Commission Release Announcing Adoption of Subordination Agreements and Margin Rules

January 22, 1997

COMMISSION RELEASE ANNOUNCING ADOPTION OF SUBORDINATION AGREEMENTS AND MARGIN RULES

With this release the Securities and Exchange Commission ("Commission") announces the adoption of the rules on Satisfactory Subordination Agreements and Margin.

The Net Capital Rule, RSA Rule 24(a)-1, which establishes requirements for the calculation of capital for brokers and dealers became effective on August 15, 1996. In order to meet the more stringent capital requirements of the Net Capital Rule, a broker or dealer may need to increase his capital base on either an interim or a long term basis. The Satisfactory Subordination Agreement Rule, RSA Rule 24 (a)-2, sets forth the minimum requirements necessary for a subordinated loan or secured demand note agreement to meet the requirements of the Net Capital Rule.

All subordinated loan agreements must be approved by the Philippine Stock Exchange ("PSE") for members of the Exchange. The PSE is presently establishing procedures for the approval process of such agreements entered into by members. In order to streamline the approval process, the Exchange is presently developing several standard forms of agreement which...

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