rsa cases i to ii

7/25/2019 RSA CASES I to II

1/215

G.R. No. L-23004 June 30, 1965

MAKATI STOCK EXCANGE, INC.,petitioner,vs.SEC!RITIES AN" EXCANGE COMMISSION #n$ MANILA STOCK EXCANGE,respondents.

Hermenegildo B. Reyes for petitioner.

Office of the Solicitor General for respondent Securities and Exchange Commission.

Norberto . !uisumbing and Emma !uisumbing"#ernando for respondent $anila Stoc% Exchange.

%ENG&ON, C.J.:

This is a review of the resolution of the Securities and Exchange Commission which would deny theMakati Stock Exchange, Inc., permission to operate a stock exchange unless it agreed not to list fortrading on its oard, securities already listed in the Manila Stock Exchange.

!"ecting to the re#uirement, Makati Stock Exchange, Inc. contends that the Commission has nopower to impose it and that, anyway, it is illegal, discriminatory and un"ust.

$nder the law, no stock exchange may do usiness in the %hilippines unless it is previouslyregistered with the Commission y filing a statement containing the information descried in Sec. &'of the Securities (ct )Commonwealth (ct *+, as amended.

It is assumed that the Commission may permit registration if the section is complied with- if not, itmay refuse. (nd there is now no #uestion that the section has een complied with, or would ecomplied with, except that the Makati Stock Exchange, upon challenging this particular re#uirementof the Commission )rule against doule listing may e deemed to have shown inaility or refusal to

aide y its rules, and therey to have given ground for denying registration. Sec. &' )a )& and)d/.

Such rule provides0 1... nor shall a security already listed in any securities exchange e listed anewin any other securities exchange ... .1

The o"ection of Makati Stock Exchange, Inc., to this rule is understandale. There is actually onlyone securities exchange 2 The Manila Stock Exchange 2 that has een operating alone for thepast 34 years- and all 2 or presumaly all 2 availale or worthwhile securities for trading in themarket are now listed there. In effect, the Commission permits the Makati Stock Exchange, Inc., todeal only &ith othersecurities. 5hich is tantamount to permitting a store to openpro'ided it sells

onlythose goods not sold in other stores. (nd if there6s only one existing store,&

the result is amonopoly.

It is not farfetched to assert 2 as petitioner does3that for all practical purposes, the Commission6sorder or resolution would make it impossile for the Makati Stock Exchange to operate. So, its1permission1 amounted to a 1prohiition.1


2/215

(pparently, the Commission acted 1in the pulic interest.1+7ence, it is pertinent to in#uire whetherthe Commission may 1in the pulic interest1 prohiit )or make impossile the estalishment ofanother stock exchange )esides the Manila Stock Exchange, on the ground that the operation oftwo or more exchanges adversely affects the pulic interest.

(t first glance, the answer should e in the negative, ecause the law itself contemplated, and,therefore, tacitly permitted or tolerated at least, the operation of two or more exchanges.

(here'er t&o or more exchanges exist, the Commission, y order, shall re#uire and enforceuniformity of trading regulations in and8or etween said exchanges. Emphasis !urs/ )Sec.3*9&+, Securities (ct.

In fact, as admitted y respondents, there were five stock exchanges in Manila, efore the %acific5ar )p. &:, rief, when the Securities (ct was approved or amended. );espondent Commissioneven admits that dual listing was practiced then. So if the existence of more than one exchangewere contrary to pulic interest, it is strange that the Congress having from time to time enacted

legislation amending the Securities (ct,o specific portion of the statute has een cited to upholdthis power. It is not found in sec. 3* )of the Securities (ct, which is entitled 1%owers )of theCommission with ;espect to Exchanges and Securities.1@

(ccording to many court precedents, the general power to 1regulate1 which the Commission has)Sec. ++ does not imply authority to prohiit.1'

The Manila Stock Exchange, oviously the eneficiary of the disputed rule, contends that the powermay e inferred from the express power of the Commission to suspend trading in a security, undersaid sec. 3* which reads partly0


3/215

(nd if in its opinion, the pulic interest so re#uires, summarily to suspend trading in anyregistered security on any securities exchange ... . )Sec. 3*+/, Securities (ct.

7owever, the Commission has not acted 2 nor claimed to have acted 2 in pursuance of suchauthority, for the simple reason that suspension under itmay only be for ten days. Indeed, this

section, if applicale, precisely argues against the position of the Commission ecause the1suspension,1 if it is, and as applied to Makati Stock Exchange, continues for an indefinite period, ifnot forever- whereas this Section 3* authoriAes suspension for ten days only. Besides, thesuspension of trading in the security should not e on one exchange only, ut onallexchanges-earing in mind that suspension should e ordered 1for the protection of investors1 )first par., sec.3* in all exchanges, naturally, and if 1the pulic interest so re#uires1 sec. 3*)+/.

This rings up the Commission6s principal conclusions underlying its determination viA.0 )a that theestalishment of another exchange in the environs of Manila would e inimical to the pulic interest-and ) that doule or multiple listing of securities should e prohiited for the 1protection of theinvestors.1

)a *ublic +nterest2 7aving already adverted to this aspect of the matter, and the emergingmonopoly of the Manila Stock Exchange, we may, at this "uncture, emphasiAe that y restricting freecompetition in the marketing of stocks, and depriving the pulic of the advantages thereof theCommission all utpermitswhat the lawpunishesas monopolies as 1crimes against publicinterest.1 *

1( stock exchange is essentially monopolistic,1 the Commission states in its resolution )p. &otto mention the personality of the roker.


4/215

) *rotection of in'estors. 2 (t any rate, supposing the arrangement contemplated isbeneficialtoinvestors )as the Commission says, it is to e douted whether it is 1necessary1 for their 1protection1within the purview of the Securities (ct. (s the purpose of the (ct is to give ade#uate and effectiveprotection to the investing pulicagainst fraudulent representations, or false promisesand theimposition of worthless ventures,it is hard to see how the proposed concentration of the market has

a necessary earing to the prevention of deceptive devices or unlawful practices. =or it is not meresemantics to declare that acts for the protection of investors are necessarily eneficial to them- utnot everything eneficial to them is necessary for their protection.

(nd yet, the Commission realiAes that if there were two or more exchanges 1the same security maysell for more in one exchange and sell for less in the other. Dariance in price of the same securitywould e the rule ... .1 >eedless to add, the rokerage rates will also differ.

This, precisely, strengthens the o"ection to the Commission6s ruling. Such difference in prices andrates gives the uyer of shares alternative options, with the opportunity to invest at lower expense-and the seller, to dispose at higher prices. Conse#uently, for the investors6 enefit )protection is not

the word, #uality of listing&:

should e permitted, nay, encouraged, and other exchanges allowed tooperate. The circumstance that some people 1made a lot of money due to the difference in prices ofsecurities traded in the stock exchanges of Manila efore the war1 as the Commission noted,furnishes no sufficient reason to let one exchange corner the market. If there was unduemanipulation or unfair advantage in exchange trading the Commission should have other means tocorrect the specific auses.

ranted that, as the Commission oserves, 1what the country needs is not another1 market forsecurities already listed on the Manila Stock Exchange, ut 1one that would focus its attention andenergies on the listing of new securities and thus effectively help in raising capital sorely needed your ... unlisted industries and enterprises.1

>onetheless, we discover no legal authority for it to shore up )and stifle free enterprise andindividual lierty along channels leading to that economic desideratum. &&

The Fegislature has specified the conditions under which a stock exchange may legally otain apermit )sec. &', Securities (ct- it is not for the Commission to impose others. If the existence of twocompeting exchanges "eopardiAes pulic interest 2 which is doutful 2 let the Congressspeak. &3$ndoutedly, the opinion and recommendation of the Commission will e given weight ythe Fegislature, in "udging whether or not to restrict individual enterprise and usiness opportunities.But until otherwise directed y law, the operation of exchanges should not e so regulated aspractically to create a monopoly y preventing the estalishment of other stock exchanges and

therey contravening0

)a the organiAers6 )Makati6s Constitutional right to e#uality efore the law-

) their guaranteed civil lierty to pursue any lawful employment or trade- and

)c the investor6s right to choose where to uy or to sell, and his privilege to select therokers in his employment. &+


5/215

(nd no extended elucidation is needed to conclude that for a licensing officer to deny license solelyon the asis of what he elieves is est for the economy of the country may amount to regimentationor, in this instance, the exercise of undelegated legislative powers and discretion.

Thus, it has een held that where the licensing statute does not expressly or impliedly authoriAe the

officer in charge, he may not refuse to granta license simply on the ground that a sufficient numerof licenses to serve the needs of the pulic have already een issued. )4+ C.G.S. p. @+@.

Concerning res -udicata. 2 Calling attention to the Commission6s order of May 3', &@+, whichMakati Stock did not appeal, the Manila Stock Exchange pleads the doctrine of res -udicata. &E e issued, and if theorganiAers thereof are willing to aide y the foregoing conditions, they may file the properapplication for the registration and licensing of the said Exchange.

In that order, the Commission advanced the opinion that 1it would permit the estalishment andoperation of the proposed Makati Stock Exchange, provided ... it shall not list for trading on its oard,securities already listed in the Manila Stock Exchange ... .1

(dmittedly, Makati Stock Exchange, Inc. has not appealed from that order of May 3', &@+. >ow,Manila Stock insists on res -udicata.

5hy should Makati have appealedJ It got the certificate of incorporationwhich it wanted. Thecondition or proviso mentioned would only apply if and when it subseuently filedthe application forregistration as stoc% exchange. It had not yet applied. It was not the time to #uestion thecondition- &4Makati was still exploring the convenience of soliciting the permit to operate su"ect tothat condition. (nd it could have logically thought that, since the condition did not affect its articles ofincorporation, it should not appeal the order )of May 3', &@+ which after all, granted the certificateof incorporation )corporate existence it wanted at that time.

(nd when the Makati Stock Exchange finally found that it could not successfully operate with thecondition attached, it took the issue y the horns, and expressing its desire for registration andlicense, it re#uested that the condition )against doule listing e dispensed with. The order of the

Commission denying, such re#uest is dated May ', &@


6/215

)& (n agreement )&hich shall not be construed as a &ai'er of any constitutional right or any right tocontest the 'alidity of any rule or regulation to comply and to enforce so far as is within its powers,compliance y its memers, with the provisions of this (ct, and any amendment thereto, and anyrule or regulation made or to e made thereunder. )See. &'9a9&, Securities (ct Emphasis !urs/.

Surely, this petition for review has suitaly een coursed. (nd making reasonale allowances for thepresumption of regularity and validity of administrative action, we feel constrained to reach theconclusion that the respondent Commission possesses no power to impose the condition of the rule,which, additionally, results in discrimination and violation of constitutional rights.

(CC!;?I>FK, the license of the petition to operate a stock exchange is approved without suchcondition. Costs shall e paid y the Manila Stock Exchange. So ordered.

G.R. No. L-45655 June 15, 193'

TE (EO(LE O) TE (ILI((INES,plaintiff9appellee,vs.*ICENTE T. )ERNAN"E& #n$ JOA+!IN TRINI"A",defendants9appellants.

#eria and /a O and *astor /. de Gu0man for appellants.

Office of the Solicitor"General 1uason for appellee.

CONCE(CION, J.:

This case involves the meaning and interpretation of 1speculative securities1 under the provisions of

(ct >o. 34*&. The defendants were charged with a violation of said statute and were tried andconvicted in the Court of =irst Instance of Manila from whose "udgment they appealed.

It was estalished y the prosecution and admitted y the appellants that they, together with otherpersons, organiAed a corporation which was registered in the Bureau of Commerce on Ganuary ',&+@ under the name of %hilippine Mutual Cooperative Society, Inc. The purposes of thisassociation, according to its articles of incorporation and y9laws, are to promote the social, moraland economic well9eing of its memers y extending to them aid in the form of enefit payments orin any other form allowed y the laws of the %hilippines. (n attempt has een made to show that theo"ect is purely cooperative y relieving and helping the unemployed, the needy, and people ofmoderate means in particular and all those who need material aid in general.

In order to carry out these purposes, the corporation has estalished and admitted two classes ofmemers, namely, class ! and class S. Each memer in ! must pay a due of %4 which entitled himto a regular enefit aid of %


7/215

e entitled to a enefit aid of %&3, which was suse#uently increased to %3: as soon as sixteen newmemers were admitted. The second memer and each of those following would receive theircorresponding enefit aids after the admission of every group of ten new memers. The memers ofoth classes, who may have received the enefit aids of the corporation, were ound to renew theirsuscriptions y paying every time they received said aid the amount of p4 or %3.4:, according to

the class to which they elonged. The corporation would and did issue to each memer a certificateof memership which specified the class to which he elonged. The enefit aids were due andpayale to the memers strictly y turns according to the respective dates of their enrollment. If aftertwo years from the date of his admission, no enefit aid had een paid a memer, the corporationpromised to refund him, on demand, the dues paid y him plus 34 per cent of the same. In order tootain more memers and carry out its purpose, the corporation offered to each memer, whosecured new memers, a commission of &: per cent for each new memer, which was payale fromthe dues collected from the new memers. Said commission was later reduced to 4 per cent, ut anadditional 4 per cent for traveling expenses was allowed.

To prevent a shortage in the funds of the corporation due to its expenditures and the fact that the

enefit aids paid y it were larger than the memership dues, it would hold pulic literary contests,etc., and other enefit performances, the net proceeds of which would e exclusively devoted to thepayment of enefit aids. The cost of holding these performances would e paid from the allotment ofthe association for expenses in order not to distur the reserve funds devoted to the payment ofenefit aids.

=rom >ovemer 3*, &+4, or prior to its incorporation, up to Ganuary &&, &+@, the corporation,without having previously otained a license from the Insular Treasurer as re#uired y law andthrough the distriution of 3:,::: prospectuses, known as Exhiit D, to the pulic, secured andadmitted


8/215

"udicial powers upon the Insular Treasurer- fourth and fifth, in not interpreting the law strictly in favorof the accused and dismissing the charge against them.

(ct >o. 34*&, etter known as the Blue Sky Faw, is patterned after similar laws enacted in variousstates of the $nion, one of the oldest of which, if not the oldest, is that of the State of Hansas, which

was amended in &&+ and &&4 )=letcher, vol. ' &&/, p. ''&o. 34*&, as amended y (ct >o. 3*&' )which amendment does not affect thepresent case, provides0

SECTI!> &. 1erms defined. 2 The term 1securities1 as used in this (ct shall e taken tomean stock certificates, shares, onds, deentures, certificates of participation, contracts,

contracts or onds for the sale and conveyance of lands on deferred payments or on theinstallment plan, or other instruments in the nature thereof, y whatsoever name known orcalled. The term 1speculative securities1 as used in this (ct shall e deemed to mean andinclude0

)a (ll securities to promote or induce the sale of which profit, gain, or advantage unusual inthe ordinary course of legitimate usiness is in any way advertiAed or promised-

) (ll securities the value of which materially depends upon proposed or promised futurepromotion or development rather than on present tangile assets and conditions-

)c (ll securities for promoting the sale of which a commission of more than five per cent isoffered or paid-

)d The securities of any enterprise or corporation which has included, or proposes to includein its assets as a material part thereof patents, formulae, good9will, promotion or otherintangile assets, or which has issued or proposes to issue a material part of its securities inpayment for patents, formulae, good9will, promotion or other intangile assets.

The certificates of memership issued y the %hilippine Mutual Cooperative Society, Inc., are trulyspeculative securities within the meaning of (ct >o. 34*&.

=irst. In order to encourage and induce their sale, profit unusual in the ordinary course of usinesshas een advertised or promised, for through the payment of the sum of %4 y a memerappertaining to class !, or that of %3.4: y a memer elonging to class S, each will receive profitsof %


9/215

new groups of &@ or &3 memers so that each original memer could receive the enefit aids of %


10/215

entitled to a discount of &: per cent on all its goods which he may purchase for defendant forhis personal use, and that defendant will annually set aside as a onus to certificate holdersall of its excess earning after paying operating expenses, fixed charges, and dividends tostockholders, the same to e distriuted at its option in the form of preferred stock,1 haveeen held to e security within the meaning of the Minnesota Blue Sky Faw, where the

certificates were transferale on notice to the company, although they contained a clausestating that they were not to e construed to e certificates of stock, or security or investmentcontracts. )State vs. opher Tire ;uer Co. &3:/, &.5., +'.

Speculative securities include those the value of which materially depends on proposed orpromised future promotion or development, rather than on present tangile assets orconditions. )Moos vs. Fandowners !il (sso. &+3/, &+@ Han.,


11/215

It has, nevertheless, een proved that (ttorney Gose Moreno, on ehalf of the %hilippine MutualCooperative Society, Inc., consulted the offices of the City =iscal and the Insular Treasurer for thepurpose of otaining a statement as to the legality of the schemes of the association and whetherthey came within the scope of (ct >o. 34*&. 7e egan his in#uiry in >ovemer, &+4, and it waswhile expecting the decision of said offices that the information in this case was filed in May, &+@

without any previous notice or answer to said in#uiry. ood faith and lack of intention to violate thelaw may, in this case, e considered as mitigating circumstances in the imposition of the penalty- utthey do not constitute a valid defense. )%eople vs. McCalla &3+/, @+ Cal. (pp., '*+- 33: %ac.,


12/215

uyer9sponsor should not exceed &@ since the commissions due from excess referrals inure to %CI,not to the uyer9sponsor.

(pparently, %CI patterned its scheme from that of olconda Dentures, Inc. )DI, which companystopped operations after the Securities and Exchange Commission )SEC issued a cease and desist

order )C?! against it. (s it later on turned out, the same persons who ran the affairs of DI directed%CINs actual operations.

In 3::&, disgruntled elements of DI filed a complaint with the SEC against %CI, alleging that thelatter had taken over DINs operations. (fter hearing,&the SEC, through its Compliance andEnforcement unit, issued a C?! against %CI. The SEC ruled that %CINs scheme constitutes anInvestment contract and, following the Securities ;egulations Code,3it should have first registeredsuch contract or securities with the SEC.

Instead of asking the SEC to lift its C?! in accordance with Section @


13/215

Court, grappling with the prolem, has on several occasions discussed the nature of investmentcontracts. That courtNs rulings, while not inding in the %hilippines, en"oy some degree ofpersuasiveness insofar as they are logical and consistent with the countryNs est interests.

The $nited States Supreme Court held in Securities and Exchange Commission '. (.. Ho&ey

Co.&:

that, for an investment contract to exist, the following elements, referred to as the 7owey testmust concur0 )& a contract, transaction, or scheme- )3 an investment of money- )+ investment ismade in a common enterprise- )


14/215

G.R. No. 195542, March 19, 2014

SECURITIES AND EXCHANGE COMMISSION, Petitioner, v. OUDINE SANTOS, Respondent.

D E C I S I O N

PEREZ,J.

Before us is another cautionary tale of an investment arrangement which, at the outset, appeared good,unraveling unhappily as a deal !oo"#oo$"!o"%&"!r'&.

This petition for review on certiorariunder Rule 45 of the Rules of Court assails the Decision1of the Court ofppeals in C!".R. #$ %o. 11&'(1 affirming the Resolutions&of the #ecretary of )ustice in *.#. %o. &++'!1+54 which, among others, dismissed the criminal complaint for violation of #ection &( of Repulic ct %o.('--, the #ecurities Regulation Code, filed y petitioner #ecurities and /change Commission 0#C againstrespondent 2udine #antos 0#antos.

#ometime in &++', yet another investment scam was e/posed with the disappearance of its primary

perpetrator, 3ichael .. 6iew 06iew, a self!styled financial guruand Chairman of the Board of Directors of$erformance *nvestment $roducts Corporation 0$*$C!B7*, a foreign corporation registered in the British7irgin *slands.

To do usiness in the $hilippines, $*$C!B7* incorporated herein as $hilippine *nternational $lanning CenterCorporation 0$*$C Corporation.

Because the head of $*$C Corporation had gone missing and with it the monies and investment of asignificant numer of investors, the #C was flooded with complaints from thirty!one 081 individualsagainst $*$C Corporation, its directors, officers, employees, agents and ro9ers for alleged violation ofcertain provisions of the #ecurities Regulation Code, including #ection &( thereof. #antos was charged inthe complaints in her capacity as investment consultant of $*$C Corporation, who supposedly inducedprivate complainants 6uisa 3ercedes $. 6oren:o 06oren:o and Ric9y lino $. #y 0#y, to invest their moniesin $*$C Corporation.

The common recital in the 81 complaints is that; chanRolesvirtual6awlirary

/ / / s directors, officers andemployees?agents?ro9ers, the former were enticed to invest their hard!earned money, the minimumamount of which must e @#A4+,+++.++, with $*$C!B7*, with a promise of higher income potential of aninterest of 1& to 1(percentum0 per annum at relatively low!ris9 investment program. The privatecomplainants also claimed that they were made to elieve that $*$C Corporation refers to $erformance*nvestment $roduct Corporation, the $hilippine office or ranch of $*$C!B7*, which is an entity engaged inforeign currency trading, and not $hilippine *nternational $lanning Center Corporation.8

#oon thereafter, the #C, through its Compliance and ndorsement Division, filed a complaint!affidavit forviolation of #ections (,4&5and &(of the #ecurities Regulation Code efore the Department of )usticewhich was doc9eted as *.#. %o. &++'!1+54. mong the respondents in the complaint!affidavit were theprincipal officers of $*$C; 6iew, Chairman and $resident Cristina "on:ale:!Tuason, Director and "eneral

3anager 3a. Cristina Bautista!)urado, Director and herein respondent #antos.

$rivate complainants, 6oren:o and #y, in their affidavits anne/ed to #C>s complaint!affidavit, respectivelynarrated #antos> participation in how they came to invest their monies in $*$C Corporation; chanRolesvirtual6awlirary

1. 6oren:o>s affidavit

/ / / /

&. * heard aout $*$C Corporation from my friend Derric9 #antos during an informal gathering sometime in3arch &++. e said that the investments in $*$C Corporation generated a return of 1(!&+ p.a. every two


15/215

0& months. e then gave me the numer of his sister, O'$()& Sa)!o*who wor9ed for $*$C $hilippines todiscuss the investment further.

8. * then met with 2udine #antos sometime during the first wee9 of pril &++ at $*$C $hilippines> lounge // /. 2udine #antos conducted for my personal enefit a presentation of the characteristics of theirinvestment product called E$erformance 3anaged $ortfolioF 0$3$. The main points of her presentation areindicated in a summary she gave me, / / /; chanRolesvirtual6awlirary

/ / / /

4. * as9ed 2udine #antos who were the traders, she said their names were Econfidential.F

5. 2udine #antos also emphasi:ed in that same meeting that * should 9eep this transaction to myselfecause they were not allowed to conduct foreign currency trading. owever, she assured me that * shouldnot worry ecause they have a lot of Eig peopleF ac9ing them up. #he also mentioned that they wereapplying for a seat in the Estoc9 e/change.F

. * ultimately agreed to put in G2RTH T2@#%D @# D266R# 0@#A4+,+++.++ in their investmentproduct.

'. 2udine #antos then gave me instructions on how to place my money in $3$ and made me sign a$artnership greement. / / /.

/ / / /

(. #oon thereafter, pursuant to the instructions 2udine #antos gave me, * remitted @#A4+,+++.++ to B%!3R2 ong ong.

-. fterwards, * received a letter dated 1' pril &++, signed y 3ichael .. 6iew, welcoming myinvestment.

/ / / /

1+. #ometime on 3ay &++, * added another @#A +,+++.++ to my then susisting account I1(18'&, thustotaling @#A1++,+++.++. This amount, pursuant to the instructions of 2udine #antos, was remitted to#tandard Chartered Ban9.

/ / / /

14. Then sometime on 3ay &++', * planned to pull out my remaining @#A1++,+++.++ investment in $*$C$hilippines. 2n && 3ay &++', * met with 2udine #antos at the 15th Gloor of Citian9 Tower in 3a9ati City. *told her * wanted to terminate all my investments.

15. 2udine #antos instead said that $*$C $hilippines has a new product * might e interested in. / / / #hee/plained that this product had the following characteristics;chanRolesvirtual6awlirary

/ / / /

1. 2udine #antos reiterated these claims in an email she sent me on && 3ay &++'. / / /.

1'. nticed y these assurances and promises of large earnings, * put in G2@R @%DRD T2@#%D @#D266R# 0@#A4++,+++.++ in $3$ 0RJB, which ecame account I R14-48&.

1(. $ursuant to the instructions 2udine #antos gave me, * remitted the amount of @#A 4++,+++.++ to RJBustria, #ingapore Branch.

/ / / /

&&. * tried calling 2udine #antos and was finally ale to reach her at around ' in the morning. #heconfirmed what 6eah Caringal told me. * told her then that * want full recovery of my investment inaccordance with their 1++ principal guarantee. To this day


16/215

5. #y>s affidavit

&. * have een a depositor of the Ban9 of the $hilippine *slands 0B$* $asong Tamo ranch for the past 15years. #ometime in the last Kuarter of &++, * was at B$* $asong Tamo to accomplish certain routinetransactions. Being a client of long standing, the an9 manager


17/215

officers and agents of $*$C Corp. against their unsuspecting investors.The deception is founded on the basicfact that neither PIPC Corp. nor its officers, employees and agents are registered brokers/dealers, making

their numerous transactions of buying and selling securities to the public a blatant violation of the provisionsof the SRC, specifically Sections and ! thereof.Their illegal offer?sale of securities in the form of theE$erformance 3anagement $artnership greementF to the pulic was perpetrated for aout nine 0- yearsand would have continued were it not for the alleged, and most proaly, contrived and delieratewithdrawal of the entire funds of the corporation y 3ichael .. 6iew. The


18/215

c. investments maintained in strict confidentiality funds will e placed into a fi/ed deposit account with a $*$C designated an9 and shallnot e e/posed for trading purposes. The $*$C designated an9 shall then e/tend a margin linereKuest for trading ased on the deposit

. $*$C shall open a separate account which will contain an amount of not more than 8+ of its ownfunds to serve as a profit and loss account

c. Trading will commence with $*$C designated an9 closely monitoring the performance to ensurethat if losses are incurred trading will cease immediately should the &+ stop limit e hit

d. $rofits will e credited into the $rofit and 6oss account with $*$C designated an9 account. 6osseswill e deited from the same account up to the controlled &+ limit

e. %otice of withdrawals must e sumitted two wee9s prior to schedule of maturity otherwiseinvestment is automatically rolled over to the ne/t atch

f. t maturity, profits accumulated in the settlement account shall e distriuted and deposited intoeach investor>s dollar an9 account within fourteen 014 an9ing days

g. The funds of various investors are pooled, atched and deposited with $*$C designated an9account acting as custodian an9, to form a massive asset ase. This account is separate anddistinct from the $rofit and 6oss ccount. The line from this pooled fund is then entrusted to fulltime professional and e/perienced foreign traders who each speciali:e in the following currencies;)apanes Hen, uro, British $ound, #wiss Grancs and ustralian Dollar. $rofits generated from tradingthese maMor currencies is credited into the $rofit and 6oss ccount, which at the end of the eight

calendar wee9 loc9!in period, will e distriuted among the investors. *nvestors are informed oftheir account status thru trading statements issued y $*$C every time there is a trade made intheir respective accounts.

/ / / /

&5. Gurthermore, it was relayed y the officers and agents to complainants!investors that $*$C Corp. is the$hilippine office of the $erformance "roup of Companies affiliates situated in different parts of the world,particularly China, *ndonesia, ong ong, )apan, orea, #ingapore, and the British 7irgin *slands 0B7*,even reaching #wit:erland. Nith such asic depiction of the legitimacy and staility of $*$C Corp.,complainants!investors deduced that it was clothed with the authority to solicit, offer


19/215

no participation whatsoever in its creation or formation, as * was not even connected with $*$C Corp. at thetime of its incorporation. *n fact, * have never een a stoc9holder, director, general manager or officer of$*$C Corp. Gurther, $*$C Corp. was duly registered with the #ecurities and /change Commission and wasorgani:ed for a legitimate purpose, and certainly not for the purpose of perpetrating a fraud against thepulic.

18. That * was an employee and, later on, an independent information provider of $*$C Corp. is of little

conseKuence. 3y duties as such were limited to providing information aout the corporate clients of $*$CCorp. that had een e/pressly reKuested y interested individuals. * performed my assigned Mo without anycriminal intent or malice. *n this regard, * have een advised that offenses penali:ed under the R$C areintentional felonies for which criminal liaility attaches only when it is shown that the malefactors acted withcriminal intent or malice. There can e no crime when the criminal mind is wanting. *n this case, *performed my tas9 of providing reKuested information aout the clients of $*$C Corp. without any intent toviolate the law. Thus, there can e no criminal liaility.

s own evidence show that the $ortfolio 3anagement $artnership greement,#ecurity greement and Declaration of Trust were e/ecuted etween $*$C!B7* and the individualcomplainants. Gurther, paragraph & of the Declaration of Trust e/plicitly stated that $*$C!B7* Ehold the saidamount of money @$2% TR@#T for the Beneficiary 2wner.F The complainants cannot, therefore, hold $*$CCorp., or any of its officers or employees, with misappropriating their money or property when they werefully aware that they delivered their money to, and transacted solely with, $*$C!B7*, and not $*$C Corp.

&5. *t also ears stressing that of the twenty!one 0&1 complainants in this case, only complainant Ric9ylino #y alleged that he had actually dealt with me. Complainant #y himself never alleged that hedelivered or entrusted any money or property to me. 2n the contrary, complainant #y admitted that hedeposited his investment of @.#.A4+,+++.++ y an9 transfer to $*$C!B7*>s account in the B% mro Ban9.That the money was delivered to $*$C!B7*, and not to me, is shown y the fact that the receipt was issuedy $*$C!B7*. * never signed or issued any ac9nowledgement receipt, as * never received any such money.%either did * ever gain physical or Muridical possession of the said money.11 0"mphasis and underscoringsupplied.


20/215

#antos> defense consisted in; 01 denying participation in the conspiracy and fraud perpetrated against theinvestor!complainants of $*$C Corporation, specifically #y and 6oren:o 0& claiming that she was initiallyand merely an employee of, and suseKuently an independent information provider for, $*$C Corporation08 $*$C Corporation eing a separate entity from $*$C!B7* of which #antos has never een a part of in anycapacity 04 her not having received any money from #y and 6oren:o, the two having, in actuality, directlyinvested their money in $*$C!B7* 05 #antos having dealt only with #y and the latter, in fact, deposited

money directly into $*$C!B7*>s account and 0 on the whole, $*$C!B7* as the other party in theinvestment contracts signed y #y and 6oren:o, thus the only corporation liale to #y and 6oren:o and theother complainants.

2n 1( pril &++(, the D2), in *.#. %o. &++'!1+54, issued a Resolution signed y a panel of three 08prosecutors, with recommendation for approval of the ssistant Chief #tate $rosecutor, and ultimatelyapproved y Chief #tate $rosecutor )ovencito R. JuLo, indicting; 0a 6iew and "on:ale:!Tuason for violationof #ections ( and & of the #ecurities Regulation Code and 0 herein respondent #antos, along withCristina "on:ale:!Tuason and 1& others for violation of #ection &( of the #ecurities Regulation Code. Thesame Resolution li9ewise dismissed the complaint against ( of the respondents therein for insufficiency ofevidence. *n the 1( pril &++( Resolution, the D2) discussed at length the liaility of $*$C Corporation andits officers, employees, agents and all those acting on $*$C Corporation>s ehalf, to wit; chanRolesvirtual6awlirary

Girstly, complainant #C filed the instant case for alleged violation y respondents


21/215

their money, they dealt with $*$C Corp. and the people acting on its ehalf ut when they signed documentsthey were provided with ones earing the name of $*$C!B7*. Clearly, this ovious and intentional confusionof names of the two entities is designed to defraud and later to avoid liailities from their victims. Therefore,the defense of a corporate fiction is unavailing in the instant case.

/ / / /

'uying and selling of securitiesis an indispensale element that ma9es one a ro9er or dealer. #o if one isnot engaged in the usiness of uying and selling of securities, naturally he or she cannot e considered asa ro9er or dealer. owever, a person may e considered as an agent of another, Muridical or natural person,if it can e inferred that he or she acts as an agent of his or her principal as aove!defined. 2ne can also ean investor and agent at the same time.

n e/amination of the records and the evidence sumitted y the parties, we have oserved that allrespondents are investors of $*$C!B7*, same with the private complainants, they also lost thousands ofdollars. Ne also noted the fact that most of the private complainants and alleged ro9ers or agents are longtime friends if not lood related individuals. %otaly also is the fact that most of them are highly educatedusinessmen?usinesswomen who are financially well!off. ence, they are regarded to e wiser and moreprudent and e/pected to e/ercise due diligence of a good father of a family in managing their finances ascompared to those who are less fortunate in life.

owever, we still need to delve deeper into the facts and the participations and if on the asis of their actions, it can e inferred that they acted asemployees!agents or investor!agents of $*$C Corp. or $*$C!B7* then are liale under #ection &( of the #RCotherwise, they cannot e


22/215

one may e an agent of a domestic corporation although he or she is not an officer thereto. / / /. The asisof agency is representation the Kuestion of whether an agency has een created is ordinarily a Kuestionwhich may e estalished in the same way as any other fact, either y direct or sustantial evidencethough that fact or e/tent of authority of the agents may not, as a general rule, e estalished from thedeclarations of the agents alone, if one professes to act as agent for another, he or she is estopped to denyher agency oth as against the asserted principal and third persons interested in the transaction in which heor she is engaged.

Gurther, they cannot raise the defense of good faith for the simple reason that the #RC is a special lawwhere criminal intent is not an essential element. 3ere violation of which is punishale e/cept in someprovisions thereof where fraud is a condition sine Kua non such as #ection & of the said law.

/ / / /

NRG2R, the foregoing considered, it is respectfully recommended that this resolution e $$R27Dand that;

1. n information for violation of #ection ( of the #RC e filed against respondent $*$C Corp.,3*C6 . 6*N and CR*#T*% "2%J6J!T@#2%

&. n information for violation of #ection & thereof e also filed against respondents 3*C6 .

6*N and CR*#T*% "2%J6J!T@#2% and

8. n information for violation of #ection &( thereof e filed against respondents CR*#T*%"2%J6J!T@#2%, 3. CR*#T*% B@T*#T!)@RD2, BRBR "RC*, %T2%H *R@6G,@"% "2, 3*C6 36C2R %@B6, 3. $36 32RR*#, 6@*# P)*3B2> R"2%, R%T2#R3*%T2, )R., 7*CT2R )2# 7R"6 D D*2#, %*C26*% 32R%T2 3%D2J, )2# P)H>T%"C2 ***,


23/215

/ / / /

/ / / s to the issue on whether or not $3$ is a security contract, we rule in the affirmative, as supportedy the herein elow provisions of the #RC, particularly; chanRolesvirtual6awlirary

#ec. (. ReKuirement of Registration of #ecurities. ! (.1. #ecurities shall not e sold or offered for sale or

distriution within the $hilippines, without registration statement duly filed with and approved y theCommission. $rior to such sale, information on the securities, in such form and with such sustance as theCommission may prescrie, shall e made availale to each prospective purchaser.

#ecurities have een defined as shares, participation or interest in a corporation or in a commercialenterprise or profit ma9ing venture and evidenced y a certificate, contract, instrument, whether written orelectronic in character. *t includes among others, investment contracts, certificates of interest orparticipation in a profit sharing agreement, certificates of deposit for a future suscription.

@nder the #RC>s mended *mplementing Rules and Regulations, specifically Rule 8, par. 1 supar. ", aninvestment contract has een defined as a contract, transaction or scheme 0collectively EcontractF, whereya person invests his money in a common enterprise and is led to e/pect profits primarily from the efforts ofothers. *t is li9ewise provided in the said provision that an investment contract is presumed to e/istwhenever a person see9s to use the money or property of others on the promise of profits and a commonenterprise is deemed created when two 0& or more investors EpoolF their resources creating a common

enterprise, even if the promoter receives nothing more than a ro9er>s commission. @ndoutedly, the $3$is an investment contract falling within the purview of the term securities as defined y law.

/ / / /

*t ears to emphasi:e that the purpose of a preliminary investigation and?or confrontation etween theparty!litigants is for them to lay down all their cards on the tale to properly inform and apprise the other ofthe charges against him?her, to avoid suprises and to afford the adverse party all the opportunity to defendhimself?herself ased on the evidence sumitted against him?her. Thus, failure on the part of the defaultingparty to sumit evidence that was then availale to him is deemed a waiver on his part to sumit it in thesame proceedings against the same party for the same issue.

NRG2R, the foregoing premises considered, the undersigned panel of prosecutors respectfullyrecommends that the assailed resolution e modifiedy dismissing the complaint against 7ictor )ose 7ergelDe Dios and that the *nformation filed with the appropriate court for violation of #ection &( of the #RC e

amended accordingly.14

Respondent #antos filed a petition for review efore the 2ffice of the #ecretary of the D2) assailing theResolutions dated 1( pril &++( and & #eptemer &++( and claiming that she was a mere clericalemployee?information provider who never solicited nor recruited investors, in particular complainants #y and6oren:o, for $*$C Corporation or $*$C!B7*. #antos also claimed dearth of evidence indicating she was asalesman?agent or an associated person of a ro9er or dealer, as defined under the #ecurities RegulationCode.

The #C filed its Comment opposing #antos> petition for review. Thereafter, the 2ffice of the #ecretary of theD2), through its then @ndersecretary Ricardo R. Blancaflor, issued a Resolution dated 1 2ctoer &++- which,as previously adverted to, e/cluded respondent #antos from prosecution for violation of #ection &( of the#ecurities Regulation Code. Gor a complete picture, we Kuote in full the disKuisition of the #ecretary of theD2); chanRolesvirtual6awlirary


24/215

The sole issue in this case is whether or not respondent #antos acted as agent of $*$C Corp. or had enticed6uisa 3ercedes $. 6oren:o or Ric9y lino $. #y to uy $*$C Corp. or $*$C!B7*>s investment products.

Ne resolve in the negative.

S&c!(o) 2- o !h& S&c'r(!(&* R'a!(o) Co$& /SRC r&a$*

#C. s investment products.

The anne/ EDF 0ENelcome to $3$F 6etter dated


25/215

etween her employer $*$C Corp. and $*$C!B7* readaly and understandaly provides that she is prohiitedfrom soliciting investments in ehalf of $*$C!B7* and her authority is limited only to providing interestedpersons with the$necessary information regarding ho% to communicate directly %ith PIPC.&$arenthetically,the decision to sign the partnership greement with $*$C!B7* to invest and repeatedly reinvest their monieswith $*$C!B7* were made y 6uisa 3ercedes $. 6oren:o and Ric9y lino $. #y themselves without anyinducement or undue influence from respondent #antos.

/ / / /

NRG2R, the assailed resolution is herey 32D*G*D, the Chief #tate $rosecutor is directed to C6@Drespondent 2udine #antos from the *nformation for violation of #ection &( of the #ecurities and RegulationCode, if any has een filed, and report the action ta9en thereon within ten 01+ days from receipt hereof.15

/pectedly, after the denial of the #C>s motion for reconsideration efore the #ecretary of the D2), the #Cfiled a petition forcertiorari efore the Court of ppeals see9ing to annul the 1 2ctoer &++- Resolution ofthe D2).

The Court of ppeals dismissed the #C>s petition for certiorariand affirmed the 1 2ctoer &++- Resolutionof the #ecretary of the D2); chanRolesvirtual6awlirary

$rescinding from the foregoing, a person must first and foremost e engaged in the usiness of uying andselling securities in the $hilippines efore he can e considered as a ro9er, a dealer or salesman within the

coverage of the #ecurities Regulation Code. The record in this case however is ereft of any showing that


26/215

1. when necessary to afford adeKuate protection to the constitutional rights of the accused

&. when necessary for the orderly administration of Mustice or to avoid oppression or multiplicity ofactions

8. when there is a preMudicial Kuestion which is sub )udice

4. %hen the acts of the officer are %ithout or in e(cess of authority*

5. where the prosecution is under an invalid law, ordinance or regulation

. when doule Meopardy is clearly apparent

'. where the court has no Murisdiction over the offense

(. where it is a case of persecution rather than prosecution

-. where the charges are manifestly false and motivated y the lust for vengeance

1+. when there is clearly no prima facie case against the accused and a motion to Kuash on that groundhas een denied.1- 0*talics supplied.

*n e/cluding #antos from the prosecution of the supposed violation of #ection &( of the #ecurities RegulationCode, the #ecretary of the D2), as affirmed y the appellate court, deun9ed the D2) panel>s finding that#antos wasprima facieliale for either; 01 selling securities in the $hilippines as a ro9er or dealer, or 0&acting as a salesman, or an associated person of any ro9er or dealer on ehalf of $*$C Corporation and?or$*$C!B7* without eing registered as such with the #C.

To get to that conclusion, the #ecretary of the D2) and the appellate court ruled that no evidence wasadduced showing #antos> actual participation in the final sale y $*$C Corporation and?or $*$C!B7* ofunregistered securities since the very affidavits of complainants 6oren:o and #y proved that #antos hadnever signed, neither was she mentioned in, any of the investment documents etween 6oren:o and #y, on

one hand, and $*$C Corporation and?or $*$C!B7*, on the other hand.

The conclusions made y the #ecretary of the D2) and the appellate court are a myopic view of theinvestment solicitations made y #antos on ehalf of $*$C Corporation and?or $*$C!B7* while she was notlicensed as a ro9er or dealer, or registered as a salesman, or an associated person of a ro9er or dealer.

Ne sustain the D2) panel>s findings which were not overruled y the #ecretary of the D2) and the appellatecourt, that $*$C Corporation and?or $*$C!B7* was; 01 an issuer of securities without the necessaryregistration or license from the #C, and 0& engaged in the usiness of uying and selling securities. *nconnection therewith, we loo9 to #ection 8 of the #ecurities Regulation Code for pertinent definitions ofterms; chanRolesvirtual6awlirary

#ec. 8.Definition of Terms.! / / /.

/ / / /

8.8. EBro9erF is a person engaged in the usiness of uying and selling securities for the account of others.

8.4. EDealerF means


27/215

/ / / /

8.18. E#alesmanF is a natural person, employed as such s Resolution was tainted with grave ause of discretion, we passupon the elements for violation of #ection &( of the #ecurities Regulation Code; 0a engaging in the usiness

of uying or selling securities in the $hilippines as a ro9er or dealer or 0 acting as a salesman or 0cacting as an associated person of any ro9er or dealer, unless registered as such with the #C.

Tying it all in, there is no Kuarrel that #antos was in the employ of $*$C Corporation and?or $*$C!B7*, acorporation which sold or offered for sale unregistered securities in the $hilippines. To escape proaleculpaility, #antos claims that she was a mere clerical employee of $*$C Corporation and?or $*$C!B7* andwas never an agent or salesman who actually solicited the sale of or sold unregistered securities issued y$*$C Corporation and?or $*$C!B7*.

#olicitation is the act of see9ing or as9ing for usiness or information it is not a commitment to anagreement.&+

#antos, y the very nature of her function as what she now unaffectedly calls an information provider,rought aout the sale of securities made y $*$C Corporation and?or $*$C!B7* to certain individuals,specifically private complainants #y and 6oren:o y providing information on the investment products of

$*$C Corporation and?or $*$C!B7* with the end in view of $*$C Corporation closing a sale.

Nhile #antos was not a signatory to the contracts on #y>s or 6oren:o>s investments, #antos procured thesale of these unregistered securities to the two 0& complainants y providing information on the investmentproducts eing offered for sale y $*$C Corporation and?or $*$C!B7* and convincing them to invest therein.

%o matter #antos> strenuous oMections, it is apparent that she connected the proale investors, #y and6oren:o, to $*$C Corporation and?or $*$C!B7*, acting as an ostensile agent of the latter on the viaility of$*$C Corporation as an investment company. t each point of #y>s and 6oren:o>s investment, #antos>participation thereon, even if not shown strictly on paper, wasprima facieestalished.

*n all of the documents presented y #antos, she never alleged or pointed out that she did not receive e/traconsideration for her simply providing information to #y and 6oren:o aout $*$C Corporation and?or $*$C!B7*. #antos only claims that the monies invested y #y and 6oren:o did not pass through her hands. *nshort, #antos did not present in evidence her salaries as a supposed Emere clerical employee or information

providerF of $*$C!B7*. #uch presentation would have foreclosed all Kuestions on her status within $*$CCorporation and?or $*$C!B7* at the lowest rung of the ladder who only provided information and who didnot use her discretion in any capacity.

Ne cannot overemphasi:e that the very information provided y #antos loc9ed the deal on unregisteredsecurities with #y and 6oren:o.

*n fact, #y alleged in his affidavit, which allegation was not refuted y #antos, that he was introduced to#antos while he performed routine transactions at his an9; chanRolesvirtual6awlirary

&. * have een a depositor of the Ban9 of the $hilippine *slands 0B$* $asong Tamo ranch for the past 15years. #ometime in the last Kuarter of &++, * was at B$* $asong Tamo to accomplish certain routinetransactions. Being a client of long standing, the an9 manager


28/215

trading aroad and that they only employ professional and e/perienced foreign e/change traders whospeciali:e in trading the )apanese Hen, uro, British $ound, #wiss Grancs and ustralian Dollar. * then toldher that * did not have any e/perience in foreign currency trading and was Kuite conservative in handling mymoney&1

#antos countered that; chanRolesvirtual6awlirary

&(. * also categorically deny complainant #y>s allegation that * EenticedF him to enter into a $artnershipgreement with $*$C!B7*. *n the first place, * came to 9now complainant #y only when he was referred tome y a mutual acKuaintance, 3s. na 6iliosa #antos, who was then the 3anager of the Ban9 of the$hilippine *slands, $asong Tamo Branch. 3s. na #antos set up a meeting etween complainant #y and meecause complainant #y wanted to 9now more aout $*$C!B7*. s with the other individuals who e/pressedinterest in $*$C Corp.>s client companies, * then provided complainant #y with additional information aout$*$C!B7*. The decision to enter into the aforementioned $artnership greement with $*$C!B7* was madey complainant #y alone without any inducement or undue influence from me, as in fact * only met himtwice ! the first one was on the meeting set up y 3s. na #antos and the second one was to introduce himto 3ichael 6iew. *ndeed, complainant #y appears to e a well!educated person with years of e/perience asa usinessman. *t is reasonale to assume that efore entering into the said $artnership greement with$*$C!B7*, complainant #y had fully understood the nature of the agreement and that in entering thereto, hehad een motivated y a desire to earn a profit and had elieved, as * myself have een led to elieve, that$*$C!B7* was a legitimate usiness concern which offered a reasonale return on investment, 3oreover,complainant #y could have withdrawn his initial investment of @#A4+,+++.++ on its date of maturity, i.e., &

)anuary &++', as indicated in the $*$C!B7*>s letter dated 1+ %ovemer &++, a copy of which is attached tocomplainant #y>s #worn #tatement. Complainant #y, however, oviously decided on his own volition to 9eephis investment with $*$C!B7* presumaly ecause he wanted to gain more profit therefrom. Complainant #yin fact admitted that he received monetary returns from $*$C!B7* in the total amount of @#A&,48-.1&.&&

Nhat is palpale from the foregoing is that #y and 6oren:o did not go directly to 6iew or any of $*$CCorporation>s and?or $*$C!B7*>s principal officers efore ma9ing their investment or renewing their priorinvestment. owever, undenialy, #antos actively recruited and referred possile investors to $*$CCorporation and?or $*$C!B7* and acted as the go!etween on ehalf of $*$C Corporation and?or $*$C!B7*.

The D2)>s and Court of ppeals> reasoning that #antos did not sign the investment contracts of #y and6oren:o is specious. The contracts merely document the act performed y #antos.

*ndividual complainants and the #C have categorically alleged that 6iew and $*$C Corporation and?or $*$C!B7* is not a legitimate investment company ut a company which perpetrated a scam on 81 individualswhere the president, a foreign national, 6iew, ran away with their money. 6iew>s asconding with the moniesof 81 individuals and that $*$C Corporation and?or $*$C!B7* were not licensed y the #C to sell securitiesare uncontroverted facts.

The transaction initiated y #antos with #y and 6oren:o, respectively, is an investment contract orparticipation in a profit sharing agreement that falls within the definition of the law. Nhen the investor isrelatively uninformed and turns over his money to others, essentially depending upon their representationsand their honesty and s9ill in managing it, the transaction generally is considered to e an investmentcontract.&8The touchstone is the presence of an investment in a common venture premised on a reasonalee/pectation of profits to e derived from the entrepreneurial or managerial efforts of others.&4

t ottom, the e/culpation of #antos cannot e preliminarily estalished simply y asserting that she did notsign the investment contracts, as the facts alleged in this case constitute fraud perpetrated on the pulic.#pecially so ecause the asence of #antos> signature in the contract is, li9ewise, indicative of a scheme to

circumvent and evade liaility should the pyramid fall apart.

6astly, we clarify that we are only dealing herein with the preliminary investigation aspect of this case. Nedo not adMudge respondents> guilt or the lac9 thereof. #antos> defense of eing a mere employee or simplyan information provider is est raised and threshed out during trial of the case.

HEREORE, the petition is GRANTED. The Decision of the Court of ppeals in C!".R. %o. #$ %o.11&'(1 and the Resolutions of the Department of )ustice dated 1 2ctoer &++- and &8 %ovemer &++-are ANNU33EDand SET ASIDE. The Resolution of the Department of )ustice dated 1( pril &++( and eptemer &++( are REINSTATED. The Department of )ustice is directed to include respondent 2udine#antos in the *nformation for violation of #ection &( of the #ecurities and Regulation Code.


29/215

SO ORDERED.

G.R. No. 125469 Ooe 2, 199

(ILI((INE STOCK EXCANGE, INC., petitioner,vs.TE ONORA%LE CO!RT O) A((EALS, SEC!RITIES AN" EXCANGE COMMISSION #n$

(!ERTO A&!L LAN", INC., respondents.

TORRES, JR., J.:

The Securities and Exchange Commission is the government agency, under the direct generalsupervision of the !ffice of the %resident, 1with the immense task of enforcing the ;evised Securities(ct, and all other duties assigned to it y pertinent laws. (mong its inumerale functions, and one of themost important, is the supervision of all corporations, partnerships or associations, who are grantees ofprimary franchise and8or a license or permit issued y the government to operate in the %hilippines. 2Gusthow far this regulatory authority extends, particularly, with regard to the %etitioner %hilippine StockExchange, Inc. is the issue in the case at ar.

In this %etition for ;eview on Certiorari, petitioner assails the resolution of the respondent Court of(ppeals, dated Gune 3', &@, which affirmed the decision of the Securities and ExchangeCommission ordering the petitioner %hilippine Stock Exchange, Inc. to allow the private respondent

%uerto (Aul Fand, Inc. to e listed in its stock market, thus paving the way for the pulic offering of%(FI6s shares.

The facts of the case are undisputed, and are herey restated in sum.

The %uerto (Aul Fand, Inc. )%(FI, a domestic real estate corporation, had sought to offer its sharesto the pulic in order to raise funds allegedly to develop its properties and pay its loans with severalanking institutions. In Ganuary, &4, %(FI was issued a %ermit to Sell its shares to the pulic ythe Securities and Exchange Commission )SEC. To facilitate the trading of its shares amonginvestors, %(FI sought to course the trading of its shares through the %hilippine Stock Exchange,Inc. )%SE, for which purpose it filed with the said stock exchange an application to list its shares,

with supporting documents attached.

!n =eruary *, &@, the Fisting Committee of the %SE, upon a perusal of %(FI6s application,recommended to the %SE6s Board of overnors the approval of %(FI6s listing application.

!n =eruary &


30/215

and ;esort Complex which %(FI claims to e among its assets and that the Ternate ?evelopmentCorporation, which is among the stockholders of %(FI, likewise appears to have een held andcontinue to e held in trust y one ;eecco %anlilio for then %resident Marcos and now, effectivelyfor his estate, and re#uested %(FI6s application to e deferred. %(FI was re#uested to commentupon the said letter.

%(FI6s answer stated that the properties forming part of the %uerto (Aul Beach 7otel and ;esortComplex were not claimed y %(FI as its assets. !n the contrary, the resort is actually owned y=antasia =ilipina ;esort, Inc. and the %uerto (Aul Country Clu, entities distinct from %(FI.=urthermore, the Ternate ?evelopment Corporation owns only &.3:O of %(FI. The Marcosesresponded that their claim is not confined to the facilities forming part of the %uerto (Aul 7otel and;esort Complex, therey implying that they are also asserting legal and eneficial ownership ofother properties titled under the name of %(FI.

!n =eruary 3:, &@, the %SE wrote Chairman Magtanggol unigundo of the %residentialCommission on ood overnment )%C re#uesting for comments on the letters of the %(FI and

the Marcoses. !n March


31/215

overnors of the %hilippine Stock Exchange denying the listing of shares of %uerto(Aul Fand, Inc., is herey set aside, and the %SE is herey ordered to immediatelycause the listing of the %(FI shares in the Exchange, without pre"udice to its authorityto re#uire %(FI to disclose such other material information it deems necessary for theprotection of the investigating pulic.

This !rder shall take effect immediately.

S! !;?E;E?.

%SE filed a motion for reconsideration of the said order on (pril 3, &@, which was, howeverdenied y the Commission in its May , &@ !rder which states0

57E;E=!;E, premises considered, the Commission finds no compelling reason toreconsider its order dated (pril 3


32/215

!n Gune


33/215

court to prove the legality of its ownership on these properties efore its shares cane listed.

In addition, the argument that the %(FI properties elong to the Military8>aval ;eservation does notinspire elief. The point is, the %(FI properties are now titled. ( property losses its pulic character

the moment it is covered y a title. (s a matter of fact, the titles have long een settled y a final"udgment- and the final decree having een registered, they can no longer e re9opened consideringthat the one year period has already passed. Fastly, the determination of what standard to apply inallowing %(FI6s application for listing, whether the discretion method or the system of pulicdisclosure adhered to y the SEC, should e addressed to the Securities Commission, it eing thegovernment agency that exercises oth supervisory and regulatory authority over all corporations.

!n (ugust &4, &@& the %SE, after it was granted an extension, filed the instant %etition for ;eviewon Certiorari, taking exception to the rulings of the SEC and the Court of (ppeals. ;espondent %(FIfiled its Comment to the petition on !ctoer &', &@. !n the same date, the %C filed a Motionfor Feave to file a %etition for Intervention. This was followed up y the %C6s %etition for

Intervention on !ctoer 3&, &@. ( supplemental Comment was filed y %(FI on !ctoer 34, &'.The !ffice of the Solicitor eneral, representing the SEC and the Court of (ppeals, likewise filed itsComment on ?ecemer 3@, &@. In answer to the %C6s motion for leave to file petition forintervention, %(FI filed its Comment thereto on Ganuary &', &', whereas the %SE filed its ownComment on Ganuary 3:, &'.

!n =eruary 34, &@, the %SE filed its Consolidated ;eply to the comments of respondent %(FI)!ctoer &', &@ and the Solicitor eneral )?ecemer 3@, &@. !n May &@, &', %(FI filed its;e"oinder to the said consolidated reply of %SE.

%SE sumits that the Court of (ppeals erred in ruling that the SEC had authority to order the %SE to

list the shares of %(FI in the stock exchange. $nder presidential decree >o. :39(, the powers ofthe SEC over stock exchanges are more limited as compared to its authority over ordinarycorporations. In connection with this, the powers of the SEC over stock exchanges under the;evised Securities (ct are specifically enumerated, and these do not include the power to reversethe decisions of the stock exchange. (uthorities are in aundance even in the $nited States, fromwhich the country6s security policies are patterned, to the effect of giving the Securities Commissionless control over stock exchanges, which in turn are given more lee9way in making the decisionwhether or not to allow corporations to offer their stock to the pulic through the stock exchange.This is in accord with the 1usiness "udgment rule1 wherey the SEC and the courts are arred fromintruding into usiness "udgments of corporations, when the same are made in good faith. the saidrule precludes the reversal of the decision of the %SE to deny %(FI6s listing application, asent a

showing of ad faith on the part of the %SE. $nder the listing rules of the %SE, to which %(FI hadpreviously agreed to comply, the %SE retains the discretion to accept or re"ect applications for listing.Thus, even if an issuer has complied with the %SE listing rules and re#uirements, %SE retains thediscretion to accept or re"ect the issuer6s listing application if the %SE determines that the listing shallnot serve the interests of the investing pulic.

Moreover, %SE argues that the SEC has no "urisdiction over se#uestered corporations, nor withcorporations whose properties are under se#uestration. ( reading of ;epulic of the*hilippines


34/215

's. Sadiganbayan, .;. >o. &:43:4, 3


35/215

This authority springs from the fact that a corporation owes its existence to the concession of itscorporate franchise from the state.

The SEC6s power to look into the su"ect ruling of the %SE, therefore, may e implied from or econsidered as necessary or incidental to the carrying out of the SEC6s express power to insure fair

dealing in securities traded upon a stock exchange or to ensure the fair administration of suchexchange. It is, likewise, oserved that the principal function of the SEC is the supervision and controlover corporations, partnerships and associations with the end in view that investment in these entitiesmay e encouraged and protected, and their activities for the promotion of economic development. '

Thus, it was in the alleged exercise of this authority that the SEC reversed the decision of the %SE todeny the application for listing in the stock exchange of the private respondent %(FI. The SEC6saction was affirmed y the Court of (ppeals.

5e affirm that the SEC is the entity with the primary say as to whether or not securities, includingshares of stock of a corporation, may e traded or not in the stock exchange. This is in line with theSEC6s mission to ensure proper compliance with the laws, such as the ;evised Securities (ct and toregulate the sale and disposition of securities in the country. 9(s the appellate court explains0

%aramount policy also supports the authority of the pulic respondent to reviewpetitioner6s denial of the listing. Being a stock exchange, the petitioner performs afunction that is vital to the national economy, as the usiness is affected with pulicinterest. (s a matter of fact, it has often een said that the economy moves on theasis of the rise and fall of stocks eing traded. By its economic power, the petitionercertainly can dictate which and how many users are allowed to sell securities thru thefacilities of a stock exchange, if allowed to interpret its own rules lierally as it mayplease. %etitioner can either allow or deny the entry to the market of securities. Torepeat, the monopoly, unless accompanied y control, ecomes su"ect to ause-hence, considering pulic interest, then it should e su"ect to governmentregulation.

The role of the SEC in our national economy cannot e minimiAed. The legislature, through the;evised Securities (ct, %residential ?ecree >o. :39(, and other pertinent laws, has entrusted to itthe serious responsiility of enforcing all laws affecting corporations and other forms of associationsnot otherwise vested in some other government office. 10

This is not to say, however, that the %SE6s management prerogatives are under the asolute controlof the SEC. The %SE is, alter all, a corporation authoriAed y its corporate franchise to engage in its

proposed and duly approved usiness. !ne of the %SE6s main concerns, as such, is still thegeneration of profit for its stockholders. Moreover, the %SE has all the rights pertaining tocorporations, including the right to sue and e sued, to hold property in its own name, to enter )or notto enter into contracts with third persons, and to perform all other legal acts within its allocatedexpress or implied powers.

( corporation is ut an association of individuals, allowed to transact under an assumed corporatename, and with a distinct legal personality. In organiAing itself as a collective ody, it waives no


36/215

constitutional immunities and per#uisites appropriate to such a ody. 11(s to its corporate andmanagement decisions, therefore, the state will generally not interfere with the same. Puestions of policyand of management are left to the honest decision of the officers and directors of a corporation, and thecourts are without authority to sustitute their "udgment for the "udgment of the oard of directors. Theoard is the usiness manager of the corporation, and so long as it acts in good faith, its orders are notreviewale y the courts. 12

Thus, notwithstanding the regulatory power of the SEC over the %SE, and the resultant authority toreverse the %SE6s decision in matters of application for listing in the market, the SEC may exercisesuch power only if the %SE6s "udgment is attended y ad faith. InBoard of /iuidators 's. 7ala&,13itwas held that ad faith does not simply connote ad "udgment or negligence. It imports a dishonestpurpose or some moral oli#uity and conscious doing of wrong. It means a reach of a known dutythrough some motive or interest of ill will, partaking of the nature of fraud.

In reaching its decision to deny the application for listing of %(FI, the %SE considered importantfacts, which, in the general scheme, rings to serious #uestion the #ualification of %(FI to sell itsshares to the pulic through the stock exchange. ?uring the time for receiving o"ections to the

application, the %SE heard from the representative of the late %resident =erdinand E. Marcos andhis family who claim the properties of the private respondent to e part of the Marcos estate. In time,the %C confirmed this claim. In fact, an order of se#uestration has een issued covering theproperties of %(FI, and suit for reconveyance to the state has een filed in the SandiganayanCourt. 7ow the properties were effectively transferred, despite the se#uestration order, from the T?Cand MS?C to ;eecco %anlilio, and to the private respondent %(FI, in only a short span of time, arenot yet explained to the Court, ut it is clear that such circumstances give rise to serious dout as tothe integrity of %(FI as a stock issuer. The petitioner was in the right when it refused application of%(FI, for a contrary ruling was not to the est interest of the general pulic. The purpose of the;evised Securities (ct, after all, is to give ade#uate and effective protection to the investing pulicagainst fraudulent representations, or false promises, and the imposition of worthless ventures. 14

It is to e oserved that the $.S. Securities (ct emphasiAed its avowed protection to acts detrimentalto legitimate usiness, thus0

The Securities (ct, often referred to as the 1truth in securities1 (ct, was designed notonly to provide investors with ade#uate information upon which to ase theirdecisions to uy and sell securities, ut also to protect legitimate usiness seeking tootain capital through honest presentation against competition from crookedpromoters and to prevent fraud in the sale of securities. )Tenth (nnual ;eport, $.S.Securities Exchange Commission, p. &


37/215

effectiveness of any registration statement which is found to include any untruestatement of a material fact or to omit to state any material fact re#uired to e statedtherein or necessary to make the statements therein not misleading. )Idem.

(lso, as the primary market for securities, the %SE has estalished its name and goodwill, and it has

the right to protect such goodwill y maintaining a reasonale standard of propriety in the entitieswho choose to transact through its facilities. It was reasonale for the %SE, therefore, to exercise its"udgment in the manner it deems appropriate for its usiness identity, as long as no rights aretrampled upon, and pulic welfare is safeguarded.

In this connection, it is proper to oserve that the concept of government asolutism is a thing of thepast, and should remain so.

The oservation that the title of %(FI over its properties is asolute and can no longer e assailed isof no moment. (t this "uncture, there is the claim that the properties were owned y T?C and MS?Cand were transferred in violation of se#uestration orders, to ;eecco %anlilio and later on to %(FI,

esides the claim of the Marcoses that such properties elong to the Marcos estate, and were heldonly in trust y ;eecco %anlilio. It is also alleged y the petitioner that these properties elong tonaval and forest reserves, and therefore eyond private dominion. If any of these claims isestalished to e true, the certificates of title over the su"ect properties now held y %(FI map edisregarded, as it is an estalished rule that a registration of a certificate of title does not conferownership over the properties descried therein to the person named as owner. The inscription inthe registry, to e effective, must e made in good faith. The defense of indefeasiility of a TorrensTitle does not extend to a transferee who takes the certificate of title with notice of a flaw.

In any case, for the purpose of determining whether %SE acted correctly in refusing the applicationof %(FI, the true ownership of the properties of %(FI need not e determined as an asolute fact.

5hat is material is that the uncertainty of the properties6 ownership and alienaility exists, and thisputs to #uestion the #ualification of %(FI6s pulic offering. In sum, the Court finds that the SEC hadacted aritrarily in arrogating unto itself the discretion of approving the application for listing in the%SE of the private respondent %(FI, since this is a matter addressed to the sound discretion of the%SE, a corporation entity, whose usiness "udgments are respected in the asence of ad faith.

The #uestion as to what policy is, or should e relied upon in approving the registration and sale ofsecurities in the SEC is not for the Court to determine, ut is left to the sound discretion of theSecurities and Exchange Commission. In mandating the SEC to administer the ;evised Securities(ct, and in performing its other functions under pertinent laws, the ;evised Securities (ct, underSection + thereof, gives the SEC the power to promulgate such rules and regulations as it may

consider appropriate in the pulic interest for the enforcement of the said laws. The secondparagraph of Section < of the said law, on the other hand, provides that no security, unless exempty law, shall e issued, endorsed, sold, transferred or in any other manner conveyed to the pulic,unless registered in accordance with the rules and regulations that shall e promulgated in the pulicinterest and for the protection of investors y the Commission. %residential ?ecree >o. :39(, onthe other hand, provides that the SEC, as regulatory agency, has supervision and control over allcorporations and over the securities market as a whole, and as such, is given ample authority indetermining appropriate policies. %ursuant to this regulatory authority, the SEC has manifested that it


38/215

has adopted the policy of 1full material disclosure1 where all companies, listed or applying for listing,are re#uired to divulge truthfully and accurately, all material information aout themselves and thesecurities they sell, for the protection of the investing pulic, and under pain of administrative,criminal and civil sanctions. In connection with this, a fact is deemed material if it tends to induce orotherwise effect the sale or purchase of its securities. 155hile the employment of this policy isrecogniAed and sanctioned y the laws, nonetheless, the ;evised Securities (ct sets sustantial andprocedural standards which a proposed issuer of securities must satisfy. 16%ertinently, Section of the;evised Securities (ct sets forth the possile Grounds for the Re-ectionof the registration of a security0

2 The Commission may re"ect a registration statement and refuse to issue a permitto sell the securities included in such registration statement if it finds that 2

)& 1he registration statement is on its face incomplete or inaccurate in any materialrespect or includes any untrue statement of a material fact or omits to state a

material fact reuired to be stated therein or necessary to ma%e the statements

therein not misleading- or

)3 The issuer or registrant 2

)i is not solvent or not in sound financial condition-

)ii has violated or has not complied with the provisions of this (ct, orthe rules promulgated pursuant thereto, or any order of theCommission-

)iii has failed to comply with any of the applicale re#uirements andconditions that the Commission may, in the pulic interest and for theprotection of investors, impose efore the security can e registered-

)iv has een engaged or is engaged or is aout to engage infraudulent transaction-

)v is in any way dishonest or is not of good repute- or

)vi does not conduct its usiness in accordance with law or isengaged in a usiness that is illegal or contrary to government rulesand regulations.

)+ The enterprise or the usiness of the issuer is not shown to e sound or to eased on sound usiness principles-

)


39/215

)4 1he issuer or registrant has not sho&n to the satisfaction of the Commission thatthe sale of its security &ould not &or% to the pre-udice of the public interest or as a

fraud upon the purchasers or in'estors. )Emphasis !urs

( reading of the foregoing grounds reveals the intention of the lawmakers to make the registration

and issuance of securities dependent, to a certain extent, on the merits of the securities themselves,and of the issuer, to e determined y the Securities and Exchange Commission. This measure wasmeant to protect the interests of the investing pulic against fraudulent and worthless securities, andthe SEC is mandated y law to safeguard these interests, following the policies and rules thereforeprovided. The asolute reliance on the full disclosure method in the registration of securities is,therefore, untenale. (s it is, the Court finds that the private respondent %(FI, on at least two points)nos. & and 4 has failed to support the propriety of the issue of its shares with unfailing clarity,therey lending support to the conclusion that the %SE acted correctly in refusing the listing of %(FIin its stock exchange. This does not discount the effectivity of whatever method the SEC, in theexercise of its vested authority, chooses in setting the standard for pulic offerings of corporationswishing to do so. 7owever, the SEC must recogniAe and implement the mandate of the law,

particularly the ;evised Securities (ct, the provisions of which cannot e amended or supplanted ymere administrative issuance.

In resume, the Court finds that the %SE has acted with "ustified circumspection, discounting,therefore, any imputation of aritrariness and whimsical animation on its part. Its action in refusing toallow the listing of %(FI in the stock exchange is "ustified y the law and y the circumstancesattendant to this case.

(CC!;?I>FK, in view of the foregoing considerations, the Court herey ;(>TS the %etition for;eview onCertiorari. The ?ecisions of the Court of (ppeals and the Securities and ExchangeCommission dated Guly 3', &@ and (pril 3TE;E?, affirming the decision of the %hilippine StockExchange to deny the application for listing of the private respondent %uerto (Aul Fand, Inc.

S! !;?E;E?.

G.R. No. 11'15 Auu , 200

CEMCO OL"INGS, INC.,%etitioner,vs.NATIONAL LI)E INS!RANCE COM(AN/ O) TE (ILI((INES, INC.,;espondent.

? E C I S I ! >

CICO-NA&ARIO, J.:

This %etition for ;eview under ;ule o. **'4* which affirmed the "udgment+dated &< =eruary 3::4 of the Securities and Exchange
http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt1http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt3http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt1http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt2http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt3


40/215

Commission )SEC finding that the ac#uisition of petitioner Cemco 7oldings, Inc. )Cemco of theshares of stock of Bacnotan Consolidated Industries, Inc. )BCI and (tlas Cement Corporation)(CC in $nion Cement 7oldings Corporation )$C7C was covered y the Mandatory !ffer ;uleunder Section & of ;epulic (ct >o. *', otherwise known as the Securities ;egulation Code.

The =acts

$nion Cement Corporation )$CC, a pulicly9listed company, has two principal stockholders Q$C7C, a non9listed company, with shares amounting to @:.4&O, and petitioner Cemco with &'.:+O.Ma"ority of $C7CNs stocks were owned y BCI with 3&.+&O and (CC with 3.@O. Cemco, on theother hand, owned O of $C7C stocks.

In a disclosure letter dated 4 Guly 3::o. +&


41/215

!n 4 (ugust 3:: (;$E>?! T7(T T7E SEC 7(S G$;IS?ICTI!> !DE; >(TI!>(F FI=ENS

C!M%F(I>T (>? T7(T T7E SECNS ;E9I>TE;%;ET(TI!> != T7E TE>?E; !==E;;$FE IS C!;;ECT, 57ET7E; !; >!T T7(T ;EI>TE;%;ET(TI!> C(> BE (%%FIE?;ET;!(CTIDEFK T! CEMC!NS %;EG$?ICE.

II.

57ET7E; !; >!T T7E SEC 7(S G$;IS?ICTI!> T! (?G$?IC(TE T7E ?IS%$TEBET5EE> T7E %(;TIES ( P$! !; T! ;E>?E; G$?ME>T ;EP$I;I> CEMC! T!M(HE ( TE>?E; !==E; =!; $CC S7(;ES.
http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt5http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt5


42/215

III.

57ET7E; !; >!T CEMC!NS %$;C7(SE != $C7C S7(;ES IS S$BGECT T! T7ETE>?E; !==E; ;EP$I;EME>T.

ID.

57ET7E; !; >!T T7E SEC ?ECISI!>, (S (==I;ME? BK T7E C( ?ECISI!>, IS (>I>C!M%FETE G$?ME>T 57IC7 %;!?$CE? >! E==ECT.@

Simply stated, the following are the issues0

&. 5hether or not the SEC has "urisdiction over respondentNs complaint and to re#uireCemco to make a tender offer for respondentNs $CC shares.

3. 5hether or not the rule on mandatory tender offer applies to the indirect ac#uisition ofshares in a listed company, in this case, the indirect ac#uisition y Cemco of +@O of $CC, apulicly9listed company, through its purchase of the shares in $C7C, a non9listed company.

+. 5hether or not the #uestioned ruling of the SEC can e applied retroactively to CemcoNstransaction which was consummated under the authority of the SECNs prior resolution.

!n the first issue, petitioner Cemco contends that while the SEC can take cogniAance ofrespondentNs complaint on the alleged violation y petitioner Cemco of the mandatory tender offerre#uirement under Section & of ;epulic (ct >o. *', the same statute does not vest the SECwith "urisdiction to ad"udicate and determine the rights and oligations of the parties since, under thesame statute, the SECNs authority is purely administrative. 7aving een vested with purelyadministrative authority, the SEC can only impose administrative sanctions such as the imposition ofadministrative fines, the suspension or revocation of registrations with the SEC, and the like.%etitioner stresses that there is nothing in the statute which authoriAes the SEC to issue orders

granting affirmative reliefs. Since the SECNs order commanding it to make a tender offer is anaffirmative relief fixing the respective rights and oligations of parties, such order is void.

%etitioner further contends that in the asence of any specific grant of "urisdiction y Congress, theSEC cannot, y mere administrative regulation, confer on itself that "urisdiction.

%etitionerNs stance fails to persuade.

In taking cogniAance of respondentNs complaint against petitioner and eventually rendering a"udgment which ordered the latter to make a tender offer, the SEC was acting pursuant to ;ule&)&+ of the (mended Implementing ;ules and ;egulations of the Securities ;egulation Code, towit0

&+. Diolation

If there shall e violation of this ;ule y pursuing a purchase of e#uity shares of a pulic company atthreshold amounts without the re#uired tender offer, the Commission, upon complaint, may nullifythe said ac#uisition and direct the holding of a tender offer. This shall e without pre"udice to theimposition of other sanctions under the Code.
http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt6http://www.lawphil.net/judjuris/juri2007/aug2007/gr_171815_2007.html#fnt6


43/215

The foregoing rule emanates from the SECNs power and authority to regulate, investigate orsupervise the activities of persons to ensure compliance with the Securities ;egulation Code, morespecifically the provision on mandatory tender offer under Section & thereof.'

(nother provision of the statute, which provides the asis of ;ule &)&+ of the (mendedImplementing ;ules and ;egulations of the Securities ;egulation Code, is Section 4.&)n, viA0

T/he Commission shall have, among others, the following powers and functions0

x x x x

)n Exercise such other powers as may e provided y law as well as those which may e impliedfrom, or which are necessary or incidental to the carrying out of, the express powers granted theCommission to achieve the o"ectives and purposes of these laws.

The foregoing provision estows upon the SEC the general ad"udicative power which is implied fromthe express powers of the Commission or which is incidental to, or reasonaly necessary to carryout, the performance of the administrative duties entrusted to it. (s a regulatory agency, it has the

incidental power to conduct hearings and render decisions fixing the rights and oligations of theparties. In fact, to deprive the SEC of this power would render the agency inutile, ecause it wouldecome powerless to regulate and implement the law. (s correctly held y the Court of (ppeals0

5e are nonetheless convinced that the SEC has the competence to render the particular decision itmade in this case. ( definite inference may e drawn from the provisions of the S;C that the SEChas the authority not only to investigate complaints of violations of the tender offer rule, ut toad"udicate

rsa cases i to ii

Documents