Villaraza & Cruz Law Offices

March 20, 1996 Villaraza & Cruz Law Offices 5th Floor, LTA Building 118 Perea St. Legaspi Village 1229 City of Makati Attention : Atty . Elma Christine R . Leogardo Atty . Catherine P . Gonzales Madam: This refers to your letter dated March 1, 1996 requesting opinions on the following queries to the proposal of your client corporation, a securities brokerage firm, to convert it from a " securities brokerage " firm to an " investment house ". 1. Can a corporation duly organized and licensed as a broker and dealer in securities continue in such business after its conversion into an investment house? 2. Assuming the Securities and Exchange Commission ("SEC") and the Bangko Sentral ng Pilipinas ("BSP") approve the conversion, should the word "Securities" be retained in the corporate name? 3. Can a director of a corporation whose shares are being traded in the Philippine Stock Exchange, Inc. be at the same time a director of an investment house? Query No. 1 is answered in the affirmative. Section 13 of P.D. No. 129 otherwise known as the Investment House Law and Section 11 of the Basic Rules and Regulations to Implement the provision thereof, quoted hereunder, expressly authorize an " investment house " to act as securities dealer or broker in addition to its underwriting activities. "SECTION 13. Applicability of Securities Acts . An Investment House may engage in the business of a dealer or a broker under the Securities Acts without obtaining a separate license for the purpose as required in Section 14 of the Securities Act (C.A. No. 83, as amended)"(Emphasis supplied) "SECTION 11. Stockbrokerage or Dealership Functions . If an Investment House engages in the business of a stockbroker or dealer pursuant to Presidential Decree No. 129, as amended, it shall comply with the provisions of C.A. No. 83, otherwise known as the Securities Acts, and the Rules and Regulations of the Commission promulgated pursuant thereto: Provided, however, that an Investment House need not obtain a separate license under Section 14 of the Securities Act ."(Emphasis supplied) However, take note that your client corporation cannot undertake any business activity of an "investment house" without first complying with Section 16 of the Corporation Code (re: amendment of the Articles of Incorporation) and the requirements under the Investment Houses Law. Relative to Query No. 2, the only limited in the Corporation Code relative to the use of corporate name is found in Section 18 thereof to the effect that " No corporate name may be allowed by the Securities and Exchange Commission if the proposed name is identical or deceptive or confusingly similar to that of any existing corporation or to any other name already protected by law or is patently deceptive, confusing or contrary to existing laws ." Corollary thereto, in our "Guidelines in the Approval of Corporate and Partnership Names". the Commission has adapted the policy that the name must not tend to mislead or confuse the public . Thus, for as long as the above statutory conditions in the use of corporate name are met, your client corporation need not retain the word "Securities" in its corporate name and may replace it with the word "Investment" as proposed in your letter. Anent Query No. 3, the Corporation Code does not prohibit interlocking directorship. An individual may be a stockholder in different corporations and it is not unusual to find a director or corporate officer occupying the same position in another corporation not only because one has investment therein but also because his services may have been proven to be valuable and efficient. However , while such situation is allowable, it is subject to: Section 33 of the Corporation Code; SEC Rules Prohibiting Brokers from Dealing On Or Otherwise Buying Or Selling Securities Of Listed Companies Where Any Of Its Stockholders, Directors, Officers Or Employees Are Also Directors Or Officers Of Said Listed Companies; and Section 3(6 and 7) and 8 (3) of the Basic Rules and Regulations to Implement the Provision of PD No. 129, otherwise known as the Investment House Law . prcd Accordingly, the views manifested in your letter are hereby confirmed. Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner