for former staffs of the Board. 


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h. Annual Report to the Commission - The Board shall submit an annual 
report (including its audited financial statements) to the Commission, and the 
Commission shall transmit a copy of that report to the Congress of the 
Philippines, not later than thirty (30) days after the date of receipt of that report by 
the Commission. 
SEC. 5. 
a. 
Registration with the Board. 
Mandatory Registration - One hundred eighty (180) days after the 
date of the Commission Determination under Section 4 (d), all public accounting 
firms shall register with the Board. Thereafter, it shall be unlawful for any person 
that is not a registered public accounting firm to prepare or issue, or to participate 
in the preparation or issuance of, any audit report with respect to any issuer. 
b. 
Application for Registration - A public accounting firm shall use 
such forms as the Board shall prescribe, by rule, to apply for registration under 
this section. 
Each public accounting firm shall submit, as part of its application for 
registration, in such detail as the Board shall specify-- 
I) the names of all issuers for which the firm prepared or 
issued audit reports during the immediately preceding calendar year, and 
for which the firm expects to prepare or issue audit reports during the 
current calendar year; 
2) 
the annual fees received by the firm from each such issuer 
for audit services, other accounting services, and non-audit services, 
respectively; 
3) 
such other current financial information for the most recently 
completed fiscal year of the firm as the Board shall reasonably request; 
4) 
a statement of the quality control policies of the firm for its 
accounting and auditing practices; 


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5) 
a list of all accountants associated with the firm who 
participate in or contribute to the preparation of audit reports, stating the 
license or certification number of each such person, as well as the license 
number of the firm itself; 
6) 
information relating to criminal, civil, or administrative actions 
or disciplinary proceedings pending against the firm or any associated 
person of the firm in connection with any audit report; 
7) 
copies of any periodic or annual disclosure filed by an issuer 
with the Commission during the immediately preceding calendar year 
which discloses accounting disagreements between such issuer and the 
firm in connection with an audit report furnished or prepared by the firm for 
such issuer; and 
8) 
such other information as the rules of the Board or the 
Commission shall specify as necessary or appropriate in the public 
interest or for the protection of investors. 
Each application for registration under this subsection shall include- 
- a consent executed by the public accounting firm to cooperation in and 
compliance with any request for testimony or the production of documents made 
by the Board in the furtherance of its authority and responsibilities under this title 
(and an agreement to secure and enforce similar consents from each of the 
associated persons of the public accounting firm as a condition of their continued 
employment by or other association with such firm); and 
I) a statement that such firm understands and agrees that 
cooperation and compliance, as described in the consent required by 
subparagraph (a), and the securing and enforcement of such consents 
from its associated persons, in accordance with the rules of the Board, 
shall be a condition to the continuing effectiveness of the registration of 
the firm with the Board. 


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c. 
Action on Applications - The Board shall approve a completed 
application for registration not later than forty-five (45) days after the receipt of 
the application, in accordance with the rules of the Board, unless the Board, prior 
to such date, issues a written notice of disapproval to, or requests more 
information from, the prospective registrant. 
A written notice of disapproval of a completed application under the 
preceding paragraph for registration shall be treated as a disciplinary sanction for 
purposes of this Act. 
d. 
Periodic Reports - Each registered public accounting firm shall 
submit an annual report to the Board, and may be required to report more 
frequently, as necessary to update the information contained in its application for 
registration under this section, and to provide to the Board such additional 
information as the Board or the Commission shall specify. 
e. 
Public Availability - Registration applications and annual reports 
required by this subsection, or such portions of such applications or reports as 
may be designated under rules of the Board, shall be made available for public 
inspection, subject to rules of the Board or the Commission, and to applicable 
laws relating to the confidentiality of proprietary, personal, or other information 
contained in such applications or reports, provided that, in all events, the Board 
shall protect from public disclosure information reasonably identified by the 
subject accounting firm as proprietary information. 
f. 
Registration and Annual Fees - The Board shall assess and collect 
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applications and annual reports. 
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SEC. 6. 
Auditing, Quality Control, and Independence Standards 
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and Rules. -- The Board shall, by rule, establish, including, to the extent it 
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determines, appropriate, through adoption of standards proposed by one or more 
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professional groups of accountants designated by the Board and amend or 
a registration fee and an annual fee from each registered public accounting firm, 
in amounts that are sufficient to recover the costs of processing and reviewing 


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otherwise modify or alter, such auditing and related attestation standards, such 
quality control standards, and such ethics standards to be used by registered 
public accounting firms in the preparation or issuance of audit reports as required 
by this Act or the rules of the Commission, or as may be necessary or 
appropriate in the public interest or for the protection of investors. 
In carrying out the preceding paragraph, the Board-- 
a. shall include in the auditing standards that it adopts, requirements that 
each registered public accounting firm shall-- 
1) prepare, and maintain for a period of not less than 7 years, audit 
work papers, and other information related to any audit report, in sufficient 
detail to support the conclusions reached in such report; 
2) provide a concurring or second partner review and approval of 
such audit report (and other related information), and concurring approval 
in its issuance, by a qualified person (as prescribed by the Board) 
associated with the public accounting firm, other than the person in charge 
of the audit, or by an independent reviewer (as prescribed by the Board); 
and 
3) 
describe in each audit report the scope of the auditor's 
testing of the internal control structure and procedures of the issuer, and 
present (in such report or in a separate report)-- 
a) 
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an evaluation of whether such internal control 
the findings of the auditor from such testing; 
structure and procedures-- 
(1) include 
maintenance of 
records 
that 
in 
reasonable 
detail 
accurately 
and 
fairly 
reflect 
the 
transactions and dispositions of the assets of the issuer; 
(2) provide reasonable assurance that transactions 
are recorded as necessary to permit preparations of financial 
statements 
in 
accordance 
with 
generally 
accepted 


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accounting principles, and that receipts and expenditures of 
the issuer are being made only in accordance with 
authorizations of management and directors of the issuer; 
and 
(3) a description, at a minimum, of material 
weaknesses in such internal controls, and of any material 
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noncompliance found on the basis of such testing; 
b. shall include, in the quality control standards that it adopts with respect 
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to the issuance of audit reports, requirements for every registered public 
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accounting firm relating to-- 
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monitoring of professional ethics and independence from 
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consultation within such firm on accounting and auditing 
issuers on behalf of which the firm issues audit reports; 
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questions; 
TITLE 111 . AUDITOR INDEPENDENCE 
SEC. 7. Services Outside The Scope of Practice of Auditors. 
a. 
Prohibited Activities - Except as provided in subsection (c) hereof, it 
shall be unlawful for a registered public accounting firm (and any associated 
person of that firm, to the extent determined appropriate by the Commission) that 
performs for any issuer any audit required by this title or the rules of the 
Commission under this title or, beginning one hundred eighty (180) days after the 
date of commencement of the operations of the Public Company Accounting 
Oversight Board established under Section 4 of this Act, to provide to that issuer, 
contemporaneously with the audit, any non-audit service, including -- 
I, bookkeeping or other services related to the accounting records 
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2. financial information systems design and implementation; 
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3. 
appraisal 
or 
valuation 
services, 
fairness 
opinions, 
or 
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contribution-in-kind reports; 
or financial statements of the audit client; 


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4. 
actuarial services; 
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internal audit outsourcing services; 
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services; 
8. 
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impermissible. 
b. 
Pre-approval Required For Non-Audit Services - 
A registered 
public accounting firm shall engage in any non-audit services, including tax 
services, that is not described in any of paragraphs (I) 
through (9) of subsection 
(a) for an audit client, only if the activity is approved in advance by the audit 
committee of the issuer, in accordance with Section 8. 
management functions or human resources; 
broker or dealer, investment adviser, or investment banking 
legal services and expert services unrelated to the audit; and 
any other service that the Board determines, by regulation, is 
c. 
Exemption Authority - The Board shall, on a case by case basis, 
exempt any person, issuer, public accounting firm, or transaction from the 
prohibition on the provision of services under paragraph (a) to the extent that 
such exemption is necessary or appropriate in the public interest and is 
consistent with the protection of investors, and subject to review by the 
Commission. 
SEC. 8. Pre-approval Requirements. -- All auditing services and non- 
audit services, other than as provided in subparagraph (b) hereof, provided to an 
issuer by the auditor of the issuer shall be pre-approved by the audit committee of 
the issuer. 
The pre-approval requirement under the preceding subparagraph is 
waived with respect to the provision of non-audit services for an issuer, if -- 
a. the aggregate amount of all such non-audit services provided to the 
issuer constitutes not more than five percent (5%) 
of the total amount of 
revenues paid by the issuer to its auditor during the fiscal year in which the non- 
audit services are provided; 


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c. such services are promptly brought to the attention of the audit 
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committee of the issuer and approved prior to the completion of the audit by the 
b. 
such services were not recognized by the issuer at the time of the 
engagement to be non-audit services; and 
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audit committee or by one or more members of the audit committee who are 
members of the board of directors to whom authority to grant such approvals has 
been delegated by the audit committee. 
Approval by an audit committee of an issuer under this subsection of a 
non-audit service to be performed by the auditor of the issuer shall be disclosed 
to investors in periodic reports under Section 21. 
The audit committee of an issuer may delegate to one or more designated 
members of the audit committee who are independent directors of the board of 
directors, the authority to grant pre-approvals required by this subsection. The 
decision of any member to whom authority is delegated under this paragraph to 
pre-approve an activity under this subsection shall be presented to the full audit 
committee at each of its scheduled meetings. 
SEC. 9. Audit Partner Rotation. - It shall be unlawful for a registered 
public accounting firm to provide audit services to an issuer if the lead (or 
coordinating) audit partner (having primary responsibility for the audit), or the 
audit partner responsible for reviewing the audit, has performed audit services for 
that issuer in each of the five (5) previous fiscal years of that issuer. 
SEC. 10. Auditor Reports To Audit Committees. - Each registered 
public accounting firm that performs for any issuer any audit required by this title 
shall timely report to the audit committee of the issuer - 
a. all critical accounting policies and practices to be used; 
b. all alternative treatments of financial information within generally 
accepted accounting principles that have been discussed with management 
officials of the issuer, ramifications of the use of such alternative disclosures and 


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c. other material written communications between the registered public 
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accounting firm and the management of the issuer, such as any management 
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letter or schedule of unadjusted differences. 
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SEC. 11. Conflicts of Interest. - It shall be unlawful for a registered 
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public accounting firm to perform for an issuer any audit service required by this 
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title, if a chief executive officer, controller, chief financial officer, chief accounting 
treatments, and the treatment preferred by the registered public accounting firm; 
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officer, or any person serving in an equivalent position for the issuer, was 
employed by that registered independent public accounting firm and participated 
in any capacity in the audit of that issuer during the one-year period preceding 
the date of the initiation of the audit. 
SEC. 12. Commission Authority. 
a. 
Commission Regulations. - Not later than one hundred eighty (180) 
days from the effectivity of this Act, the Commission shall issue regulations to 
carry out the provisions of this Title. 
b. Auditor Independence. - It shall be unlawful for any registered public 
accounting firm (or an associated person thereof, as applicable) to prepare or 
issue any audit report with respect to any issuer, if the firm or associated person 
engaged in any activity with respect to that issuer is prohibited under Section 7 
(a) or any rule or regulation of the Commission or of the Board issued 
there u nd e r. 
SEC. 13. Considerations By Appropriate State Regulatory Authority. - 
In supervising non-registered public accounting firms and their associated 
persons, appropriate State regulatory authorities shall make an independent 
determination of the proper standards applicable, particularly taking into 
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consideration the size and nature of the business of the accounting firms they 
supervise and the size and nature of the business of the clients of those firms. 
The standards applied by the Board under this Act should not be presumed to be 


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applicable for purposes of this section for small and medium sized non-registered 
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public accounting firms. 
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TITLE IV - 
CORPORATE RESPONSIBILITY 
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SEC. 14. Public Company Audit Committees. - 
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a. 
Commission Rules - Two hundred seventy (270) days after the 
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effectivity of this Act, the Commission shall, by rule, direct the national securities 
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exchanges and national securities associations to prohibit the listing of any 
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security,of an issuer that is not in compliance with the requirements of any 
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portion of paragraphs (b) through (9. 
The rules of the Commission under the preceding paragraph shall provide 
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for appropriate procedures for an issuer to have an opportunity to cure any 
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defects that would be the basis for a prohibition under preceding paragraph, 
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b. 
Responsibilities Relating To Registered Public Accounting Firms - 
before the imposition of such prohibition. 
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The audit committee of each issuer, in its capacity as a committee of the board of 
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directors, shall be directly responsible for the appointment, compensation, and 
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oversight of the work of any registered public accounting firm employed by that 
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issuer (including resolution of disagreements between management and the 
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auditor regarding financial reporting) for the purpose of preparing or issuing an 
audit report or related work, and each such registered public accounting firm 
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shall report directly to the audit committee. 
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C. 
Independence - Each member of the audit committee of the issuer 
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shall be a member of the board of directors of the issuer, and shall otherwise be 
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independent. 
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In order to be considered to be independent for purposes of this 
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paragraph, a member of an audit committee of an issuer shall not, other than in 
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his or her capacity as a member of the audit committee, the board of directors, or 
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any other board committee -- 


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1. accept any consulting, advisory, or other compensatory fee from 
the issuer; or 
2. be an affiliated person of the issuer or any subsidiary thereof. 
The Commission shall exempt from the requirements of preceding 
paragraph a particular relationship with respect to audit committee members, as 
the Commission determines appropriate in light of the circumstances. 
d. 
Complaints - Each audit committee shall establish procedures for -- 
The receipt, retention and treatment of complaints received by the issuer 
regarding accounting, internal accounting controls, or auditing matters, and the 
confidential, anonymous submission by employees of the issuer of concerns 
regarding questionable accounting or auditing matters. 
e. 
Authority To Engage Advisers - Each audit committee shall have 
the authority to engage independent counsel and other advisers, as it determines 
necessary to carry out its duties. 
f. 
Funding - Each issuer shall provide for appropriate funding, as 
determined by the audit committee, in its capacity as a committee of the board of 
directors, for payment of compensation to the registered public accounting firm 
employed by the issuer for the purpose of rendering or issuing an audit report, 
and to any advisers employed by the audit committee under paragraph (e). 
SEC. 15. Corporate Responsibility For Financial Reports. 
a. 
Regulations Required - The Commission shall, by rule, require, for 
each company filing periodic reports with the Commission that the principal 
executive officer or officers and the principal financial officer or officers, or 
persons performing similar functions, certify in each annual or quarterly report 
filed or submitted under this Act that -- 
I. 
2. 
the signing officer has reviewed the report; 
based on the officer's knowledge, the report does not contain 
any untrue statement of a material fact or omit to state a material fact 


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necessary in order to make the statements made, in light of the 
circumstances under which such statements were made, not misleading; 
3. based on such officer's knowledge, the financial statements, 
and other financial information included in the report, fairly present in all 
material respects the financial condition and results of operations of the 
issuer as of, and for, the periods presented in the report; 
4. the signing officers - 
(a) are responsible for establishing and maintaining internal 
controls; 
(b) have designed such internal controls to ensure that 
material information relating to the issuer and its consolidated 
subsidiaries is made known to such officers by others within those 
entities, particularly during the period in which the periodic reports 
are being prepared; 
(c) have evaluated the effectiveness of the issuer's internal 
controls as of a date within ninety (90) days prior to the report; and 
(d) have presented in the report their conclusions about the 
effectiveness of their internal controls based on their evaluation as 
of that date; 
5. the signing offjcers have disclosed to the issuer's auditors and 
the audit committee of the board of directors (or persons fulfilling the 
equivalent function) -- 
(a) all significant deficiencies in the design or operation of 
internal controls which could adversely affect the issuer's ability to 
record, process, summarize, and report financial data and have 
identified for the issuer's auditors any material weaknesses in 
internal controls; and 


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(b) any fraud, whether or not material, that involves 
management or other employees who have a significant role in the 
issuer's internal controls; and 
6. the signing officers have indicated in the report whether or not 
there were significant changes in internal controls or in other factors that 
could significantly affect internal controls subsequent to the date of their 
evaluation, including any corrective actions with regard to significant 
deficiencies and material weaknesses. 
b. 
Foreign Re-incorporations Have No Effect - Nothing in this section 
shall be interpreted or applied in any way to allow any issuer to lessen the legal 
force of the statement required under this section, by an issuer having 
reincorporated or having engaged in any other transaction that resulted in the 
transfer of the corporate domicile or offices of the issuer from inside the 
Philippines to outside thereof. 
SEC. 16. Improper Influence on Conduct of Audits. 
a. 
Rules to Prohibit - It shall be unlawful, in contravention of such 
rules or regulations as the Commission shall prescribe as necessary and 
appropriate in the public interest or for the protection of investors, for any officer 
or director of an issuer, or any other person acting under the direction thereof, to 
take any action to fraudulently influence, coerce, manipulate, or mislead any 
independent public or certified accountant engaged in the performance of an 
audit of the financial statements of that issuer for the purpose of rendering such 
financial statements materially misleading. 
b. 
Enforcement - In any civil proceeding, the Commission shall have 
exclusive authority to enforce this section and any rule or regulation issued under 
this section. 
c. 
No Preemption of Other Law - The provisions of subsection (a) 
shall be in addition to, and shall not supersede or preempt, any other provision of 
law or any rule or regulation issued thereunder. 


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d. 
Deadline for Rulemaking - 
The Commission shall issue rules or 
regulations required by this section, not later than two hundred seventy (270) 
days after the date of enactment of this Act. 
SEC. 17. Forfeiture of Certain Bonuses and Profits. -- If an 
issuer is required to prepare an accounting restatement due to the 
material noncompliance of the issuer, as a result of misconduct, with any 
financial reporting requirement under the securities laws, the chief 
executive officer and chief financial officer of the issuer shall reimburse the 
issuer for -- 
a. 
any bonus or other incentive-based or equity-based compensation 
received by that person from the issuer during the twelve (12) month period 
following the first public issuance or filing with the Commission, whichever comes 
first, of the financial document embodying such financial reporting requirement; 
and 
b. 
any profits realized from the sale of securities of the issuer during 
the twelue (12) month period. 
The Commission shall exempt any person from the application of 
preceding paragraph, as it deems necessary and appropriate. 
SEC. 18, Equitable Relief - In any action proceeding or instituted by the 
Commission under any provision of the securities laws, the Commission shall 
seek, and any court shall grant any equitable relief that may be appropriate or 
necessary for the benefit of investors. 
SEC. 19. Prohibition on Insider Trading. -- It shall be unlawful for any 
director or executive officer of an issuer of any equity security, directly or 
indirectly, to purchase, sell, or otherwise acquire or transfer any equity security of 
the issuer with respect to such equity security if such director or officer acquires 
such equity security in connection with his or her service or employment as a 
director or executive officer, within three (3) years from acquisition of such 
shares. 


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Any profit realized by a director or executive Officer referred to in the 
above paragraph from any purchase, sale, or other acquisition or transfer in 
violation of this subsection shall inure to and be recoverable by the issuer, 
irrespective of any intention on the part of such director or executive officer in 
entering into the transaction. 
An action to recover profits in accordance with this subsection shall be 
instituted at law or in equity in any court of competent jurisdiction by the issuer, or 
by the owner of any security of the issuer in the name and in behalf of the issuer 
if the issuer fails or refuses to bring such action within sixty (60) days after the 
date of request, or fails diligently to prosecute the action thereafter, except that 
no such suit shall be brought more than two (2) years after the date on which 
such profit was realized. 
SEC. 20. Study of Enforcement Actions. -- The Commission shall 
review and analyze all enforcement actions by the Commission involving 
violations of reporting requirements imposed under the securities laws, and 
restatements of financial statements, over the 5-year period preceding the date 
of enactment of this Act, to identify areas of reporting that are most susceptible to 
fraud, inappropriate manipulation, or inappropriate earnings management, such 
as revenue recognition and the accounting treatment of off-balance sheet special 
purpose entities. 
The Commission shall report its findings to the Congress of the Philippines 
within six (6) months from the effectivity of this Act. 
TITLE V - 
ENHANCED FINANCIAL DISCLOSURES 
SEC. 21. Disclosures In Periodic Reports. -- Each financial report that 
contains financial statements, and that is required to be prepared in accordance 
with generally accepted accounting principles under this title and filed with the 
Commission shall reflect all material correcting adjustments that have been 
identified by a registered public accounting firm in accordance with generally 
accepted accounting principles and the rules and regulations of the Commission. 


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Not later than one hundred eighty (180) days after the effectivity of this 
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Act, the Commission shall issue rules providing that each annual and quarterly 
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financial report required to be filed with the Commission shall disclose all material 
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off-balance sheet transactions, arrangements, obligations (including contingent 
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obligations), and other relationships of the issuer with unconsolidated entities or 
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other persons, that may have material, current or future effect on financial 
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condition, changes in financial condition, results of operations, liquidity, capital 
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expenditures, capital resources, or significant components of revenues or 
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expenses. 
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Not later than I 8 0  days after the effectivity of this Act, the Commission 
shall issue rules providing that pro forma financial information included in any 
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periodic or other report filed with the Commission pursuant to the securities laws, 
or any public disclosure or press or other release, shall be presented in a manner 
that - 
a. 
does not contain an untrue statement of a material fact or omit to 
state a material fact necessary in order to make the pro forma financial 
information, in light of the circumstances under which it is presented, not 
misleading; and 
b. 
reconciled it with the financial condition and results of operations of 
the issuer under generally accepted accounting principles. 
The Commission shall, not later than one (I) 
year after the effective date 
of adoption of off-balance sheet disclosure rules required by this Section, 
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the extent of off-balance sheet transactions, including 
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assets, liabilities, leases, losses, and the use of special purpose entities; and 
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whether generally accepted accounting rules result in 
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financial statements of issuers reflecting the economics of such off-balance sheet 
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transactions to investors in a transparent fashion. 
complete a study of filings by issuers and their disclosures to determine - 


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Not later that six (6) months after the date of completion of the study 
required by this Section, the Commission shall submit a report to the President 
and to the Congress of the Philippines, setting forth - 
a. 
the amount or an estimate of the amount of off-balance sheet 
transactions, including assets, liabilities, leases, and losses of, and the use of 
special purpose entities by, issuers filing periodic reports; 
b. 
the extent to which special purpose entities are used to facilitate 
off-balance sheet transactions; 
c. 
whether generally accepted accounting principles or the rules of the 
Commission result in financial statements of issuers reflecting the economics of 
such transactions to investors in a transparent fashion; 
d. 
whether generally accepted accounting principles specifically result 
in the consolidation of special purpose entities sponsored by an issuer in cases 
in which the issuer has the majority of the risks and rewards of the special 
purpose entity; and 
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any recommendations of the Commission for improving the 
transparency and quality of reporting off-balance sheet transactions in the 
financial statements and disclosures required to be filed by an issuer with the 
Commission. 
SEC. 22. Prohibition on Personal Loans to Executives. -- It shall be 
unlawful for any issuer, directly or indirectly, including through any subsidiary, to 
extend or maintain credit, to arrange for the extension of credit, or to renew an 
extension of credit, in the form of a personal loan to or for any director or 
executive officer (or equivalent thereof) of the issuer: Provided, however, that an 
extension of credit maintained by the issuer before the approval of this Act shall 
not be subject to the provisions of this subsection, provided that there is no 
material modification to any term of any such extension of credit or any renewal 
of any such extension of credit on or after that date of enactment: Provided, 


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further, this shall not apply to any loan made or maintained by insured depository 
institution. 
The above paragraph does not preclude any home improvements and 
manufacture home loans, consumer credit, or any extension of credit under an 
open and credit plan, or a charge card, or any extension of credit by a broker or 
dealer registered this Act to an employee of that broker or dealer to buy, trade, or 
carry securities, that is permitted under rules or regulations of the Securities and 
Exchange Commission (other than an extension of credit that would be used to 
purchase the stock of that issuer), that is - 
a. made or provided in the ordinary course of the consumer credit 
business of such issuer; 
b. of a type that is generally made available by such issuer to the public; 
and 
c. made by such issuer on market terms, or terms that are no more 
favorable than those offered by the issuer to the general public for such 
extensions of credit. 
SEC. 23. Disclosures. of Transactions Involving Management and 
Principal Stockholders. 
Every person who is directly or indirectly the 
beneficial owner of more than 10 percent of any class of any equity security 
(other than an exempted security) which is registered with the Securities and 
Exchange Commission or companies imbued with public interest such as 
pension and other pre-need plans and other similar companies, or who is a 
director or an officer of the issuer of such security, shall file the statements 
-- 
required by this subsection with the Commission (and, if such security is 
registered on a national securities exchange, also with the stock exchange). 
The statements required by this subsection shall be filed -- 
a. 
at the time of the registration of such security on a national 
securities exchange or ninety (90) days after the approval of this Act whichever 
comes earlier; 


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applicable to its principal financial officer and comptroller or principal accounting 
officer, or persons performing similar functions. 
The Commission shall revise its regulations concerning matters requiring 
prompt disclosure to require the immediate disclosure, by means of the filing of 
such form, dissemination by the Internet or by other electronic means, by any 
issuer of any change in or waiver of the code of ethics for senior financial office. 
For purposes of this section, the term “code of ethics” means such 
standards as are reasonably necessary to promote -- 
a. honest and ethical conduct, including the ethical handling of actual or 
apparent conflicts of interest between personal and professional relationships; 
b. full, fair, accurate, timely, and understandable disclosure in the periodic 
reports required to be filed by the issuer; and 
c. compliance with applicable governmental rules and regulations. 
The Commission shall promulgate rules to implement this section, not 
later than ninety (90) days after the approval of this Act. 
SEC. 26. Disclosure Of Audit Committee Financial Expert. -- The 
Commission shall issue rules, as necessary or appropriate in the public interest 
and consistent with the protection of investors, to require each issuer, together 
with periodic reports required, to disclose whether or not, and if not, the reasons 
therefore, the audit committee. of that issuer is comprised of at least one (1) 
member who is a financial expert, as such term is defined by the Commission. 
In defining the term ‘financial expert’ for purposes of preceding paragraph, 
the Commission shall consider whether a person has, through education and 
experience as a public accountant or auditor or a principal financial officer, 
comptroller, or principal accounting officer of an issuer, or from a position 
involving the performance of similar functions -- 
a. an understanding of generally accepted accounting principles and 
fin an ci a I st atemi nts ; 
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2. the application of such principles in connection with the 
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c. experience with internal accounting controls; and 
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d. an understanding of audit committee functions. 
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the preparation or auditing of financial statements of generally 
accounting for estimates, accruals, and reserves; 
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The Commission shall promulgate rules to implement this section, not 
later than ninety (90) days after the approval of this Act. 
SEC. 27. Enhanced Review of Periodic Disclosures by issuers. -- 
The Commission shall review disclosures made by issuers and which have a 
class of securities listed on a national securities exchange or of companies 
otherwise imbued with public interest on a regular and systematic basis for the 
protection of investors and the general public. Such review shall include a review 
of an issuer's financial statement. 
For purposes of scheduling the reviews required by preceding paragraph, 
the Commission shall consider, among other factors -- 
a. issuers that have issued material restatements of financial results; 
b. issuers that experience significant volatility in their stock price as 
compared to other issuers; 
c. issuers with the largest market capitalization; 
d. emerging companies with disparities in price to earning ratios; 
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issuers whose operations significantly affect any material sector of 
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f. any other factors that the Commission may consider relevant. 
In no event shall an issuer required to file reports be reviewed under this 
section less frequently than once every three (3) years. 
SEC. 28. Real Time issuer Disclosures - Each issuer reporting under 
this Act shall disclose to the public on a rapid and current basis such additional 
information concerning material changes in the financial condition or operations 
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of the issuer, in plain English, which may include trend and qualitative information 
and graphic presentations, as the Commission determines, by rule, is necessary 
or useful for the protection of investors and ,in the public interest. 
TITLE VI - ANALYST CONFLICTS OF INTEREST 
SEC. 29. Securities Analysts and Research Reports. -- a. Analyst 
Protections -- The Commission, or upon the authorization and direction of the 
Commission, a registered securities association or national securities exchange, 
shall adopt, not later than one (I) 
year after the effectivity of this Act, rules 
reasonably designed to address conflicts of interest that can arise when 
securities analysts recommend equity securities in research reports and public 
appearances, in order to improve the objectivity of research and provide 
investors with more useful and reliable information, including rules designed -- 
I. 
to foster greater public confidence in securities research, and 
protect the objectivity and independence of securities analysts, by -- 
a) 
restricting the prepublication clearance or approval of 
research reports by persons employed by the broker or dealer who 
are engaged in investment banking activities, or persons not 
directly responsible for investment research, other than legal or 
compliance staff; 
b) 
limiting the supervision and compensatory evaluation of 
securities analysts to officials employed by the broker or dealer who 
are not engaged in investment banking activities; and 
c) 
requiring that a broker or dealer and persons employed 
by a broker or dealer who are involved with investment banking 
activities may not, directly or indirectly, retaliate against or threaten 
to retaliate against any securities analyst employed by that broker 
or dealer or its affiliates as a result of an adverse, negadve, or 
otherwise unfavorable research report that may adversely affect the 
present or prospective investment banking relationship of the 


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broker or dealer with the issuer that is the subject of the research 
report, except that such rules may not limit the authority of a broker 
or dealer to discipline a securities analyst for causes other than 
such research report in accordance with the policies and 
procedures of the firm; 
2. 
to define periods during which brokers or dealers who have 
participated, or are to participate, in a public offering of securities as 
underwriters or dealers should not publish or otherwise distribute research 
reports relating to such securities or to the issuer of such securities; 
3. 
to establish structural and institutional safeguards within 
registered brokers or dealers to assure that securities analysts are 
separated by appropriate informational partitions within the firm from the 
review, pressure, or oversight of those whose involvement in investment 
banking activities might potentially bias their judgment or supervision; and 
to address such other issues as the Commission, or such 
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association or exchange, determines appropriate. 
b. Disclosure - The Commission, or upon the authorization and direction 
of the Commission, a registered securities association or national securities 
exchange, shall have adopted, not later than ninety (90) days after the date of 
enactment of this Act, rules reasonably designed to require each securities 
analyst to disclose in public appearances, and each registered broker or dealer 
to disclose in each research report, as applicable, conflicts of interest that are 
known or should have been known by the securities analyst or the broker or 
dealer, to exist at the time of the appearance of the date of distribution of the 
report, including -- 
I. the extent to which the securities analyst has debt or equity 
investments in the issuer that is the subject of the appearance or research 
report; 


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2. whether any compensation has been received by the registered 
broker or dealer, or any affiliate thereof, including the securities analyst, 
from the issuer that is the subject of the appearance or research report, 
subject to such exemptions as the Commission may determine 
appropriate and necessary to prevent disclosure by virtue of this 
paragraph of material non-public information regarding specific potential 
future investment banking transactions of such issuer, as is appropriate in 
the public interest and consistent with the protection of investors; 
3. whether an issuer, the securities of which are recommended in 
the appearance or research report, currently is, or during the one (1) year 
period preceding the date of the appearance or date of distribution of the 
report has been, a client of the registered broker or dealer, and if so, 
stating the types of services provided to the issuer; 
4. whether the securities analyst received compensation with 
respect to a research report, based, among others, upon the investment 
banking revenues (either generally or specifically earned from the issuer 
being analyzed) of the registered broker or dealer; and 
5. such other disclosures of conflicts of interest that are material to 
investors, research analysts, or the broker or dealer as the Commission, 
or such association or exchange, determines appropriate. 
As used in this section, the term 'securities analyst' shall mean any 
associated person of a registered broker or dealer that is principally responsible 
for, and any associated person who reports directly or indirectly to a securities 
analyst in connection with, the preparation of the substance of a research report, 
whether or not any such person has the job title of 'securities analyst. 
As used in this section, the term 'research report' means a written or 
electronic communication that includes an analysis of equity securities of 
individual companies or industries, and that provides information reasonably 
sufficient upon which to base an investment decision. 


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The Commission may promulgate and amend its regulations, or direct a 
registered securities association or national securities exchange to promulgate 
and amend its rules, to carry out the provisions of this Section as is necessary for 
the protection of investors and in the public interest. 
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TITLE VI1 - COMMISSION AUTHORITY 
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SEC. 30. Appearance and Practice before the Commission. -- The 
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Commission may censure any person, or deny, temporarily or permanently, to 
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way, if that person is found by the Commission, after notice and opportunity for 
hearing in the matter - 
a. 
b. 
not to possess the requisite qualifications to represent others; 
to be lacking in character or integrity, or to have engaged in 
unethical or improper professional conduct; or 
c. 
to have willfully violated , or willfully aided and abetted the violation 
of, any provision of the securities laws or the rules and regulations issued 
thereunder. 
With respect to any registered public accounting firm or associated 
person, for purposes of this section, the term 'improper professional conduct' 
means - 
a. intentional or knowing conduct, including reckless conduct, that results 
in a violation of applicable professional standards; and 
b. negligent conduct in the form of - 
I. a single instance of highly unreasonable conduct that results in 
a violation of applicable professional standards in circumstances in which 
the registered public accounting firm or associated person knows, or 
should know, that heightened scrutiny is warranted; or 
2. repeated instances of unreasonable conduct, each resulting in a 
violation of applicable professional standards, that indicate a lack of 
competence to practice before the Commission. 


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TITLE Vlll - STUDIES AND REPORTS 
SEC. 31. Commission Study and Report Regarding Credit Rating 
Agencies. -- The Commission shall conduct a study of the role and function of 
credit rating agencies in the operation of the securities market. 
The study 
required by this subsection shall examine - 
a. 
the role of credit rating agencies in the evaluation of issuers of 
securities: 
b. 
importance of that role to investors and the functioning of the 
securities markets; 
c. 
any impediments to the accurate appraisal by credit rating agencies 
of the financial resources and risks of issuers of securities; 
d. 
any barriers to entry into the business of acting as a credit rating 
agency, and measures needed to remove such barriers; 
e. 
any 
measures which shall be required to 
improve the 
dissemination of information concerning such resources and risks when credit 
rating agencies announce credit ratings; and 
f. 
any conflict of interest in the operation of credit rating agencies and 
measures to prevent such conflicts or ameliorate the consequences of such 
conflicts. 
The Commission shall submit a report on the study required by preceding 
paragraph to the President and to the Congress of the Philippines not later than 
one hundred eighty (180) days after the effectivity of this Act. 
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SEC. 32. Study and Report on Violators and Violations. -- The 
Commission shall conduct a study to determine, based upon information for the 
period from January 1 , 1998 to December 31 , 2001 , particularly - 
a. 
the number of securities professionals, defined as public 
accountants, public accounting firms, investment bankers, investment advisers, 
brokers, dealers, attorneys, and other securities professional practicing before 
the Commission - 


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1. 
who have been found to have aided and abetted a violation 
of the securities laws, including rules or regulations promulgated 
thereunder, but who have not been sanctioned, disciplined, or otherwise 
penalized as a primary violator in any administrative action or civil 
proceeding, including in any settlement of such an action or proceeding 
(referred to in this section as 'aiders and abettors'); and 
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securities laws; 
b. 
who have been found to have been primary violators of the 
a description of the securities laws violations committed by aiders 
and abettors and by primary violators, including -- 
the specific provision of securities laws violated; 
1. 
the specific sanctions and penalties imposed upon such 
aiders and abettors and primary violators, including the amount of any 
monetary penalties assessed upon and collected from such persons; 
2. 
the occurrence of multiple violations by the same person or 
persons, either as an aider or abettor or as a primary violator; and 
5. 
whether, as to each such violator, disciplinary sanctions 
have been imposed, including any censure, suspension, temporary bar, or 
permanent bar to practice before the Commission; and 
6. 
the amount of disgorgement, restitution, or any other fines or 
payments that the Commission has assessed upon and collected from, 
aiders and abettors and from primary violators. 
A report based upon the study conducted pursuant to this Section shall be 
submitted to the Congress of the Philippines not later than one hundred eighty 
(1 80) days after the effectivity of this Act. 
SEC. 33. Study of Enforcement Actions. -- The Commission shall 
review and analyze all enforcement actions by the Commission involving 
violations of reporting requirements imposed under the securities laws, and 
restatements of financial statements, over the five (5) year period preceding the 


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to fraud, inappropriate manipulation, or inappropriate earnings management, 
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such as revenue recognition and the accounting treatment of off-balance sheet 
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special purpose entities. 
The Commission shall report its findings to the Congress of the Philippines 
not later than one hundred eighty (180) days after the date of effectivity of this 
Act, and shall use such findings to revise its rules and regulations, as necessary. 
The report shall include a discussion of regulatory or legislative steps that are 
recommended or that may be necessary to address concerns identified in the 
study. 
SEC. 34. 
Study of Investment Banks. 
-- 
The Chairman of the 
Monetary Board shall conduct a study on whether investment banks and financial 
advisers assisted public companies in manipulating their earnings and 
obfuscating their true financial condition. The study should address the rules of 
investment banks and financial advisers - 
a. With respect to the design and implementation of derivatives 
transactions, transactions involving special purpose vehicles, and other financial 
arrangements that shall have had the effect of altering the company’s reported 
financial statements in ways that obscured the true financial picture of the 
company; 
b. With respect to transactions that may have had the effect of altering 
the company’s reported financial picture of the company; and 
c. Generally, in creating and marketing transactions which shall have 
been designed solely to enable cdmpanies to manipulate revenue streams, 
obtain loans, or move liabilities off-balance sheets without altering the economic 
and business risks faced by the companies or any other mechanism to obscure a 
company’s financial picture. 
TITLE IX - CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY 


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SEC. 35. Criminal Penalties for Altering Documents. -- a. Whoever 
knowingly alters, destroys, mutilates, conceals, covers up, falsifies, or makes a 
false entry in any record, document, or tangible object with the intent to impede, 
obstruct, or influence the investigation or proper administration of any matter 
within the jurisdiction of any department or agency of the Philippines or any case 
filed under Title IV of this Act, or in relation to or contemplation of any such 
matter or case, shall be punished with a fine of not less than one hundred 
thousand pesos (P100,OOO.OO) but not more than five hundred thousand pesos 
(P500,OOO.OO) and imprisonment of not less than ten ( I O )  years but not more 
than twenty (20) years. 
b. 
Whoever knowingly and willfully violates any rule or regulation 
promulgated by the Securities and Exchange Commission with regard to the 
retention of corporate records shall be punished with a fine of not less than one 
hundred thousand pesos (PI OO,OOO.OO), or imprisonment of not less than two 
(2) years but not more than five (5) years or both such fine and imprisonment at 
discretion of the court: Provided, That the Securities and Exchange Commission 
shall promulgate, within one hundred eighty (180) days from the effectivity of this 
Act, such rules and regulations as are necessary relating to the retention of 
relevant records such as work papers, documents that form the basis of an audit 
or review, memoranda, correspondence, communications, other documents and 
records, including electronic records, that are created, sent or received in 
connection with an audit or review and contain conclusions, opinions, analyses, 
or financial date relating to such audit or review, which is conducted by any 
accountant who conducts an audit of an issuer of securities: Provided, further, 
that the Commission shall, from time to time, amend or supplement the rules 
and regulations that it is required to promulgate under this section, in order to 
ensure that such rules and regulations adequately comport with the purposes of 
this section: Proved, finally, that any accountant who conducts an audit of an 
issuer of securities shall maintain all audit or review work papers for a period of 


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five (5) years from the end of the fiscal period in which the audit or review was 
concluded. 
SEC.36. 
Debts Non-dischargeable If Incurred In Violation Of 
Securities Fraud Laws. -- All debts that are incurred in violation of securities 
laws through fraud, deceit, or manipulation, in connection with the purchase or 
sale of any security shall not be discharged and shall be settled accordingly. 
A private right of action that involves a claim of fraud, deceit, manipulation, 
or contrivance in contravention of a regulatory requirement concerning the 
securities laws, shall be brought not later than two (2) years after the discovery of 
the facts constituting the violation; or five (5) years after such violation, whichever 
comes earlier. 
The limitations period provided in this section shall apply to all 
proceedings addressed by this section that are commenced on or after the date 
of the effectivity of this Act. Nothing in this section shall create a new, private 
right of action. 
SEC. 37. Protection For Employees Who Provide Evidence Of Fraud. 
-- 
No company with duly listed securities or that is required to file reports under 
this Act or otherwise imbued with public interest, or any officer, employee, 
contractor, subcontractor, or agent of such company, shall discharge, demote, 
suspend, threaten, harass, or in any other manner discriminate against an 
employee in the terms and conditions of employment because of any lawful act 
done by the employee-- 
a. 
to provide information, cause information to be provided, or 
otherwise assist in an investigation regarding any conduct which the employee 
reasonably believes constitutes a violation of this Act or any rule or regulation of 
the Securities and Exchange Commission, when the information or assistance is 
provided to or the investigation is conducted by- 
1. a law enforcement agency; 
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2. any Member of Congress or any committee of Congress; or 


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3. a person with supervisory authority over the employee (or such 
other person working for the employer who has the authority to 
investigate, discover, or terminate misconduct); or 
b. 
to file, cause to be filed, testify, participate in, or otherwise assist in 
a proceeding filed or about to be filed (with the knowledge of the employer) 
relating to an alleged violation of this Act or any rule or regulation of the 
Securities and Exchange Commission, or any provision of law relating to fraud 
against shareholders, or the general public. 
A person who alleges discharge or other discrimination by any person in 
violation of this section shall seek relief under this section by -- 
a. filing a complaint with the Secretary of Labor; or 
b. bring an action in the appropriate court of law, which shall have 
jurisdiction over such an action without regard to the amount in controversy, if the 
Secretary has not issued a final decision within one hundred eighty (180) days 
from the filing of the complaint and there is no showing that such delay is due to 
the bad faith of the claimant,. 
An action under this Section shall be commenced not later than ninety 
(90) days after the date on which the violation occurs. 
An employee prevailing in any action under this section shall be entitled to 
all relief necessary to make the employee whole. Relief for any action under this 
section shall include-- 
a. 
reinstatement with the same seniority status that the employee 
would have had, but for discrimination; 
b. 
c. compensation for any special damages sustained as a result of the 
discrimination, including litigation costs, expert fees, and reasonable attorney 
fees. 
the amount of back pay, with interest; and 


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Nothing in this section shall be deemed to diminish the rights, privileges, 
or remedies, of any employee under any law, or under any collective bargaining 
agreement. 
SEC. 
38. 
Criminal Penalties For Defrauding Shareholders Of 
Publicly Traded Companies, And The General Public In Case Of Companies 
Imbued With Public Interest. -- Whoever knowingly executes, or attempts to 
execute, a scheme or artifice -- 
a. to defraud any person in connection with any security of an issuer with 
a class of securities registered with the Securities and Exchange Commission or 
that is required to file reports under this Act. 
b. to obtain, by means of false or fraudulent pretenses, representations, 
or promises, any money or property in connection with the purchase of any 
security of an issuer with a class of securities registered under the Securities and 
Exchange Commission, shall be punishable with a fine of not less than one 
hundred thousand pesos (PI 00,000.00) and imprisonment of not less than ten 
( I O )  years but not more than twenty (20) years. 
SEC. 39. Corporate Responsibility For Financial Reports. -- Each 
periodic report containing financial statements filed by an issuer with the 
Securities and Exchange Commission shall be accompanied by a written 
statement by the chief executive officer and chief financial officer (or equivalent 
thereof) of the issuer. Failure to do so shall be punishable by a fine of not less 
than one hundred thousand pesos (P100,OOO.OO) and imprisonment of not less 
than two (2) years but not more than five (5) years. 
The statement required under above paragraph shall certify that the 
periodic report containing the financial statements fully complies with the 
requirements of this Act and that information contained in the periodic report 
fairly presents, in all material respects, the financial condition and results of 
operations of the issuer. 


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SEC. 
40. Corporate Tax Returns. -- 
The income tax return of a 
corporation shall be signed by the chief executive officer of such corporation. 
Failure to do so shall be punishable by a fine of not less than one hundred 
thousand pesos (P100,OOO.OO) or imprisonment of not less than five (5) years but 
not more than ten (IO) years, or both such fine and imprisonment at the 
discretion of the Court. 
SEC. 41. 
Tampering With A Record Or Otherwise Impeding An 
Official Proceeding. - Whoever intentionally 
a. 
alters, destroys, mutilates, or conceals a record, document, or other 
object, or attempts to do so, with the intent to impair the object’s integrity or 
availability for use in an official proceeding; or 
(a) otherwise obstructs, influences, or impedes any official proceeding, or 
attempts to do so, shall be punished with a fine of not less than P200,OOO and 
imprisonment of not less than ten ( I O )  years but not more than twenty (20) 
years. 
SEC. 42. Attempt and Conspiracy to Commit Criminal Fraud 
Any person who attempts or conspires to commit any offense under this 
Title shall be subject to the same penalties as those prescribed for the offense, 
the commission of which was the object of the attempt or conspiracy. 
SEC. 
43. 
Temporary Freeze Authority For The Securities And 
Exchange Commission, 
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Whenever, during the course of a lawful 
investigation involving possible violations of the securities laws by an issuer of 
publicly traded securities or any of its directors, officers, partners, controlling 
persons, agents, or employees, it shall appear to the Commission that it is likely 
that the issues will make extraordinary payment (whether compensation or 
otherwise) to any of the foregoing persons, the Commission may petition a court 
for a temporary order requiring the issuer to escrow, subject to court supervision, 
those payments in an interest-bearing account for forty-five (45) days. 


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A temporary order shall be entered under the preceding paragraph, only 
after notice and opportunity for a hearing, unless the court determines that notice 
and hearing prior to entry of the order would be impracticable or contrary to the 
public interest. 
A temporary order issued shall (I) become effective immediately; (11) be 
served upon the parties subject to it; and ( I l l )  unless set aside, limited or 
suspended by a court of competent jurisdiction, shall remain effective and 
enforceable for forty-five (45) days: Provided, that the court may extend the 
temporary order, upon good cause shown, for not longer than forty-five (45) 
additional days: Provided, further, that the combined period of the order shall not 
exceed ninety (90) days. 
If the issuer or other person described in this section is charged with any 
violation of the securities laws before the expiration of the effective period of a 
temporary order issued pursuant to the preceding paragraph, including any 
applicable extension period, the order shall remain in effect, subject to court 
approval, until the conclusion of any legal proceedings related thereto, and the 
affected issuer or other person shall have the right to petition the court for review 
of the order. 
If the issuer or other person described in this section is not charged with 
any violation of securities laws, the escrow shall terminate at the expiration of the 
forty-five (45) day effective period of the temporary order or the expiration of any 
extension period, as applicable, and the disputed payments, with accrued 
interest shall be returned to the issuer or other affected person. 
SEC. 44. Authority Of The Commission To Prohibit Persons From 
Serving As Officers Or Directors. - In any cease-and-desist proceeding, the 
Commission may issue an order to prohibit, conditionally or unconditionally, and 
permanently or for such period of time as it shall determine, any person who has 
violated any provision of this Act or the rules or regulations thereunder, from 
acting as an officer or director of any issuer that has a class of securities 


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registered with the Commission, or that is required to file reports pursuant to this 
Act, if the conduct of that person demonstrates unfitness to serve as an officer or 
director of any such issuer. 
SEC. 45. Retaliation Against Informants. - Whoever knowingly, with 
the intent to retaliate, takes any action harmful to any person, including 
interference with the lawful employment or livelihood of any person, for providing 
to a law enforcement officer any truthful information relating to the commission or 
possible commission of any offense punishable under this Act, shall be punished 
with a fine of not less than one hundred thousand pesos (P100,OOO.OO) and 
imprisonment of not less than five (5) years but not more than ten (IO) years. 
TITLE X - FINAL PROVISIONS 
SEC. 46. 
Rules And Regulations. - The Securities and Exchange 
Commission shall promulgate rules and regulations that are not otherwise 
provided under any other provision of this Act, within one hundred eighty (180) 
days from the effectivity of this Act. 
SEC. 47. Appropriations. - The amount as may be necessary for the 
effective implementation of this Act shall be charged to the current appropriations 
of the Securities and Exchange Commission. Thereafter, such amount as may 
be necessary for its continued implementation shall be charged to the annual 
General Appropriations Act. 
SEC. 48. Separability Clause. - If any provision of this Act shall be 
declared unconstitutional, any other provision not affected thereby shall remain in 
full force and effect. 
SEC. 49. Repealing Clause. - All laws, decrees, orders, rules and 
regulations, or parts thereof inconsistent with this Act are hereby repealed or 
amended accordingly. 
SEC. 50. Effectivity. - This Act shall take effect fifteen (15) days after 
its publication in at least two (2) national newspapers of general circulation. 
Approved,