Rules and Regulations Governing Membership

RULES AND REGULATIONS GOVERNING MEMBERSHIP ARTICLE 1 Definitions EXCHANGE OR PSE means Philippine Stock Exchange, Inc. SEC means Securities & Exchange Commission. MEMBER means a natural or corporate person who has been accepted as a member of the Exchange and who owns a Seat in the Exchange, including a Nominee Member. INDIVIDUAL MEMBER means a Member who is a natural person. CORPORATE MEMBER means a Member who is a Corporate person represented by a nominee. NOMINEE MEMBER a natural person appointed by a Corporate Member. SEAT means membership in the Exchange. ARTICLE 2 Seat Ownership Each Member (other than a Nominee Member) shall own and hold and be entitled to only one Seat in the Exchange. There shall be only two hundred (200) Seats in the Exchange. ARTICLE 3 Rights of Members All Members in good standing are entitled to vote in the regular and special meetings of the Members and may be voted upon or be appointed to any position and exercise the rights and perform the obligations appurtenant to such position. All Members shall have the right to participate in the assets of the Exchange upon its dissolution. ARTICLE 4 Membership Committee SECTION 1. The Board of Governors of the Exchange shall annually constitute and appoint a Membership Committee ("Committee") which shall be composed of at least two (2) members. The members of the Committee shall serve for a term co-terminus with that of the Board of Governors. SECTION 2. The Committee shall have the following functions and powers: (a) To develop specific rules and regulations to guide the conduct and affairs of the members, to include rules and regulations regarding reporting requirements, insolvency, investigation, suspension, expulsion and reinstatement of members. aisadc (b) To investigate and make recommendations to the Board on all applications for membership in the Exchange, and for reinstatement of suspended members. (c) To require that rules of the Exchange regarding applications for membership are strictly complied with and to make recommendations to the Board. (d) To compel interview of applicants for membership. ARTICLE 5 Posting and Approval of Applications An application for membership shall be circularized and posted on the bulletin board of the Exchange for comment for a period of at least fifteen (15) days. All applications for membership must be approved by an affirmative vote of at least EIGHT (8) members of the Board of Governors. All applicants shall host a fellowship for all Members upon approval of application for membership. ARTICLE 6 Acknowledgment Persons admitted to membership shall enjoy the privileges thereof only after they shall have signed the Constitution and By-Laws of the Exchange (Annex "A"). By such signature, they acknowledge and pledge themselves to accept and abide by all the provisions thereof. ARTICLE 7 Certificate of Membership Upon admission to the membership, a Certificate of Membership (Annex "B") shall be issued to the new Member. The Certificate, however, shall not be construed as an evidence of part ownership in the property or assets of the Exchange, except as to rights granted by law at the time of the dissolution of the Exchange. ARTICLE 8 Pledge of Seat Each Member of the Exchange who owns a seat shall pledge his/its seat by delivering his/its membership certificate to the Corporate Secretary. The Member shall receive in lieu of the pledged certificate a receipt (Annex "C") signed by the President and Corporate Secretary of the Exchange, which receipt shall certify to the effect that said certificate is deposited in accordance with the By-Laws, and is pledged to the extent of the full value thereof to secure the payment of all debts due to other Members of the Exchange arising out of or in connection with the present or future member contracts. The members' contracts shall refer exclusively to stock brokerage business. ARTICLE 9 Individual Membership SECTION 1. An applicant for individual membership, including nominee membership, must be at least twenty one (21) years of age and shall submit to the Exchange the following: cd 1. Application Letter for Individual Membership; 2. Deed of Sale/Transfer of Seat, duly notarized, in case the seat is being acquired from a retiring member; The Exchange shall be the sole agent in any sale/transfer of Seat . The Vendor/Transferor and the Vendee/Transferee shall authorize the Exchange to deposit the said purchase price in an interest-bearing account with a bank acceptable to Vendor/Transferor and Vendee/Transferee . The Exchange shall be held free and harmless from any risk in relation to the investment of the escrowed funds . An Escrow Fee of P50,000 . 00 shall be paid to the Exchange . A pro-forma Escrow Agreement (attached as Annex "D") shall be used . 3. Recommendation Letter from a member in good standing of the Exchange; Note: Recommendation letter issued by a member of the PSE Membership Committee shall not be acceptable. 4. Reference letters from three (3) reputable persons or institutions in the Philippines, one of which must come from a commercial bank; 5. Applicant's bio-data; 6. Applicant's latest audited financial statement prepared and certified to by a licensed Certified Public Accountant; 7. Verified Letter to the Exchange stating that: a. Applicant intends to be active in the brokerage business within a period of six (6) months from approval of his application; b. Applicant has a minimum unimpaired capital of P10 Million exclusive of the value of the membership seat which should be in place prior to operation of the Seat; SECTION 2. The applicant shall pay for the Seat. If the Seat comes from the unissued membership Seat of the Exchange, payment shall accompany the application of membership and be deposited with the Exchange pending approval thereof. SECTION 3. The applicant shall pay an Entrance fee of P200,000.00 if he is acquiring the seat direct from the Exchange or from another member. However, if the transfer by an individual member is to his firm/corporation, spouse or relative within the second degree of consanguinity, or if the ownership of a Seat is consolidated/acquired by a beneficial owner thru a dissolution of a trust, the Entrance Fee shall be P10,000 . 00 . (Sec. 15. By-Laws) SECTION 4. The applicant agrees to be subjected to credit verification from credit bureau acceptable to the Exchange. SECTION 5. The applicant agrees to undergo a written qualification examination(s) to establish competence in the securities business. SECTION 6. The applicant shall sign a Deed of Pledge of Membership Seat in such form provided for by the Exchange. SECTION 7. The foregoing shall be applicable for change of Membership Status from Corporate to Individual Membership. ARTICLE 10 Corporate Membership SECTION 1. An entity applying for membership must be a duly registered domestic corporation authorized to transact business as a broker or dealer in securities and shall submit to the Exchange the following: 1. Application Letter for Corporate Membership: 2. Copy of the approved Articles of Incorporation and By-Laws of the applicant duly certified by the SEC: 3. Bio-data, Income Tax Return and latest Statement of Assets and Liabilities of all stockholders owning 5% or more of the outstanding shares of stock of the applicant corporation; 4. Board resolution contained in a sworn Corporate Secretary's Certificate to the effect that: a. The Board authorizes the application for corporate membership in the Exchange; b. The Board designates one of the stockholders/top officers of the corporation, of legal age, as Nominee to act on its behalf in the Exchange; 5. Recommendation Letter from a member in good standing of the Exchange. Note: Recommendation letter issued by a member of the PSE Membership Committee shall not be acceptable. 6. Reference letters from at least three (3) reputable persons or institutions in the Philippines, one of which is a commercial bank; 7. Latest Audited Financial Statement; 8. Certified true copy of license from the SEC to operate as broker and dealer of securities; 9. A verified letter stating that: a. The corporation undertakes to engage solely in the stock and bond brokerage business and as a dealer in securities and/or underwriting of securities during the term and existence of its license. b. The corporation undertakes to be active in the brokerage business within a period of six (6) months from approval of its application; c. The corporation certifies that it has a minimum unimpaired capital of P10 Million exclusive of the value of the membership seat which should be in place prior to operation of the seat. cdt 10. Deed of Sale/Transfer of Seat, duly notarized in case the Seat is being acquired from a corporate/individual seller; The Exchange shall be the sole agent in any sale/transfer of Seat . The Vendor/Transferor and the Vendee/Transferee shall authorize the Exchange to deposit the said purchase price in an interest-bearing account with a bank acceptable to Vendor/Transferor and Vendee/Transferee . The Exchange shall be held free and harmless from any risk in relation to the investment of the escrowed funds . An Escrow Fee of P50,000 . 00 shall be paid to the Exchange . A pro-forma Escrow Agreement (attached as Annex "D") shall be used . SECTION 2. The applicant shall pay for the seat. If the Seat comes from the unissued membership Seat of the Exchange, payment shall accompany the application for membership and be deposited with the Exchange pending approval thereof. SECTION 3. The applicant shall pay an Entrance Fee of P200,000.00 to the Exchange. 3.1. A change in the ownership structure of a member-firm constituting a transfer of at least 51% of the total shares of the Corporate stocks to a new entity shall likewise be assessed P200,000 . 00 as transfer fee . SECTION 4. The business name of the applicant shall include the word "stock brokerage" or "securities". SECTION 5. The applicant shall sign a Deed of Pledge of Membership Seat in such form provided for by the Exchange. SECTION 6. The foregoing shall be applicable for change of Membership Status from the Individual to Corporate Membership. ARTICLE 11 Undertaking Applicants for Individual and Corporate Membership shall undertake to faithfully comply with such other requirements in the By-Laws of the Exchange and those which may from time to time be issued by the Exchange. ARTICLE 12 Nominee Members All the rights and obligations of a Corporate Member with respect to its operation its ownership of its Seat on the Exchange, as well as its membership in the Exchange, shall be exercised and performed by its Nominee member. Each Corporate Member may submit and recommend only one Nominee Member. The Corporate Member which designated such Nominee Member shall be exempted from payment of entrance fees. Foreigners designated as Nominee shall submit to the Exchange the following requirements : a. Copy of the applicant's work permit (if domiciled here in the Philippines) ; b. Reference Letter from a bank based in the applicant's home country ; and c. Recommendation Letter from the applicant's home country Stock Exchange (if the applicant is also the Nominee of a Brokerage House in the home country) . ARTICLE 13 Change in Corporate Nominee SECTION 1. A Corporate Nominee may be changed subject to the submission by the new Corporate Nominee of the following: 1. Corporate Secretary's Certification of the Board Meeting appointing/designating a new corporate nominee. 2. Recommendation Letter from a member in good standing of the Exchange. Note: Recommendation letter issued by a member of the PSE Membership and Account Executive Committee shall not be acceptable; 3. Reference letters from at least three (3) reputable persons or institutions in the Philippines, one of which is a commercial bank. 4. Bio data 5. Latest Statement of Assets and Liabilities of the New Nominee. SECTION 2. The corporation shall pay the Exchange the amount of P50,000.00 as entrance fee of the new corporate nominee. SECTION 3. The corporation shall submit its latest copy of Articles of Incorporation. SECTION 4. The change in corporate nominee shall undergo 15 days posting as provided in Article 5. SECTION 5. The Corporate Member shall maintain the Corporate Nominee at all times and shall inform the Exchange in writing of any change of Nominee . In case of such change, the incumbent Nominee shall continue to act as such until the assumption by the New Nominee . In case of resignation of the Nominee, the Corporate Member shall appoint an acting Nominee within 48 hours, and appoint the Nominee within 30 days . Otherwise, the brokerage shall be suspended from its trading operation until a Nominee is approved . Inactive Corporate Members without an approved Nominee shall be fined Ten Thousand Pesos (P10,000 . 00) a month . ARTICLE 14 Transfer of Seat Subject to the requirements on applications for and transfers of membership, a Seat may be transferred or sold upon prior approval of the Board of Governors. ARTICLE 15 Involuntary Loss of Seat/Membership When a Member shall cease for any cause to be a Member of the Exchange, EXCEPT by death or by voluntary sale or transfer approved by the Board of Governors, the Seat on the Exchange previously held and owned by him shall become ipso facto vacant and shall be vested in the Board of Governors, which alone shall be entitled to dispose thereof. ARTICLE 16 Death of Individual Member In the event of the death of an Individual Member, his Seat shall be sold by the Board of Governors for account of the deceased member's estate: provided, however, that the Seat may, subject to the procedure prescribed by the By-Laws and/or related rules and regulations, be transferred to his qualified next-of-kin or member of his immediate family on the condition that where the transfer does not involve a payment of the Seat, the transferee shall hold the Seat subject to the rights of the creditors of his deceased predecessor. ARTICLE 17 Suspension The suspension of a Member holding an office or position, shall not create a vacancy in said office or position, but shall only operate to suspend the member from said office or position for the same period of time as he is suspended as member of the Exchange. ARTICLE 18 Operation of a Brokerage Firm SECTION 1. Prior to the organization of the brokerage firm, the corporation shall submit to the Exchange the following: 1.1 Bio-data. Income Tax Return and latest Statement of Assets and Liabilities of all incorporators/stockholders of the corporation owning 5% or more of the outstanding shares of stock thereof. 1.2 Proposed name of the brokerage firm. SECTION 2. After the organization of the brokerage firm, the corporation shall submit to the Exchange the following: 2.1 Articles of Incorporation and its By-Laws duly certified by the SEC. 2.2 SEC Order and SEC Certificate registering the corporation as Broker and Dealer in Securities duly certified by the SEC. 2.3 Stock Broker Bond for P5,000,000.00 and Dealer Bond for P1,000,000.00 cd 2.4 Minutes of Organizational Meeting containing the following: a. election of directors and officers; b. adoption of resolutions regarding officers/persons authorized to sign checks and endorse stock certificates 2.5 Duly notarized Corporate Secretary's Certificate certifying that copies of aforesaid minutes are true and correct. 2.6 Initial list of officers and employees (office and trading floor) 2.7 Sample forms to be used for Clearing House and office purposes 2.8 Letter from company's depository bank as to company's account/deposit thereat. 2.9 Certification of Computer Training from PSE's Computer Department. ARTICLE 19 Suspension of Brokerage Operations Voluntary suspension of brokerage operation by a Member shall be subject to the approval by the Board of Governors and to thirty (30) days prior written notice. ARTICLE 20 Usage of the PSE Members' Lounge SECTION 1. The Members' Lounge shall be exclusively for Members or Nominee Members, retired or ex-members, those designated by the member or Nominee Member and eligible officers of listed companies who applied to and were approved by the Exchange. SECTION 2. A Member or a Nominee Member may designate four (4) persons, aside from himself, to gain access to the Members' Lounge. The following requirements shall be submitted to the Exchange: 2.1 Bio-data of the applicants with 1 x 1 ID picture; 2.2 Letter to the Exchange formally designating the applicants to gain access to the Members' Lounge and guaranteeing any and all actions of the applicants while in the Members' Lounge. 2.3 A monthly fee of Two Hundred Fifty Pesos (P250.00). SECTION 3. Ex-members and retired Members shall be allowed in the Members' Lounge, provided, they apply with the Exchange and pay a monthly fee of Two Hundred fifty pesos (P250.00). Moreover, access to the Trading Floor shall only be extended to Ex-members and retired Members only if they are affiliated to a member-firm. SECTION 4. Eligible guests of listed companies shall pay a monthly fee of One Hundred fifty pesos (P150.00). cdt ARTICLE 21 Disqualification Individual Member and Nominee Member shall not in any way be a director, officer, employee, or stockholder in any stock brokerage company other than their own company.