• 
FIFTEENTH CONGRESS OF THE REPUBLIC) 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
SENATlb'~lf' 
Senate Bill No. 
1~"Q~ 
Introduced by Senator Lacson 
EXPLANATORY NOTE 
;Serwtr 
{~fllrt uf tip! '~'F"crr-t.'H~ 
", 1 MAR 31 
['5 :02 
Our country is facing a crisis of confidence that is eroding the public's trust in our 
markets, and poses a real threat to the economy. The present state of our laws requires a 
strong and balanced response to the accowlting and corporate responsibility problems 
confronting our financial markets. 
The problem of restoring investor confidence has 
become more and more widespread. 
Thus, it is critical to put provisions in place that will deter and punish corporate and 
accounting fraud and corruption, ensure justice for wrongdoers, and protect the interests of 
workers and shareholders. 
This bill aims to improve the quality and transparency of financial reporting, 
independent audits, and accounting services for public companies. It strengthens the 
independence of firms that audit public companies; increases corporate responsibility and 
the usefulness of corporate financial disclosure; penalizes corporate wrongdoing and 
protects the objectivity and independence of securities analysts. 
Moreover, to intensifY corporate responsibility, chief executive officers and chief 
financial officers must personally vouch for the truth and fairness of their company's 
disclosures under pain of sanctions that include reimbursement of any bonus or other 
incentive/equity-based compensation they have received from the issuer and the profits 
they have realized from the sale of securities of the issuer within the 12 month period 
following the first public issuance or the filing with the Securities and Exchange 
Commission of the finallcial docnment embodying such financial report. The proposed 
measure likewise specifically provides for penalties for the destruction, alteration or 
falsification of corporate audit record or any other record to obstruct government 
investigation. Increased criminal penalties are imposed on those who commit securities 
fraud. 
Furthermore, corporate misdeeds will be fOWld and punished by furthering the 
authority of the SEC to uncover wrongdoing. The SEC may now bar dishonest directors 
and officers from ever again serving in positions of corporate responsibility. 
For the reasons above-stated, approval of this bill is therefore earnestly requested. 
PAN~~ACSON 
~~~ator 


;jemttr 
FIFTEENTH CONGRESS OF THE REPUBLIC 
) 
(/~jhrr uf IIIP ~~frrtbr~ 
OF THE PHILIPPINES 
) 
First Regular Session 
) 
'11 
MAR3! 
P5:02 
SENATE 
. 
..'~ '"" ~ v. 
Senate Bill No.1f.. f 'l.!l~ 
HECEiVLD BY~ 
Introduced by Senator Lacson 
AN ACT 
TO PROTECT INVESTORS BY IMPROVING THE ACCURACY AND 
RELIABILITY OF CORPORATE FINANCIAL REPORTING AND DISCLOSURES, 
AND FOR OTHER PURPOSES. 
Be it enacted by the Senate and House of Representatives of the Philippines in 
Congress Assembled: 
SECTION 1. Short Title: 
This Act shall be known as the "Corporate 
Accountability and Responsibility Act of2011". 
Sec. 2. Declaration of Policy. . The state recognizes the vital role of the private 
sector in nation building and shall endeavor to actively promote corporate governance 
reforms aimed at raising investor's confidence, develop capital market and help achieve 
high sustained growth for the corporate sector and the economy. Towards this end, a 
system designed to improve the quality of financial reporting, independent audits and 
accounting services for public companies, the independence of accounting firms that audit 
public companies and increase the responsibility of management for financial and 
corporate disclosures are hereby adopted. 
Sec. 3. Definitions: As used in this Act, the following terms shall mean: 
(1) AUDIT· The term 'audit' means an examination of the financial statements of 
any issner by an independent public accounting firm in accordance with the generally 
accepted auditing and related standards or the rules of the Commission for the purpose of 
expressing an opinion on such statements. 
(2) AUDIT COMMITTEE - The term 'audit committee' means--
(A) 
a committee established by and amongst the board of directors of an issuer 
for the purpose of overseeing the accounting and financial reporting processes of the issuer 
and audits of the financial statements of the issuer; and 
(B) 
if no such committee exists with respect to an issuer, the entire board of 
directors of the issuer. 
(3) AUDIT REPORT- The term 'audit report' means a document or other record-
(A) 
prepared following an audit performed for purposes of compliance by an 
issuer with the requirements ofthe securities laws; and 
(B) in which a public accounting firm either--
(i) sets forth the opinion of that firm regarding a financial statement, report, or 
other document; or 
(ii) asseJis that no such opinion can be expressed. 


f, 
(4) 
COMMISSION-
The term refers to the Securities and Exchange 
Commission. 
(5) 
INDEPENDENT DIRECTOR - refers to a person other than an officer or 
employee of the corporation, its parent or subsidiaries, or any other individual having any 
relationship with the corporation, which would interfere with the exercise of independent 
judgment in carrying out the responsibilities of a director. This means that apart from the 
directors' fees and shareholdings, he should be independent of management and free from 
any business or other relationship which could materially interfere with the exercise of his 
independent judgment. 
(6) 
ISSUER- The term 'issuer' means a corporation whose secuntJes are 
registered or listed in a stock exchange or a corporation which is a grantee of permit/license 
and secondary franchise from the Commission or a public company as defined herein, and 
a branch or subsidiary of a foreign corporation operating in the Philippines whose 
securities are registered or listed in a stock exchange, 
(7) 
NON-AUDIT SERVICES- The term 'non-audit services' means any 
professional services provided to an issuer by a registered public accounting firm, other 
than those provided to an issuer in connection with an audit or a review of the financial 
statements of an issuer. Examples include: 
(A) bookkeeping or other services related to the accounting records or financial 
statements of the audit client; 
(8) financial information systems design and implementation; 
(C) appraisal or valuation services, fairness opinions, or contribution-in-kind 
reports; 
(D) actuarial services; 
(E) internal audit outsourcing services; 
(F) management functions or hurnan resources; 
(0) broker or dealer, investment adviser, or investment banking services; 
(H) legal services urn'elated to the audit; and 
(I) any other servICe as 
may be determined by the appropriate government 
authority. 
(8) PERSON ASSOCIATED WITH A PUBLIC ACCOUNTING FIRM-
(A) IN GENERAL - The terms 'person associated with a public accounting firm' 
and' associated person of a public accounting firm' mean any individual proprietor, partner, 
shareholder, principal, accountant, or other professional employee of a public accounting 
firm, or any other independent contractor or entity that, in connection with the preparation 
or issuance of any audit report--
(i) shares in the profits of, or receives compensation in any other form from, 
that firm; or 
(ii) participates as agent or otherwise on behalf of such accounting firm in any 
activity of that firm. 
(8) 
EXEMPTION AUTHORITY- The Commission may, by rule, exempt 
persons engaged only in ministerial tasks from the definition in subparagraph (A), to the 
extent that the Commission determines that any such exemption is consistent with the 
purposes of this Act, the public interest, or the protection of investors. 


\ , 
(9) PROFESSIONAL STANDARDS - The term 'professional standards' means-
(A) accounting principles that are-
(i) established by the Accounting Standards Council and the rules promulgated 
by the Commission with regard to the preparation of financial statements; and 
(ii) relevant to audit reports for particular issuers, or dealt with in the quality 
control system of a particular registered public accounting firm; and 
(B) 
auditing standards that are established by the Auditing Standards and 
Practices Council, standards for attestation engagements, quality control policies and 
procedures, ethical and competency standards, and independence standards (including rules 
implementing Title III) that the Commission determines-
(i) relate to the preparation or issuance of audit reports for issuers; and 
(ii) are established or promulgated as rules of the Commission, 
(10) PUBLIC ACCOUNTING FIRM- The term 'public accounting firm' means-
(A) a proprietorship, professional partnership, limited liability partnership, or other 
legal entity that is engaged in the practice of public accounting or preparing or issuing audit 
reports; and 
(B) to the extent so designated by the rules of the Commission, any associated 
person of any entity described in subparagraph (A). 
(11) PUBLIC COMPANY - The term 'public company' refers to any corporation 
with a class of equity securities listed in an Exchange or with assets in excess of Fifty 
Million Pesos (P50,000,000.00) and having two hundred (200) or more stockholders each 
holding at least one hundred (100) shares ofa class of its securities. 
(12) SECURITY - The term refers to the "securities" referred to in 3.1 of Republic 
Act 8799, otherwise known as the Securities Regulation Code; 
(13) SECURITIES LAWS - The term refers to Republic Act 8799, otherwise 
known as the Securities Regulation Code and the rules, regulations, and orders issued by 
the Commission thereunder. 
SEC. 4. Commission Rules and Enforcement. -
(a) Regulatory Action. - The 
Commission shall promulgate such rules and regulations, as may be necessary or 
appropriate in the public interest for the protection of investors, and in furtherance of this 
Act. 
(b) Effect on Commission Authority. - Nothing in this Act shall be construed to 
impair or limit: (1) 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 director, executive, or finance officer of 
an issuer or any registered accounting firm or any associated person hereof. 
TITLE I 
CORPORATE RESPONSIBILITY 
Sec. 5. Public Company Audit Committees. - (a) The Board of Directors of an 
issuer shall constitute an Audit Committee in aid of good corporate governance. 
(b) The Audit Committee shall be composed of at least three (3) Board members, 
preferably with accounting and finance background, one of whom shall be an independent 
director and another should have related audit experience. It shall have the following 
specific functions: 
(1) Provide oversight over the senior management's activities in managing credit, 
market, liquidity, operational, legal and other risks of the corporation. This function shall 
include receiving from senior management periodic information on risk exposures and risk 
management activities. However, in consideration ofthe risk profile of the corporation, the 
Board may constitute a separate Risk Management Committee to focus on carrying out this 
oversight role over risk management; 
(2) Provide oversight of the corporation's internal and external auditors; 
(3) Review and approve audit scope and frequency, and the annual internal audit 
plan; 
(4) Discuss with the external auditor before the audit commences the nature and 
scope ofthe audit, and ensure coordination where more than one audit firm is involved; 
(5) Responsible for the setting-up of an internal audit department and consider the 
appointment of an internal auditor as well as an independent external auditor, the audit fee 
and any question of resignation or dismissal; 
(6) Monitor and evaluate the adequacy and effectiveness of the corporation's 
internal control system; 
(7) Receive and review reports of internal and external auditors and regulatory 
agencies, where applicable and ensure that management is taking appropriate corrective 
actions, in a timely manner in addressing control and compliance functions with regulatory 
agencies; 
(8)Review the quarterly, half-year and annual financial statements before 
submission to the Board, focusing particularly on: 
(A) Any change/s in accounting policies and practices 
(8) Major judgmental areas 
(C) Significant adjustments resulting from the audit 
(D) Going concern assumption 
(E) Compliance with accounting standards 
(F) Compliance with tax, legal, and stock exchange requirements 
(9) Responsible for coordinating, monitoring and facilitating compliance with 
existing laws, rules and regulations. It may also constitute a Compliance Unit for this 
purpose. 


(10) Evaluate and determine non-audit services by external auditors and keep under 
review the non-audit fees paid to the external auditor both in relation to their significance 
to the auditor and in relation to the company's total expenditure on consultancy. The non-
audit services should be disclosed in the annual report. 
(11) Establish and identify the reporting line of the chief audit executive so that the 
reporting level allows the internal audit activity to fulfill its responsibilities. The chief audit 
executive shall report directly to the Audit Committee functionally. The Audit Committee 
shall ensure that the internal auditors shall have free and full access to all the company's 
records, properties and personnel relevant to the internal audit activity and that the internal 
audit activity should be free from interference in determining the scope of internal auditing 
examinations, performing work, and communicating results, and shall provide a venue for 
the Audit Committee to review and approve the annual internal audit plan. 
(c) The Chairman of this committee should be an independent director. He should 
be responsible for inculcating in the minds of the Board members the importance of 
management responsibilities in maintaining a sound system of internal control and the 
Board's oversight responsibility. 
(d) For Philippine branches or subsidiaries of foreign corporations covered by this 
Code, the local audit head for such entities should be independent of the Philippine 
operations and should report to the regional or corporate headquarters. 
Sec. 6. Corporate Responsibility For Financial Reports. -raj 
Regulations 
Required - The Commission shall, by rule, require, for each company filing periodic 
reports to 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 either such section of such Act that-
(I) the signing officer has reviewed the report; 
(2) 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 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, results of operations and cash flows 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, pmticularly 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 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 officers 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 
(B) allY 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 of the Philippines. 
Sec. 7. 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. 
Sec. 8. Foifeiture of Certain Bonuses and Profits. - (a) Additional Compensation 
Prior To Noncompliance With Commission's Financial Reporting ReqUirements - 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 --
(1) any bonus or other incentive-based or equity-based compensation received by 
that person from the issuer during the 12-month period following the first public issuance 
or filing with the Commission (whichever first occurs) of the financial document 
embodying such financial reporting requirement; and 
(2) any profits realized from the sale of securities of the issuer during that 12-month 
period. 
(b) Commission's Exemption Authority - The Commission may exempt any person 
fi'om the application of subsection (a), as it deems necessary and appropriate. 


· , 
TITLE" 
ENHANCED FINANCIAL REPORTING AND DISCLOSURES 
Sec. 9. Disclosures In Periodic Reports. -
(a) Accuracy of Financial Reports -
Each financial report that contains financial statements and required to be prepared in 
accordance with generally accepted accouuting principles under this title and filed with the 
Commission shall reflect all material correcting adjustments that have been identified by a 
public accounting firm in accordance with generally accepted accounting principles and the 
rules and regulations of the Commission, 
(b) Of}Balance Sheet Transactions - Each annual and quarterly financial report 
required to be filed with the Commission shall disclose all material off-balance sheet 
transactions, arrangements, obligations (including contingent obligations), and other 
relationships of the issuer with unconsolidated entities or other persons, that may have a 
material current or future effect on financial condition, changes in financial condition, 
results of operations, liquidity, capital expenditures, capital resources, or significant 
components of revenues or expenses, 
(c) Rules On Pro Forma Figures - Pro forma financial information included in any 
periodic or other report filed with the Commission pursuant to the securities laws, or in any 
public disclosure or press or other release, shall be presented in a manner that--
(1) 
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 
(2) 
reconciles it with the financial condition and results of operations of the 
issuer under generally accepted accounting principles, 
Sec. 10. Enhanced Conflict of Interest Provisions. -
Disclosure Required On 
Personal Loans To Executives -
(1) In General - Any issuer directly or indirectly, 
including through any subsidiary, extending or maintaining credit, arranging for the 
extension of credit, or renewing an extension of credit, in the form of a personal loan to or 
for any director or executive officer (or equivalent thereof) of that issuer, is required to 
disclose such fact in its annual report submitted to the Commission, An extension of credit 
maintained by the issuer on the date of enactment of this subsection shaH 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. 
(2) Limitation - Paragraph (I) does not apply to any home improvement and home 
loans, consumer credit, or any extension of credit under an open end credit plan, or a 
charge card, or any extension of credit by a registered broker or dealer to an employee of 
that broker or dealer to buy, trade, or carry securities, 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.H. Disclosures Of Transactions Involving Management And Principal 
Stockholders. -
(a) Disclosures Required -
(1) Directors, Officers, And Principal 
Stockholders Required To File -
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 pursuant to section 8, 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 with the Exchange, also with the 
Exchange). 
(2) Time of Filing - 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 by the 
effective date of a registration statement filed pursuant to section 8 of the Securities 
Regulation Code; 
(B) within 10 days after he or she becomes such beneficial owner, director, or 
officer; 
(C) ifthere has been a change in such ownership. 
(3) Contents Of Statements - A statement filed -- (A) Under subparagraph (A) or 
(B) of paragraph (2) shall contain a statement of the amount of all equity securities of such 
issuer of which the filing person is the beneficial owner; and 
(B) Under subparagraph (C) of such paragraph shall indicate ownership by the 
filing person at the date of filing, any such changes in such ownership, and such purchases 
and sales of the security-based swap agreements as have occurred since the most recent 
such filing under such subparagraph. 
(4) Electronic Filing And Availability - Beginning not later than I year after the 
date of enactment of this Act -- (A) a statement filed under subparagraph (C) of paragraph 
(2) shall be filed electronically; 
(B) The Commission shall provide each such statement on a publicly accessible 
Internet site not later than the end of the business day following that filing; and 
(C) The issuer shall provide that statement on that corporate website if it has one, 
not later than the end of the business day following that filing. 
Sec.12. Management Assessment Of Internal Controls. -
(a) Rules Required -
The Commission shall prescribe mles requiring each annual report to contain an internal 
control report, which shall--
(l) state the responsibility of management for establishing and maintaining an 
adequate internal control stmcture and procedures for financial reporting; and 
(2) contain an assessment, as of the end of the most recent fiscal year of the issuer, 
of the effectiveness of the internal control structure and procedures of the issuer for 
financial reporting. 
(b) 
Internal Control Evaluation And Reporting - With respect to the internal 
control assessment required by subsection (a), each registered public accounting firm that 
prepares or issues the audit report for the issuer shall attest to, and report on, the 
assessment made by the management of the issuer. An attestation made under this 


, , 
subsection shall be made in accordance with standards for attestation engagements issued 
or adopted by the Board, Any such attestation shall be the subject of a separate 
engagement. 
Sec.13. Code of Ethics For Senior Financial Officers. -
(a) Code Of Ethics 
Disclosure - The Commission shall issue rules to require each issuer, together with 
periodic reports required to be submitted to the Commission, to disclose whether or not, 
and if not, the reason therefor, such issuer has adopted a code of ethics for senior financial 
officers, applicable to its principal financial officer and comptroller or principal accounting 
officer, or persons performing similar functions. 
(b) Definition - In this section, the term 'code of ethics' means such standards as are 
reasonably necessary to promote--
(1) honest and ethical conduct, including the ethical handling of actual or apparent 
conflicts of interest between personal and professional relationships; 
(2) full, fair, accurate, timely, and understandable disclosw'e in the periodic reports 
required to be filed by the issuer; and 
(1) compliance with applicable goverrunental rules and regulations, 
SEC. 14. Enhanced Review Of Periodic Disclosures By Issuers. -
(a) Regular 
and Systematic Review - The Commission shall review disclosures made by issuers 
submitting periodic reports to the Commission for the protection of investors. Such review 
shall include a review of an issuer's financial statement. 
(b) Review Criteria - For purposes of scheduling the reviews required by subsection 
(a), the Commission shall consider, among other factors-
(1) issuers that have issued material restatements of financial results; 
(2) issuers that experience significant volatility in their stock price as compared to 
other issuers; 
(3) issuers with the largest market capitalization; 
(4) emerging companies with disparities in price to earning ratios; 
(5) issuers whose operations significantly affect any material sector of the economy; 
and 
(6) any other factors that the Commission may consider relevant. 
(c) Minimum Review Period. - In no event shall an issuer required to file reports 
with the Commission be reviewed under this section less frequently than once every 3 
years. 
Sec. 15. Real Time Issuer Disclosures. - Each issuer reporting under section 17 
shall disclose to the public on a rapid and current basis such additional information 
concerning material changes in the financial condition or operations 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. 


Sec.16. Auditing, Quality Control, And Independence Standards and Rules. - (a) 
Auditing, Quality Control And Ethics Standards - (1) In General - The Commission shaIl, 
by rule, establish, including, to the extent it determines appropriate, through adoption of 
standards proposed by 1 or more professional groups of accountants designated pursuant to 
paragraph (3)(A) or advisory groups convened pursuant to paragraph (4), and amend or 
otherwise modify or alter, such auditing and related attestation standards, such quality 
control standards, and such ethics standards to be used by public accounting firms in the 
preparation and 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. 
(2) Rule Requirements - In canying out paragraph (I), the Commission-
(A) shaIl include in the auditing standards that it adopts, requirements that each 
public accounting firm shaIl--
(i) prepare, and maintain for a period of not less than 5 years, audit work papers, 
and other information related to any audit report, in sufficient detail to support the 
conclusions reached in such report; 
(ii) 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 Commission) associated with the public accounting firm, other 
than the person in charge of the audit, or by an independent reviewer (as prescribed by the 
Commission); and 
(iii) describe in each audit report the scope of the auditor's testing of the internal 
control structure and procedures of the issuer, required by section 204(b}, and present (in 
such report or in a separate report)--
(I) the findings of the auditor from such testing; 
(II) an evaluation of whether such internal control structure and procedures--
(aa) include maintenance of records that in reasonable detail accurately and fairly 
reflect the transactions and dispositions of the assets of the issuer; 
(bb) provide reasonable assurance that transactions are recorded as necessary to 
permit preparation of financial statements in accordance with generally accepted 
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 
(III) a description, at a minimum, of material weaknesses in such internal controls, 
and of any material noncompliance found on the basis of such testing. 
(8) shall include, in the quality control standards that it adopts with respect to the 
issuance of audit reports, requirements for every public accounting firm relating to-
(i) monitoring of professional ethics and independence from issuers on behalf of 
which the firm issues audit reports; 
(ii) consultation within such firm on accounting and auditing questions; 
(iii) supervision of audit work; 
(iv) hiring, professional development, and advancement of personnel; 


(v) the acceptance and continuation of engagements; 
(vi) internal inspection; and 
(vii) such other requirements as the Commission may prescribe, subject to 
subsection (a)(I). 
(3) Authority To Adopt Other Standards. -
(A) In General - In carrying out this 
subsection, the Commission -- (i) may adopt as its rules any portion of any statement of 
auditing standards or other professional standards that the Commission determines satisfY 
the requirements of paragraph (1), and that were proposed by 1 or more professional 
groups of accountants that shall be designated or recognized by the Commission, by rule, 
for such purpose, pursuant to this paragraph or I or more advisory groups convened 
pursuant to paragraph (4); and 
(ii) Notwithstanding clause (i), shall retain full authority to modifY, supplement, 
revise, or subsequently amend, modifY, or repeal, in whole or in part, any portion of any 
statement described in clause (i). 
(B) Initial and Transitional Standards - The Commission shall adopt standards 
described in subparagraph (A)(i) as initial or transitional standards, to the extent the 
Commission determines necessary. 
(4) Advisory Groups - The Commission shall convene, or authorize its staff to 
convene, such expert advisory groups as may be appropriate, which may include 
representatives of the Philippine Institute of Certified Public Accountants, Accounting 
Standards Council, Auditing Standards and Practices Council, practicing accountants and 
other experts, as well as representatives of other interested groups, subject to such rules as 
the Commission may prescribe to prevent conflicts of interest, to make recommendations 
concerning the content (including proposed drafts) of auditing, quality control, ethics, 
independence, or other standards required to be established under this section. 
(b) Independence Standards and Rules - The Commission shall establish such rules 
as may be necessary or appropriate in the public interest or for the protection of investors. 
(c) Cooperation with Designated Professional Groups of Accountants and Advisory 
Groups .. -
(1) 1n General - The Commission shall cooperate on an ongoing basis with 
professional groups of accountants designated under subsection (a)(3)(A) and advisory 
groups convened under subsection (a)(4) in the examination of the need for changes in any 
standards subject to its authority under subsection (a), recommend issues for inclusion on 
the agendas of such designated professional groups of accountants or advisory groups, and 
take such other steps as it deems appropriate to increase the effectiveness of the standard 
setting process. 
(2) Commission Responses - The Commission shall respond in a timely fashion to 
requests from designated professional groups of accountants and advisory groups referred 
to in paragraph (I) for any changes in standards over which the Commission has authority. 
TITLE III 
AUDITOR INDEPENDENCE 


Sec. 17. Non-Audit Services. -
A 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 
may provide to that issuer, contemporaneously with the audit, any non-audit services; 
Provided, that, such non-audit services shall not compromise the independence and 
objectivity of the external 
audit. 
In general, the provision of tax services 
contemporaneously with the external audit shall not be deemed to compromise the 
independence and objectivity of the external audit. The provision of non-audit services 
should, however, be disclosed by the issuer in the annual report submitted to the 
Commission. 
Sec. 18. Audit Partner Rotatioll. - The lead (or coordinating) audit partner (having 
primary responsibility [or the audit), or the audit partner responsible for reviewing the 
audit, should be changed or rotated every five (5) years or earlier. 
Sec. 19. Auditor Reports to Audit Committees. - Reports to Audit Committees -
Each public accounting firm that performs for any issuer any audit required by this title 
shall timely report to the audit committee of the issuer--
(1) all critical accounting policies and practices to be used; 
(2) 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 treatments, and the treatment 
prefened by the registered public accounting firm; and 
(3) other material written communications between the registered public accounting 
firm and the management of the issuer, such as any management letter or schedule of 
unadjusted differences. 
Sec. 20. COllflict of Interest. - It shall be unlawful for a public accounting firm to 
perform for an issuer any audit service required by this title, if a chief executive officer, 
controller, chief financial officer, chief accounting officer, or any person serving in an 
equivalent position for the issuer, was employed by that registered independent public 
accounting firm as a partner and participated in the audit of that issuer during the I-year 
period preceding the date of the initiation of the audit. 
TITLE IV 
ANALYST CONFLICTS OF INTEREST 
Sec. 2I. Treatment of Securities Analysts by Registered Securities Associatiolls 
alld Natiollal Securities Exchanges. - Securities Analysts and Research Reports. -
(a) 
Analysts Protections - The Commission, or upon the authorization and direction of the 
Commission, the Exchange, shall have adopted, not later than 1 year after the date of 
enactment of this section, 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 --
(1) to foster greater public confidence in securities research, and to 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, negative, or otherwise unfavorable 
research report that may adversely affect the present or prospective investment banking 
relationship of the 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 
(4) to address such other issues as the Commission, or such association or 
exchange, determines appropriate. 
(b) Disclosure - The Commission, or upon the authorization and direction of the 
Commission, the Exchange, shall have adopted, not later than I year after the date of 
enactment of this section, 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 or the date of distribution of the report, inciuding-
(1) 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; 
(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 I-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 upon (among any other factors) the investment banking revenues (either 


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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. 
(c) Definitions - In this section - (I) the term 'securities analyst' means 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'; and 
(2) 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. 
(c) Commission Authority - The Commission may promulgate and amend its 
regulations, or direct the Exchange to promulgate and amend its rules, and to carry out the 
provisions of the Securities Regulation Code as is necessary for the protection of investors 
and in the public interest. 
TITLE V 
CORPORATE AND CRIMINAL FRAUD ACCOUNTABILITY 
Sec. 22. Criminal Penalties For Altering Documents. - (a) Destruction, Alteration 
or Falsification of Records in Investigations and Bankruptcy -
The penalty of 
imprisonnlent ranging from four years and one day to eight years and a fine of five hundred 
thousand pesos (P500,000.00) shall be imposed upon any person who 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 the provisions of this Act 
and the Securities Regulation Code, or in relation to or contemplation of any such matter or 
case. 
(b) Destruction of Corporate Audit Record - (I) Any accountant who conducts an 
audit of an issuer shall maintain all audit or review work-papers for a period of 5 years 
from the end of the fiscal period in which the audit or review was concluded. 
(2) The Commission shall promulgate, within 180 days, after adequate notice and 
an opportunity for comment, such rules and regulations, as are reasonably 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) which are created, sent. or received 
in connection with an audit or review containing conclusions, opinions, analyses, or 
financial data relating to such an audit or review, conducted by any accountant who 
conducts an audit of the above-described issuer of securities. The Commission may, from 
time to time, amend or supplement the rules and regulations that it is required to 
promulgate under this section, after adeqnate notice and an opportunity for comment, in 
order to ensure that such rules and regulations adequately comport with the purposes ofthis 
section. 
(c) Penalty for Violation - The penalty of imprisonment ranging from four years 
and one day to six years and a fine of five hundred thousand pesos (P500,000.00) shall be 


· . 
imposed upon any person who knowingly and willfully violates subsection (a), or any rule 
or regulation promulgated by the Commission under subsection (b )(2) of this Act. 
(d) Duty to Maintain Documents - Nothing in this section shall be deemed to 
diminish or relieve any person of any other duty or obligation imposed by law or regulation 
to maintain, or refrain from destroying, any document. 
Sec.23. Statute of Limitations for Securities Fraud. - (a) In General - 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, may be brought 
not later than the earlier of --
(I) 2 years after the discovery of the facts constituting the violation; or 
(2) 5 years after such violation. 
(b) Effective Date - The limitations period provided in the preceding section shall 
apply to all proceedings addressed by this section that are commenced on or after the date 
of enactment of this Act. 
(c) No Creation of Actions. - Nothing in this section shall create a new private right 
of action. 
Sec. 24. Protection for Employees of Publicly Traded Companies who Provide 
Evidence of Fraud. Civil action to protect against retaliation in fraud cases. -- No 
company with a class of securities registered under section 8 of the Securities Regulation 
Code (, or that is required to file reports under section 17 of the Securities Regulation 
Code, or any officer, employee, contractor, subcontractor, or agent of such company, may 
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 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 any rule or regulation of the Commission, or any provision of law 
relating to fraud against shareholders; or to file, cause to be filed, testify, participate in, or 
otherwise assist in a proceeding filed or about to be filed (with any knowledge of the 
employer) relating to an alleged violation of any rule or regulation of the Commission, or 
any provision oflaw relating to fraud against shareholders. 
Sec. 15. Criminal Penalties for Defrauding Shareholders of Publicly Traded 
Companies. - Securities fraud. - The penalty of imprisonment ranging from six years and 
one day to eight years and a fine of five hundred thousand pesos (P500,OOO.OO) shall be 
imposed upon any person who knowingly executes, or attempts to execute, a scheme or 
artifice --
(1) to defraud any person in connection with any security of an issuer with a 
class of securities registered under section 8 of the Securities Regulation Code or that is 
required to file reports under section 17 of the Securities Regulation Code; or 
(2) to obtain, by means of false or fraudulent pretenses, representations, or 
promises, any money or property in cOimection with the purchase or sale of any security of 
an issuer with a class of securities registered under section 8 of the Securities Regulation 
Code or that is required to file reports under section 17 ofthe Securities Regulation Code; 
TITLE VI 
CORPORATE RESPONSIBILITY FOR FINANCIAL REPORTS 


• 
. . 
Sec. 26. Corporate Responsibility For Financial Reports. - Failure of corporate 
ofJicers to certifY financial reports. -
(aJ Certification of Periodic Financial Reports -
Each periodic report containing financial statements filed by an issuer with the 
Commission pursuant to the Securities Regulation Code shall be accompanied by a written 
statement by the chief executive officer and chief financial officer or any official of similar 
rank oCthe issuer. 
(b) Content - The statement required under subsection (a) shall certifY that the 
periodic report containing the financial statements fully complies with the requirements of 
the Regulation Code and that the information contained in the periodic report fairly 
presents, in all material respects, the financial condition and results of operations of the 
issuer. 
(c) Criminal Penalties -
(I) The penalty of imprisonment of three years and a fine 
of two hundred thousand pesos (P200,OOO.OO) shall be imposed upon any person who shall 
certifY any statement as set forth in subsections (a) and (b) of this section knowing that the 
periodic report accompanying the statement does not comply with all the requirements set 
forth in this section; or 
(2) The penalty of imprisonment for six years and a fine of five hundred thousand 
pesos (P500,OOO.OO) shall be imposed upon any person who shall willfully certifY any 
statement as set forth in subsections (a) and (b) of this section knowing that the periodic 
report accompanying the statement does not comply with all the requirements set forth in 
this section. 
TITLE VII 
CORPORATE TAX RETURNS 
Sec. 27. Signiizg of Corporate Tax Returns by the Chief Executive Officers. -
The income tax return of a corporation should be signed by the chief executive officer of 
such corporation. 
TITLE XIII 
CORPORATE FRAUD ACCOUNTABILITY 
Sec. 28. 
Temporary Freeze Authority of the Securities and Exchange 
Commission. - Temporary Freeze - (AJ In General- (i) Issuance of Temporary Order -
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 issuer will make extraordinary payments (whether compensation or 
otherwise) to any of the foregoing persons, the Commission may petition the regional trial 
court for a temporary order requiring the issuer to escrow, subject to court supervision, 
those payments in an interest-bearing account for 45 days. 
(ii) Standard - A temporary order shall be entered under the preceding section 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. 


(iii) Effective Period - A temporary order issued under clause shall be effective and 
may be extended or terminated under the conditions set forth under the Revised Rules of 
Court. 
Sec. 29. Authority of the Commission to Prohibit Persons from Serving as 
Officers or Directors. -
In any cease-and-desist proceeding under Section 64 of the 
Securities Regulation Code, 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 the rules or regulations thereunder from acting as an officer or 
director of any issuer that has a class of securities registered pursuant to section 8, or that is 
required to file reports pursuant to section 17, if the conduct of that person demonstrates 
unfitness to serve as an officer or director of any such issuer. 
TITLE IX 
FINAL PROVISIONS 
Sec. 30. Implementing Rules and RegUlations. - The Professional Regulations 
Commission, the Board of Accountancy, the Securities and Exchange Commission, the 
Bangko Sentral ng Pilipinas and other appropriate govermnent agency which is responsible 
for the licensure or other regulation of the practice of accounting or over all accounting 
firm shall promulgate within ninety (90) days the Implementing Rules and Regulations 
necessary to implement the provisions of this Act. 
Sec. 31. Separability Clause. -
If any of the provisions of this Act is held or 
declared to be unconstitutional or invalid by a competent court, the other provisions hereof 
not so declared shall continue to be in force as if the provision as annulled or voided had 
never been implemented in this Act. 
Sec. 32. Repealing Clause. - All laws, executive orders, presidential decrees, rules 
and regulation or parts thereof which are inconsistent with any part of this Act are hereby 
repealed or amended accordingly. 
Sec. 33. Effectivity Clause. - This Act shall take effect after fifteen (15) days 
following its publication in the Official Gazette or in two (2) newspapers of general 
circulation in the Philippines. 
Approved,