Routine/Regular Annual Audit on Member-Brokers by the Compliance and Surveillance Group

May 7, 1998 PSE MEMO FOR BROKERS NO. 212-98 SUBJECT : Routine/Regular Annual Audit on Member-Brokers by the Compliance and Surveillance Group Please be informed that pursuant to Section 3, Article IX of the By-Laws of the Exchange, and after our Compliance and Surveillance Group (CSG) had conducted seminars for member-brokers as part of our PSE Training Institute programs, we have started to implement the above-required regular annual audit this year. Therefore, the auditors of CSG (with its Acting Head, Atty. Joselito Santos) shall be visiting your premises with introductory letters signed by the CSG Head for authenticity. Attached as Annex "A" is a list of documents/items that CSG shall normally require member-brokers to make available for inspection in the course of its audit engagement. If you need clarification or any other assistance, we are all at your service. (SGD.) JOSE LUIS U. YULO, JR. President/CEO ANNEX A I. List of Statements, Schedules and Analyses 1. Trial Balance 2. Inventory of stocks as of ___________ 3. Bank reconciliation statements 4. Schedule of short-term investments 5. Schedule of marketable securities with extension totals indicating the following: Name of stocks Number of shares Cost Market value/share Total market value 6. Collateral valuation of securities account by security, by location with extension totals (for customers and brokers) using the following format: LLpr Debit balance Name of customer Money balance Number of shares Market valuation (long/short) More than 250% At least 200% but not more than 250% At least 150% but not more than 200% At least 100% but not more than 150% Less than 100% and unsecured Credit balance Name of customer Money balance Number of shares Market valuation (long/short) More than 100% 75% to 100% less than 75% and free balances securities held in-trust\ Accounts with no money balance (see format on credit balance) 7. Dealer's account with extension totals indicating the following Number of shares Extension (long/short) 8. Schedule of Due to/from Clearing House 9. Accounts Receivables detailed listing and reconciliation with general ledger 10. Prepaid expenses 11. Investment in shares of stocks 12. Other liabilities detailed listing and reconciliation with general ledger II. Documents 1. Written Supervisory Procedures 2. Customer Complaints File 3. Buy and Sell Order Slips 4. Buy and Sell Confirmation 5. PCD Reports 6. Daily Transaction Reports (DTRs) 7. In/Out Receipts 8. Customer Account Information Forms 9. Customer Ledger 10. Stock Ledger