ASG Law

Tag: Securities Regulation Code

  • Quasi-Legislative Power of the SEC: When Can Courts Intervene?

    Understanding the Limits of SEC Authority: When Courts Can Step In

    SECURITIES AND EXCHANGE COMMISSION VS. HON. RODOLFO R. BONIFACIO, ET AL., G.R. No. 198425, January 30, 2024

    Imagine a scenario where a government agency issues a regulation that you believe infringes on your property rights. Can you challenge that regulation in court, or are you bound to follow it without question? This question lies at the heart of the Supreme Court’s decision in Securities and Exchange Commission vs. Hon. Rodolfo R. Bonifacio, et al. This case explores the delicate balance between the Securities and Exchange Commission’s (SEC) authority to regulate the stock market and the power of the courts to review the validity of those regulations. The central issue revolves around whether the Regional Trial Court (RTC) has the jurisdiction to hear a petition for injunction filed against the SEC regarding its directives on voting rights within the Philippine Stock Exchange (PSE).

    The SEC’s Regulatory Role and the Courts’ Power of Review

    Administrative agencies, like the SEC, possess both quasi-legislative and quasi-judicial powers. Quasi-legislative power allows agencies to create rules and regulations that have the force of law, while quasi-judicial power enables them to adjudicate disputes and enforce those regulations. However, these powers are not absolute.

    The Securities Regulation Code (Republic Act No. 8799) grants the SEC broad authority to regulate the securities market, but it also includes safeguards to prevent abuse of power. Section 33.2(c) of the Code is particularly relevant, as it limits the ownership and control of voting rights in stock exchanges:

    Where the Exchange is organized as a stock corporation, that no person may beneficially own or control, directly or indirectly, more than five percent (5%) of the voting rights of the Exchange and no industry or business group may beneficially own or control, directly or indirectly, more than twenty percent (20%) of the voting rights of the Exchange: Provided, however, That the Commission may adopt rules, regulations or issue an order, upon application, exempting an applicant from this prohibition where it finds that such ownership or control will not negatively impact on the exchange’s ability to effectively operate in the public interest.

    This provision aims to prevent any single entity or industry group from dominating the exchange and potentially manipulating the market. The SEC is empowered to grant exemptions to this rule if it finds that such ownership or control would not harm the public interest.

    The Supreme Court has consistently held that regular courts have jurisdiction to review the validity or constitutionality of rules and regulations issued by administrative agencies in the performance of their quasi-legislative functions. This principle ensures that agencies do not exceed their delegated authority and that their regulations comply with the Constitution and relevant laws. For example, if the SEC created a rule that favored one company over another without any reasonable basis, a court could step in and invalidate that rule.

    The Case of the Voting Rights and the PSE Brokers

    The Philippine Association of Securities Brokers and Dealers, Inc. (PASBDI), representing brokers who are also shareholders of the PSE, challenged the SEC’s directive to limit the voting rights of brokers as an industry group to 20% of the total outstanding capital stock of the PSE. PASBDI argued that this limitation infringed on their property rights as shareholders.

    Here’s how the case unfolded:

    • The SEC, citing Section 33.2(c) of the Securities Regulation Code, directed the PSE to limit the voting rights of brokers to 20%.
    • PASBDI filed a petition for injunction with the RTC, seeking to restrain the SEC and the PSE from implementing this directive.
    • The RTC issued a writ of preliminary injunction, allowing the brokers to vote their entire shareholdings.
    • The SEC appealed, arguing that the RTC lacked jurisdiction and that the injunction was improperly granted.
    • The Court of Appeals upheld the RTC’s decision.
    • The Supreme Court consolidated the cases, examining the scope of the RTC’s jurisdiction and the validity of the injunction.

    The Supreme Court emphasized that the RTC had jurisdiction to hear the case because PASBDI’s petition challenged the validity of the SEC’s directive, which was an exercise of its quasi-legislative power. The Court quoted Section 23 of the Revised Corporation Code, which ensures that, in stock corporations, stockholders who are eligible to vote shall have the right to vote the number of shares of stock standing in their own names in the stock books of the corporation at the time fixed in the bylaws or where the bylaws are silent, at the time of the election.

    However, the Court also found that the RTC erred in granting the injunction against the SEC itself. Since the SEC was merely implementing a valid provision of the law, there was no basis to restrain its actions.

    “As the agency entrusted to administer the provisions of Republic Act No. 8799, there was nothing erroneous on the part of SEC in issuing Resolution No. 86 and the Order dated February 3, 2011 for purposes of limiting the voting rights of stockbrokers in the 2010 and the 2011 Stockholders’ Meeting respectively,” the Court stated. Further, the court emphasizes that since the SEC’s directive is based on the statute, the same cannot be collaterally attacked. Thus, questions regarding the restriction on the right of PASBDI et al. should have been raised as a direct attack on the validity of Section 33.2(c).

    Practical Implications for Businesses and Shareholders

    This case clarifies the boundaries of the SEC’s regulatory authority and the courts’ power to review its actions. It confirms that while the SEC has broad powers to regulate the securities market, those powers are not unlimited and are subject to judicial review.

    For businesses and shareholders, the key takeaway is that they have the right to challenge regulations that they believe are invalid or unconstitutional. However, they must do so through the proper legal channels and demonstrate that the regulation infringes on their rights.

    Key Lessons

    • Courts can review the validity of regulations issued by administrative agencies.
    • Shareholders have the right to challenge regulations that infringe on their property rights.
    • Challenges to regulations must be made through the proper legal channels.
    • Injunctions against administrative agencies are generally disfavored unless there is a clear violation of rights.

    Frequently Asked Questions (FAQ)

    Q: What is quasi-legislative power?

    A: It is the power of an administrative agency to make rules and regulations that have the force of law.

    Q: What is quasi-judicial power?

    A: It is the power of an administrative agency to adjudicate disputes and enforce its regulations.

    Q: Can I challenge a regulation issued by the SEC?

    A: Yes, you can challenge the validity of a regulation issued by the SEC in court.

    Q: What is the 20% limitation on voting rights in stock exchanges?

    A: Section 33.2(c) of the Securities Regulation Code limits the voting rights of any industry or business group in a stock exchange to 20% of the total outstanding capital stock.

    Q: How does this case affect shareholders in the Philippines?

    A: It confirms their right to challenge regulations that infringe on their property rights and clarifies the role of the courts in reviewing administrative actions.

    Q: What is a direct vs. collateral attack on a statute?

    A: A direct attack is when the primary proceeding is intended to test the validity of the statute, whereas a collateral attack is when the question of validity is only raised as an incident in a different cause.

    ASG Law specializes in corporate law, securities law, and litigation. Contact us or email hello@asglawpartners.com to schedule a consultation.

  • Securities Regulation: Untrue Statements, Probable Cause, and Corporate Liability in the Philippines

    When is a Forward-Looking Statement Considered an Untrue Statement Under the Securities Regulation Code?

    G.R. No. 230649, April 26, 2023

    Imagine investing in a promising golf course project, lured by the promise of its completion date. But what happens when that date comes and goes, and the project remains unfinished? Can the officers of the corporation be held criminally liable for making an “untrue statement”? This recent Supreme Court decision sheds light on the complexities of securities regulation, probable cause, and corporate liability in the Philippines.

    This case examines the circumstances under which corporate officers can be held liable for violations of the Securities Regulation Code, particularly concerning potentially misleading statements in registration statements. It highlights the importance of establishing a direct link between the officer’s actions and the alleged violation.

    Understanding the Securities Regulation Code

    The Securities Regulation Code (RA 8799) aims to protect investors by ensuring transparency and accuracy in the securities market. It requires companies offering securities to the public to register with the Securities and Exchange Commission (SEC) and provide detailed information about their business, financial condition, and projects. A key provision, Section 12.7, mandates that issuers state under oath in every prospectus that all information is true and correct. It further specifies that “any untrue statement of fact or omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading shall constitute fraud.”

    Section 73 outlines the penalties for violating the Code, including fines and imprisonment for individuals who make untrue statements or omit material facts in a registration statement. The law also addresses the liability of corporations and their officers, stating that penalties may be imposed on the juridical entity and the officers responsible for the violation.

    For example, if a company falsely inflates its projected earnings in a prospectus to attract investors, this would constitute an untrue statement of a material fact. Similarly, if a company fails to disclose significant risks associated with a project, this would be an omission of a material fact. Both scenarios could lead to criminal liability under the Securities Regulation Code.

    The specific provisions at play in this case are:

    SECTION 12.7. Upon effectivity of the registration statement, the issuer shall state under oath in every prospectus that all registration requirements have been met and that all information are true and correct as represented by the issuer or the one making the statement. Any untrue statement of fact or omission to state a material fact required to be stated therein or necessary to make the statement therein not misleading shall constitute fraud.

    SECTION 73. Penalties. — Any person who violates any of the provisions of this Code, or the rules and regulations promulgated by the Commission under authority thereof, or any person who, in a registration statement filed under this Code, makes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, shall, upon conviction, suffer a fine of not less than Fifty thousand pesos (P50,000.00) nor more than Five million pesos (P5,000,000.00) or imprisonment of not less than seven (7) years nor more than twenty-one (21) years, or both in the discretion of the court.

    The Caliraya Springs Case: A Timeline

    The case revolves around Caliraya Springs Golf Club, Inc., which filed a registration statement with the SEC in 1997 to sell shares to finance its golf course and clubhouse project in Laguna. The project was expected to be completed by July 1999. However, the project faced delays, and the SEC later discovered that Caliraya had not complied with its undertakings.

    Here’s a breakdown of the key events:

    • 1997: Caliraya files a registration statement with the SEC, projecting completion of its golf course project by July 1999.
    • 2003: The SEC discovers that Caliraya has not complied with its project undertakings.
    • 2004: The SEC revokes Caliraya’s registration of securities and permit to sell to the public.
    • 2009: The SEC asks Caliraya and its officers to explain the misrepresentations regarding the project’s development.
    • 2010: An ocular inspection reveals that only one of the two golf courses is completed.
    • 2013: The Regional Trial Court (RTC) initially dismisses the criminal case against the corporate officers for lack of probable cause.
    • 2014: The RTC grants the prosecution’s motion for reconsideration but ultimately dismisses the case again.
    • 2016: The Court of Appeals (CA) affirms the RTC’s dismissal.
    • 2023: The Supreme Court upholds the CA’s decision, emphasizing the need to establish a direct link between the corporate officers’ actions and the alleged violation.

    The SEC filed a complaint against the incorporators, board members, and officers of Caliraya, alleging a violation of Section 12.7 in relation to Section 73 of the Securities Regulation Code. The Information alleged that the respondents fraudulently made an untrue statement by declaring July 1999 as the expected completion date when the project remained incomplete.

    The Supreme Court quoted:

    “[Omitting] to state any material fact required to be stated therein or necessary to make the statements therein not misleading.” Indeed, when it became clear that such estimate would not come to pass, it was incumbent on the registered issuer to amend its registration statement to correct the same in order to reasonably protect the investing public. This Caliraya failed to do.

    However, the Court ultimately ruled in favor of the respondents, emphasizing that the prosecution failed to establish probable cause to hold them personally liable. The Court highlighted that the Information charged the respondents for making an untrue statement, which was not the proper mode of violation in this instance. Furthermore, the Information did not charge Caliraya itself, and there was no direct link between the respondents and the alleged violation.

    Practical Implications for Businesses and Investors

    This case underscores the importance of accuracy and transparency in securities registration statements. While forward-looking statements are inherent in project proposals, companies must update their disclosures promptly when actual progress deviates significantly from initial projections. Failure to do so could lead to liability for omitting material facts that could mislead investors.

    Moreover, the case clarifies that corporate officers are not automatically liable for corporate violations. Prosecutors must demonstrate a direct link between the officer’s actions and the alleged violation to establish probable cause for criminal charges.

    Key Lessons

    • Update Disclosures: Regularly review and update registration statements to reflect the current status of projects and address any deviations from initial projections.
    • Document Everything: Maintain thorough records of project progress, challenges, and decisions made by corporate officers.
    • Seek Legal Counsel: Consult with legal counsel to ensure compliance with securities regulations and to understand the potential liabilities of corporate officers.

    Frequently Asked Questions

    Q: What is probable cause?

    A: Probable cause refers to the existence of such facts and circumstances as would engender the belief, in a reasonable mind, that the person charged was guilty of the crime for which he was prosecuted.

    Q: Are corporate officers automatically liable for corporate violations?

    A: No, corporate officers are not automatically liable. Their liability must be proven by establishing a direct link between their actions and the alleged violation.

    Q: What is an untrue statement under the Securities Regulation Code?

    A: An untrue statement means one not in accord with facts or one made in deceit for ulterior motives.

    Q: What should companies do if a project’s completion date is delayed?

    A: Companies should amend their registration statement to reflect the updated timeline and explain the reasons for the delay.

    Q: What is the role of the SEC in regulating securities?

    A: The SEC is responsible for ensuring transparency and accuracy in the securities market to protect investors.

    ASG Law specializes in corporate law and securities regulation. Contact us or email hello@asglawpartners.com to schedule a consultation.

  • Securities Regulation: Due Process and SEC Investigation Requirements

    The Supreme Court has affirmed that the Securities and Exchange Commission (SEC) maintains discretion in conducting investigations for violations of the Securities Regulation Code (SRC). The court emphasized that while the SEC must refer criminal complaints to the Department of Justice (DOJ) for preliminary investigation and prosecution, it is not mandated to provide specific notices of investigation to accused parties before doing so. This ruling clarifies the procedural requirements for prosecuting securities violations and underscores the SEC’s authority in initiating such actions, ultimately protecting investors from fraudulent activities.

    Navigating the Labyrinth: Due Process vs. SEC’s Investigative Powers in Securities Fraud Cases

    The case arose from complaints filed by investors of Philippine International Planning Center Corporation (PIPCC), alleging that PIPCC, through its agents, including Jose T. Tengco III, Anthony Kierulf, Barbara May L. Garcia, and Herley Jesuitas (collectively, petitioners), enticed them to invest in securities without proper registration. The investors claimed that they were promised high returns with low risk. Following an investigation, the SEC filed a complaint with the DOJ, which then filed an information against the petitioners for violating Section 28 of the Securities Regulation Code (SRC). The petitioners moved to dismiss the case, arguing that the SEC failed to conduct its own preliminary investigation and notify them of the charges, thereby depriving them of due process.

    The Regional Trial Court (RTC) initially granted the motion to dismiss, but the Court of Appeals (CA) reversed this decision, reinstating the criminal case. The central legal question revolves around the interpretation of Section 53.1 of the SRC and whether the SEC’s failure to notify the petitioners of the investigation constituted a denial of due process, thereby stripping the RTC of jurisdiction.

    The petitioners contended that the SEC’s failure to notify them of the investigation and conduct its own preliminary investigation violated their right to due process, thus depriving the RTC of jurisdiction over the case. They relied on jurisprudence such as Baviera v. Paglinawan to support their claim that a criminal complaint for violation of the SRC must first be filed with the SEC, which must then determine probable cause before referring the case to the DOJ.

    The Supreme Court, however, found no merit in the petitions, affirming the CA’s decision. The court clarified that Section 53.1 of the SRC grants the SEC discretion in conducting investigations and does not prescribe a specific manner for doing so. The provision states:

    SEC. 53. Investigations, Injunctions and Prosecution of Offenses. —

    53.1. The Commission may, in its discretion, make such investigations as it deems necessary to determine whether any person has violated or is about to violate any provision of this Code…Provided, however, That any person requested or subpoenaed to produce documents or testify in any investigation shall simultaneously be notified in writing of the purpose of such investigation: Provided, further, That all criminal complaints for violations of this Code, and the implementing rules and regulations enforced or administered by the Commission shall be referred to the Department of Justice for preliminary investigation and prosecution before the proper court…

    The court emphasized that the mandatory referral of criminal complaints to the DOJ does not require the SEC to conduct a preliminary investigation or provide specific notices to the accused before doing so. The primary requirement is that the SEC must first receive the complaints before referring them to the DOJ for further action.

    Building on this principle, the Supreme Court distinguished the present case from Baviera v. Paglinawan, where the criminal complaint was directly filed with the DOJ, bypassing the SEC altogether. In this case, the investors filed complaints with the SEC, which then conducted an investigation and referred the matter to the DOJ. This procedural sequence, the court held, complied with the requirements of the SRC.

    Moreover, the court noted that the petitioners actively participated in the preliminary investigation conducted by the DOJ, where they had the opportunity to present their counter-affidavits and refute the charges against them. Therefore, their claim of being deprived of due process was unsubstantiated.

    This approach contrasts with a scenario where individuals are not afforded the chance to respond to allegations before formal charges are filed. Due process ensures that every party has an opportunity to be heard, and in this instance, the petitioners’ participation in the DOJ’s preliminary investigation satisfied this requirement.

    The court also addressed the petitioners’ reliance on Pua v. Citibank, N.A., clarifying that this case pertains to the distinction between civil and criminal suits under the SRC, rather than the procedural requirements for SEC investigations. In Pua, the court emphasized that civil suits under the SRC fall under the exclusive original jurisdiction of the regional trial courts and need not be first filed before the SEC, unlike criminal cases.

    In essence, the Supreme Court affirmed that the SEC has broad discretionary powers in conducting investigations for securities violations, and the referral of criminal complaints to the DOJ does not require specific notices of investigation to the accused. This ruling reinforces the SEC’s role in protecting investors and ensuring compliance with securities regulations.

    The practical implications of this decision are significant for both the SEC and individuals involved in securities transactions. It clarifies the procedural framework for prosecuting securities violations and underscores the importance of investor protection. It also emphasizes that while the SEC has broad investigative powers, due process must still be observed, primarily through the opportunity for the accused to participate in the DOJ’s preliminary investigation.

    Furthermore, this ruling serves as a reminder that those involved in securities transactions must be diligent in complying with regulations and transparent in their dealings with investors. Failure to do so may result in legal consequences, including criminal prosecution.

    FAQs

    What was the key issue in this case? The key issue was whether the SEC’s failure to notify the accused of its investigation before referring the criminal complaint to the DOJ constituted a denial of due process and deprived the RTC of jurisdiction.
    What did Section 53.1 of the Securities Regulation Code address? Section 53.1 of the SRC outlines the SEC’s powers to conduct investigations into potential violations of the SRC and mandates the referral of criminal complaints to the DOJ for preliminary investigation and prosecution.
    What was the ruling in Baviera v. Paglinawan? In Baviera v. Paglinawan, the Supreme Court held that a criminal complaint for violation of the SRC must first be filed with the SEC before being referred to the DOJ, highlighting the SEC’s primary jurisdiction over such matters.
    How did the Supreme Court distinguish this case from Baviera v. Paglinawan? The Supreme Court distinguished the present case from Baviera by noting that, unlike Baviera, the complaints were initially filed with the SEC, which then conducted an investigation and referred the matter to the DOJ, thus complying with the SRC’s requirements.
    Did the petitioners have an opportunity to respond to the charges against them? Yes, the petitioners had the opportunity to respond to the charges against them during the preliminary investigation conducted by the DOJ, where they filed their counter-affidavits and presented their defenses.
    What did the Court say about the SEC’s discretion in conducting investigations? The Court affirmed that the SEC has broad discretionary powers in conducting investigations for securities violations and is not required to provide specific notices of investigation to the accused before referring the matter to the DOJ.
    What is the main takeaway from this case for individuals involved in securities transactions? The main takeaway is that individuals involved in securities transactions must ensure compliance with regulations and transparency in their dealings with investors to avoid potential legal consequences, including criminal prosecution.
    What was the significance of the ruling in Pua v. Citibank, N.A. in this context? The ruling in Pua v. Citibank, N.A. clarified the distinction between civil and criminal suits under the SRC, emphasizing that civil suits fall under the exclusive original jurisdiction of the regional trial courts and need not be first filed before the SEC.

    In conclusion, the Supreme Court’s decision in this case clarifies the SEC’s authority in conducting investigations for securities violations and reinforces the importance of adhering to procedural requirements while safeguarding due process rights. The ruling provides essential guidance for both the SEC and individuals engaged in securities transactions.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: Jose T. Tengco III, et al. vs. People, G.R. Nos. 236620, 236802, 237156, February 01, 2023

  • Striking the Balance: Protecting Investor Privacy vs. Tax Collection Efficiency

    In a landmark decision, the Supreme Court of the Philippines sided with investor privacy, declaring Revenue Regulations No. 1-2014, Revenue Memorandum Circular No. 5-2014, and Securities and Exchange Commission Memorandum Circular No. 10-2014 unconstitutional. The Court found that requiring listed companies and broker dealers to disclose the personal information of dividend payees violated the right to privacy and lacked due process, setting a precedent for safeguarding financial data against overly broad government intrusion.

    The Alphalist Under Scrutiny: Can Tax Regulations Trump Investor Privacy?

    This case, The Philippine Stock Exchange, Inc. vs. Secretary of Finance, revolves around the constitutionality of regulations mandating the disclosure of dividend payees’ personal information. These regulations sought to amend existing practices where listed companies could report the Philippine Depository and Trust Corporation (PDTC) Nominee as the payee for dividends, thus maintaining investor anonymity. The new rules aimed to capture detailed data on income payments for tax administration purposes, but petitioners argued that this violated due process, privacy rights, and the principle of non-impairment of contracts.

    The petitioners, including the Philippine Stock Exchange (PSE) and various financial associations, argued that the new regulations infringed upon the due process rights of investors by requiring disclosure without proper notice or hearing. Moreover, they claimed that the mandatory disclosure violated the right to privacy, compelling the sharing of sensitive personal information with third parties. Citing the Data Privacy Act, the petitioners asserted that the regulations lacked adequate safeguards to protect investor data from misuse. Furthermore, they contended that the SEC Chairperson acted beyond her jurisdiction in issuing a memorandum circular to supplement tax regulations, and that the regulations improperly amended the Securities Regulation Code (SRC) by restricting the use of “PCD Nominee”.

    In response, the respondents—the Secretary of Finance, Commissioner of Internal Revenue, and Chairperson of the Securities and Exchange Commission—maintained that the regulations were necessary for effective tax collection and fell within the scope of their regulatory authority. They argued that the Data Privacy Act did not apply, as the information was required to carry out the functions of public authority. Additionally, they posited that the regulations did not violate the Bank Secrecy Law or unduly expand the Commissioner’s power to inquire into bank accounts.

    The Supreme Court, in its analysis, first addressed the procedural issue of legal standing, affirming that the petitioners had third-party standing to represent the interests of their investors. The Court then delved into the substantive issues, examining the importance of the stock market, the withholding tax system, and the purpose of the challenged regulations.

    The Court emphasized that while the state has the power to regulate stock market transactions, such regulations must align with constitutional principles, recognizing the role of the private sector and encouraging private enterprise. The decision highlighted the shift from the previous practice of non-disclosure to mandatory disclosure of investor identities. The court noted the ultimate objectives of the regulations—establishing a simulation model and formulating an analytical framework for policy analysis—were vague and subjective.

    Central to the Court’s decision was the finding that the issuance of the questioned regulations violated due process. The Court distinguished between legislative and interpretative rules, holding that the regulations were legislative in nature because they imposed new obligations and substantially increased the burden on those governed. Since the regulations did not undergo prior notice and hearing, they were deemed invalid. Further, the Court found that the regulations violated the right to privacy, as they were not narrowly drawn to prevent abuses and lacked sufficient safeguards to protect investor information. The Court applied the strict scrutiny test, noting the regulations’ failure to ensure that the collected data would not be used for purposes outside of tax collection.

    “In no uncertain terms, we also underscore that the right to privacy does not bar all incursions into individual privacy. The right is not intended to stifle scientific and technological advancements that enhance public service and the common good. It merely requires that the law be narrowly focused and a compelling interest justify such intrusions. Intrusions into the right must be accompanied by proper safeguards and well-defined standards to prevent unconstitutional invasions. We reiterate that any law or order that invades individual privacy will be subjected by this Court to strict scrutiny.” – Ople v. Torres, 354 Phil. 948 (1998)

    The Court also determined that the SEC Chairperson exceeded her authority in issuing SEC MC 10-2014, as the SEC’s power to issue rules should be in accordance with its duty to implement the SRC and related corporate laws, not tax laws. The Court also concluded that in prohibiting the use of “PCD Nominee,” the Secretary of Finance and the CIR acted outside their scope of authority by delving into matters outside taxation and regulated by the SEC.

    Moreover, the Supreme Court clarified that the regulations did not violate the Bank Secrecy Law, as investments in securities are not considered deposits. The court noted, “Investments in securities covered by scripless trading are not covered by the confidentiality rule under the Bank Secrecy Law.” Also, it ruled that the requirement for disclosure of payees of dividend payments was clear and unequivocal.

    “It is said that taxes are what we pay for civilized society. Without taxes, the government would be paralyzed for lack of the motive power to activate and operate it. Hence, despite the natural reluctance to surrender part of one’s hard-earned income to the taxing authorities, every person who is able to must contribute [their] share in the running of the government.” – Commissioner of Internal Revenue v. Algue, 241 Phil. 829 (1988)

    This decision underscores the importance of balancing the state’s power to tax with the constitutional rights of individuals. While the Court acknowledged the emerging trend towards disclosure of beneficial ownership information, it emphasized that administrative agencies must comply with the Constitution, laws, and jurisprudence. This ruling reaffirms the judiciary’s role in safeguarding individual liberties against potentially overreaching government actions.

    FAQs

    What was the key issue in this case? The key issue was whether the government regulations requiring the disclosure of dividend payees’ personal information violated the constitutional rights to due process and privacy. The Supreme Court ruled in favor of protecting these rights.
    What did the Revenue Regulations 1-2014, Revenue Memorandum Circular 5-2014, and Securities and Exchange Commission Memorandum Circular 10-14 aim to do? These regulations aimed to establish a comprehensive taxpayer database by requiring listed companies and broker dealers to disclose the personal information of dividend payees, replacing the practice of using “PCD Nominee.” The goal was to enhance tax collection and policy analysis.
    Why did the Supreme Court declare these regulations unconstitutional? The Court found that the regulations violated due process by not undergoing proper notice and hearing, and infringed upon the right to privacy by lacking sufficient safeguards for investor data. The SEC Chairperson also acted beyond her authority.
    What is third-party standing, and why was it important in this case? Third-party standing allows a party to bring a lawsuit on behalf of others who may be affected by a law or regulation. In this case, the petitioners had third-party standing to represent the interests of their investors.
    How did the Data Privacy Act factor into the Court’s decision? The Court held that the regulations did not comply with the Data Privacy Act because they failed to provide adequate guarantees for protecting sensitive personal information. The State did not demonstrate that the data collection was narrowly tailored.
    What is the significance of the “strict scrutiny” test in this case? The “strict scrutiny” test requires the government to demonstrate a compelling state interest and that the means chosen are narrowly tailored to achieve that interest. The Court found that the regulations failed to meet this test.
    Did the Court find any violations of the Bank Secrecy Law in this case? No, the Court clarified that investments in securities covered by scripless trading are not subject to the confidentiality rule under the Bank Secrecy Law. This is because such investments are not considered deposits.
    What does this ruling mean for the future of tax regulations in the Philippines? This ruling sets a precedent for balancing the state’s power to tax with the protection of individual constitutional rights. It emphasizes the need for due process, privacy safeguards, and clear legal authority when implementing tax regulations.
    What was the main issue in the GESMUNDO, CJ CONCURRING OPINION The GESMUNDO, CJ CONCURRING OPINION agreed to grant the petition citing concerns on due process. RR 1-2014 must do so capriciously, based on some arbitrary purpose to the detriment of stockholders, as it will not anymore be within the confines of the Tax Code
    What was the main issue in the LEONEN, J SEPARATE CONCURRING OPINION The LEONEN, J SEPARATE CONCURRING OPINION also agreed to grant the petition noting that issuances that creates responsibilities where none existed before and did not procure the permission of the individual investors for the transfer of their personal information from their broker dealers to the listed companies and failed to provide a mechanism to safeguard the personal information of the individual investors. The Court held that public respondents never accused the listed companies of withholding and remitting the wrong amount.
    What was the main issue in the LAZARO-JAVIER, J CONCURRENCE and DISSENT The LAZARO-JAVIER, J CONCURRENCE and DISSENT concurred that the assailed issuances are void due to non-compliance with the foregoing statutory requirements. The data privacy objection would have been easily obviated even without resorting to Section 4(e) of the Data Privacy Act and would have also been able to make the necessary adjustments, especially the individual investors most impacted by this new requirement

    The Supreme Court’s decision in The Philippine Stock Exchange, Inc. vs. Secretary of Finance reinforces the importance of safeguarding individual rights while pursuing legitimate government objectives. This ruling serves as a reminder that administrative regulations must adhere to constitutional principles and respect the privacy expectations of individuals.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: THE PHILIPPINE STOCK EXCHANGE, INC., VS. SECRETARY OF FINANCE, 68497, July 05, 2022

  • Navigating Corporate Dissolution and Fraud: Understanding Intra-Corporate Disputes in the Philippines

    Key Takeaway: Understanding the Application of Interim Rules in Intra-Corporate Disputes

    Bank of the Philippine Islands v. Bacalla, Jr., G.R. No. 223404, July 15, 2020

    Imagine investing in a company, only to find out that your money has been siphoned off through a complex web of corporate schemes. This is not just a plot from a financial thriller; it’s a real issue that investors in the Philippines faced with the Tibayan Group of Investment Companies, Inc. (TGICI). The Supreme Court case of Bank of the Philippine Islands v. Bacalla, Jr. delves into the murky waters of corporate fraud and dissolution, shedding light on the application of the Interim Rules of Procedure for Intra-Corporate Controversies. At the heart of this case is the question: When does a dispute become an intra-corporate matter, and how should it be handled?

    The case began with a petition for the involuntary dissolution of TGICI, filed in the Regional Trial Court (RTC) of Las Piñas City. The court appointed Atty. Marciano S. Bacalla, Jr. as the receiver to liquidate the company’s assets. However, the situation escalated when it was alleged that TGICI had engaged in fraudulent activities, diverting investors’ funds through its subsidiaries to other entities. This led to a subsequent civil case filed against Prudential Bank and Trust Company (now Bank of the Philippine Islands) and other parties involved in the alleged scheme.

    Legal Context: Understanding Intra-Corporate Disputes and the Interim Rules

    Intra-corporate disputes are conflicts that arise within a corporation, involving shareholders, directors, or officers. In the Philippines, these disputes are governed by the Interim Rules of Procedure for Intra-Corporate Controversies, which were established following the transfer of jurisdiction from the Securities and Exchange Commission (SEC) to the RTC under Republic Act No. 8799, the Securities Regulation Code.

    The Interim Rules apply to cases involving fraud or misrepresentation detrimental to the public or the corporation’s stakeholders, as outlined in Section 5 of Presidential Decree No. 902-A. This section specifies that such disputes include:

    a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partners, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission;

    To determine if a case falls under these rules, courts use the ‘relationship test’ and the ‘nature of controversy test’. The former looks at the relationship between the parties involved, while the latter examines the nature of the dispute itself, ensuring it pertains to the enforcement of rights and obligations under the Corporation Code.

    For instance, if a company’s officers engage in a scheme to defraud investors, as was alleged in the TGICI case, the dispute would fall under the Interim Rules because it involves fraud detrimental to the public and the corporation’s stakeholders.

    Case Breakdown: From Dissolution to Dispute

    The journey of this case began with the RTC’s decision to dissolve TGICI and appoint Atty. Bacalla as the receiver. The receiver, along with affected investors, then filed a civil case against Prudential Bank and other entities, alleging that TGICI’s funds were fraudulently diverted through corporate layering and other schemes.

    The Bank of the Philippine Islands (BPI), as the successor-in-interest to Prudential Bank, contested the application of the Interim Rules, arguing that the case did not involve an intra-corporate dispute. However, the Court of Appeals (CA) affirmed the RTC’s decision, ruling that the complaint indeed involved an intra-corporate controversy under Section 5(a) of P.D. No. 902-A.

    The Supreme Court upheld the CA’s decision, emphasizing the specificity of the allegations in the complaint:

    We perused the subject complaint and were convinced that it contained specific allegations of corporate layering, improper matched orders and other manipulative devices or schemes resorted to by the corporate officers in defrauding the stockholders and investors of TGICI.

    The Court also clarified the application of the relationship and nature of controversy tests:

    Under the relationship test, the existence of any of the following relations makes the conflict intra-corporate: (1) between the corporation, partnership or association and the public; (2) between the corporation, partnership or association and the State insofar as its franchise, permit or license to operate is concerned; (3) between the corporation, partnership or association and its stockholders, partners, members or officers; and (4) among the stockholders, partners or associates themselves.

    The procedural steps involved in this case included:

    • Filing of a petition for involuntary dissolution of TGICI.
    • Appointment of Atty. Bacalla as the receiver to liquidate assets.
    • Filing of a civil case by the receiver and investors against Prudential Bank and others for alleged fraud.
    • Denial of BPI’s requests for admission by the RTC, leading to a petition for certiorari to the CA.
    • CA’s affirmation of the RTC’s decision, followed by BPI’s appeal to the Supreme Court.

    The Supreme Court’s decision affirmed the applicability of the Interim Rules, rejecting BPI’s argument that the rule against splitting the cause of action applied to its petition for certiorari.

    Practical Implications: Navigating Intra-Corporate Disputes

    This ruling underscores the importance of understanding the nature of intra-corporate disputes and the applicability of the Interim Rules. For businesses and investors, it highlights the need for vigilance in monitoring corporate activities and the potential recourse available in cases of fraud.

    Companies should ensure transparency and accountability in their operations to avoid falling into the trap of intra-corporate disputes. Investors, on the other hand, should be aware of their rights and the legal mechanisms available to them in case of fraudulent activities by corporate officers.

    Key Lessons:

    • Understand the criteria for an intra-corporate dispute, including the relationship and nature of controversy tests.
    • Be aware of the Interim Rules and their application in cases involving corporate fraud.
    • Seek legal advice promptly if you suspect fraudulent activities within a corporation.

    Frequently Asked Questions

    What is an intra-corporate dispute?

    An intra-corporate dispute is a conflict that arises within a corporation, involving shareholders, directors, or officers, and often pertains to the enforcement of rights and obligations under the Corporation Code.

    How do the Interim Rules apply to intra-corporate disputes?

    The Interim Rules of Procedure for Intra-Corporate Controversies apply to cases involving fraud or misrepresentation detrimental to the public or the corporation’s stakeholders, as outlined in Section 5 of Presidential Decree No. 902-A.

    What is the relationship test in determining an intra-corporate dispute?

    The relationship test examines the relationship between the parties involved in the dispute, such as between the corporation and its shareholders, or among shareholders themselves.

    What is the nature of controversy test?

    The nature of controversy test looks at whether the dispute pertains to the enforcement of rights and obligations under the Corporation Code, ensuring it is intrinsically connected to the corporation’s internal affairs.

    Can a receiver file a case on behalf of a dissolved corporation?

    Yes, a court-appointed receiver, as in the case of Atty. Bacalla, can file a case on behalf of a dissolved corporation to recover assets that have been fraudulently dissipated.

    What should investors do if they suspect corporate fraud?

    Investors should gather evidence, consult with a legal professional, and consider filing a complaint under the Interim Rules if the fraud involves intra-corporate matters.

    ASG Law specializes in corporate law and intra-corporate disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.

  • When is SEC approval needed to trade securities? SC clarifies rules on probable cause in securities fraud

    In the Philippines, the Securities and Exchange Commission (SEC) closely regulates the trading of securities to protect investors. This case clarifies when the SEC can file charges against a company for illegally trading securities. The Supreme Court emphasizes that the SEC must show concrete evidence of actual buying and selling, not just the lack of a license. This ruling safeguards businesses from unwarranted legal actions, ensuring charges are based on solid proof rather than mere suspicion.

    Price Richardson Corp: When does unauthorized trading warrant legal action?

    This case revolves around a complaint filed by the Securities and Exchange Commission (SEC) against Price Richardson Corporation (Price Richardson), along with its officers Consuelo Velarde-Albert and Gordon Resnick. The SEC alleged that Price Richardson engaged in the business of buying and selling securities without the necessary license or registration, violating Sections 26.3 and 28 of the Securities Regulation Code. These sections aim to prevent fraudulent transactions and ensure that individuals or entities involved in the securities market are properly registered and authorized. The SEC also accused the respondents of Estafa under Article 315(1)(b) of the Revised Penal Code, claiming they defrauded investors by posing as legitimate stockbrokers and misappropriating their investments.

    The SEC’s complaint was based on affidavits from former employees of Price Richardson and Capital International Consultants, Inc., who claimed that Price Richardson was involved in “boiler room operations,” selling non-existent stocks to investors using high-pressure sales tactics. They alleged that the company would close down and re-emerge under a new name whenever its activities were discovered. Acting on these allegations, the National Bureau of Investigation (NBI) and the SEC obtained search warrants and seized documents and equipment from Price Richardson’s office. The SEC then filed a complaint with the Department of Justice (DOJ), seeking the indictment of Price Richardson and its officers.

    In response, Price Richardson argued that it was merely providing administrative services and that the alleged transactions were not subject to Philippine jurisdiction because the buyers were not Philippine residents and the securities were registered outside the Philippines. Velarde-Albert and Resnick denied any direct participation in the alleged illegal stock trading. The State Prosecutor initially dismissed the SEC’s complaint for lack of probable cause, finding that the SEC failed to provide sufficient evidence of unauthorized trading. The SEC appealed this decision to the Secretary of Justice, who upheld the dismissal. The Court of Appeals affirmed the DOJ’s resolutions, leading the SEC to file a Petition for Review before the Supreme Court.

    The Supreme Court’s analysis hinged on whether the DOJ committed grave abuse of discretion in finding no probable cause to indict the respondents. The court reiterated that the determination of probable cause for filing a criminal information is primarily an executive function, falling within the discretion of the public prosecutor and the Secretary of Justice. Courts can only interfere with this determination if there is a showing of grave abuse of discretion, which constitutes a refusal to act in contemplation of law or a gross disregard of the Constitution, law, or existing jurisprudence.

    The Supreme Court emphasized the definition of probable cause as such facts as are sufficient to engender a well-founded belief that a crime has been committed and that the respondent is probably guilty thereof. In this context, the court examined the evidence presented by the SEC, including the certification that Price Richardson was not licensed to engage in the business of buying and selling securities, the documents seized from its office, and the complaints from individuals who claimed to have been defrauded. The court found that this evidence, along with Price Richardson’s admission that it engaged in outsourced operations to inform foreign individuals about securities available in foreign locations, was sufficient to support a reasonable belief that Price Richardson was probably guilty of violating Sections 26.3 and 28 of the Securities Regulation Code.

    “What is material to a finding of probable cause is the commission of acts constituting [the offense], the presence of all its elements and the reasonable belief, based on evidence, that the respondent had committed it.”

    However, the Court upheld the dismissal of the complaints against Velarde-Albert and Resnick, finding that the SEC failed to allege specific acts that could be interpreted as their direct participation in the alleged violations. The court reiterated the principle that a corporation’s personality is separate and distinct from its officers, directors, and shareholders, and that to hold individuals criminally liable for the acts of a corporation, there must be a showing that they actively participated in or had the power to prevent the wrongful act.

    The Supreme Court also cited Villanueva v. Secretary of Justice to define probable cause:

    “Probable cause, for purposes of filing a criminal information, has been defined as such facts as are sufficient to engender a well-founded belief that a crime has been committed and that the private respondent is probably guilty thereof. It is such a state of facts in the mind of the prosecutor as would lead a person of ordinary caution and prudence to believe or entertain an honest or strong suspicion that a thing is so.”

    The decision highlights the importance of adhering to the due process of law, particularly the necessity of establishing probable cause before initiating criminal proceedings. It underscores the principle that the determination of probable cause is an executive function but subject to judicial review when grave abuse of discretion is alleged. The court’s ruling also serves as a reminder that corporate officers cannot be held liable for the acts of the corporation unless their direct participation or power to prevent the wrongful act is clearly established.

    FAQs

    What was the key issue in this case? The key issue was whether the Department of Justice (DOJ) committed grave abuse of discretion in finding no probable cause to indict Price Richardson Corporation and its officers for violating the Securities Regulation Code and Estafa.
    What is the Securities Regulation Code? The Securities Regulation Code is a law that regulates the trading of securities in the Philippines, aiming to protect investors and ensure fair and transparent market practices. It requires brokers, dealers, and salesmen to be registered with the Securities and Exchange Commission (SEC).
    What is probable cause in the context of filing a criminal information? Probable cause refers to such facts and circumstances that would lead a reasonably cautious person to believe that a crime has been committed and that the accused is probably guilty of the offense. It is a lower standard than proof beyond reasonable doubt, which is required for conviction.
    What is grave abuse of discretion? Grave abuse of discretion means such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. In other words, when the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility, and it must be so patent and gross as to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law.
    Can corporate officers be held liable for the acts of a corporation? Generally, a corporation has a separate and distinct personality from its officers and shareholders. Corporate officers can be held liable for the acts of the corporation if it is proven that they actively participated in or had the power to prevent the wrongful act.
    What evidence did the SEC present against Price Richardson? The SEC presented a certification that Price Richardson was not licensed to engage in the business of buying and selling securities, documents seized from its office showing possible sales of securities, and complaints from individuals who claimed to have been defrauded.
    Why were the complaints against Velarde-Albert and Resnick dismissed? The complaints against Velarde-Albert and Resnick were dismissed because the SEC failed to allege specific acts that could be interpreted as their direct participation in the alleged violations. There was no evidence showing that they were directly responsible for Price Richardson’s actions.
    What is the role of the Department of Justice in this case? The Department of Justice (DOJ), through the State Prosecutor and the Secretary of Justice, is responsible for determining whether there is probable cause to file a criminal information against the respondents. The DOJ reviews the evidence presented by the SEC and the respondents before making a decision.

    This case underscores the importance of providing concrete evidence when alleging violations of the Securities Regulation Code. While the SEC has a duty to protect investors and regulate the securities market, it must ensure that its actions are based on solid evidence and not mere suspicion. The Supreme Court’s decision provides guidance on the standard of proof required to establish probable cause in securities fraud cases, safeguarding businesses from unwarranted legal actions.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: SECURITIES AND EXCHANGE COMMISSION VS. PRICE RICHARDSON CORPORATION, ET AL., G.R. No. 197032, July 26, 2017

  • Investment Contracts and SEC Jurisdiction: Protecting Investors Through Regulation

    The Supreme Court ruled that a Cease and Desist Order (CDO) issued by the Securities and Exchange Commission (SEC) against CJH Development Corporation and CJH Suites Corporation for selling unregistered investment contracts was an interlocutory order and not appealable. The Court emphasized that the SEC has primary jurisdiction over cases involving the sale of securities, and parties must exhaust all administrative remedies before seeking judicial intervention. This decision reinforces the SEC’s authority to protect the investing public from potentially fraudulent schemes by ensuring compliance with the Securities Regulation Code.

    Condotels and Contracts: Is a ‘Leaseback’ a Security Requiring SEC Oversight?

    The case revolves around CJH Development Corporation (CJHDC) and its subsidiary, CJH Suites Corporation (CJHSC), which were selling condotel units in Baguio City under two schemes: a straight purchase and sale, and a sale with a “leaseback” or “money-back” arrangement. The Bases Conversion and Development Authority (BCDA), suspecting that the “leaseback” and “money-back” schemes were unregistered investment contracts, requested the SEC to investigate. The SEC’s investigation led to a Cease and Desist Order (CDO) against CJHDC and CJHSC, halting the sale of these condotel units until proper registration was completed. This order was challenged by CJHDC and CJHSC, leading to a legal battle concerning the SEC’s jurisdiction, the nature of the CDO, and the definition of an investment contract.

    The central legal question is whether the “leaseback” and “money-back” arrangements offered by CJHDC and CJHSC constitute investment contracts, which are considered securities under the Securities Regulation Code (SRC). The definition of a security is critical because the SRC mandates that all securities must be registered with the SEC before being offered or sold to the public. This registration requirement is designed to protect investors by ensuring that they have access to adequate information about the investment and the issuer. The SEC’s determination that the arrangements were unregistered securities triggered the issuance of the CDO.

    The Supreme Court underscored that the SEC’s CDO was an **interlocutory order**, which is a provisional decision that does not fully resolve the controversy. As the Court stated, “The word interlocutory refers to something intervening between the commencement and the end of the suit which decides some point or matter but is not a final decision of the whole controversy.” Therefore, it’s not immediately appealable. The Court emphasized that an interlocutory order “merely resolves incidental matters and leaves something more to be done to resolve the merits of the case.” The SEC’s CDO, being based on prima facie evidence, falls under this category, as it allows for further evidence and hearings to determine the ultimate validity of the claims.

    Building on this, the Court cited the SEC’s own rules of procedure to reinforce the non-appealable nature of a CDO. Section 10-8 of the 2006 Rules of Procedure of the Commission explicitly states:

    SEC. 10-8. Prohibitions. – No pleading, motion or submission in any form that may prevent the resolution of an application for a CDO by the Commission shall be entertained except under Rule XII herein. A CDO when issued, shall not be the subject of an appeal and no appeal from it will be entertained; Provided, however, that an order by the Director of the Operating Department denying the motion to lift a CDO may be appealed to the Commission En Banc through the O[ffice of the] G[eneral] C[ounsel].

    This rule clearly indicates that the proper recourse for parties subject to a CDO is to file a motion to lift the order, rather than immediately appealing to the Court of Appeals. By failing to file this motion, CJHDC and CJHSC did not exhaust the administrative remedies available to them.

    The doctrine of **exhaustion of administrative remedies** requires parties to pursue all available avenues for relief within the administrative system before resorting to judicial intervention. The Court reiterated the rationale behind this doctrine, stating, “Under the doctrine of exhaustion of administrative remedies, before a party is allowed to seek the intervention of the court, he or she should have availed himself or herself of all the means of administrative processes afforded him or her.” This ensures that administrative agencies are given the opportunity to correct their own errors and resolve disputes within their area of expertise.

    Furthermore, the Supreme Court found that the determination of whether the “leaseback” and “money-back” schemes constituted investment contracts required the specialized knowledge and expertise of the SEC. This aligns with the doctrine of **primary administrative jurisdiction**, which holds that courts should defer to administrative agencies on matters that fall within their regulatory competence. The Court reasoned that the SEC, as the agency tasked with enforcing the SRC, is best equipped to determine whether the schemes meet the definition of a security and whether their sale should be regulated.

    CJHDC and CJHSC argued that the SEC’s investigation violated their right to due process. However, the Court rejected this argument, citing Sections 64.1 and 64.2 of the SRC, which allow the SEC to issue a CDO motu proprio (on its own initiative) if it believes that an act or practice, unless restrained, will operate as a fraud on investors or cause grave injury to the investing public. In Primanila Plans, Inc. v. Securities and Exchange Commission, the Court clarified:

    The law is clear on the point that a cease and desist order may be issued by the SEC motu proprio, it being unnecessary that it results from a verified complaint from an aggrieved party. A prior hearing is also not required whenever the Commission finds it appropriate to issue a cease and desist order that aims to curtail fraud or grave or irreparable injury to investors. There is good reason for this provision, as any delay in the restraint of acts that yield such results can only generate further injury to the public that the SEC is obliged to protect.

    The Court emphasized that due process is satisfied as long as the company is apprised of the results of the SEC investigation and given a reasonable opportunity to present its defense. In this case, CJHDC and CJHSC had the opportunity to file a motion to lift the CDO, which would have allowed them to present evidence and arguments against the SEC’s findings.

    In conclusion, the Supreme Court’s decision underscores the SEC’s critical role in protecting investors and regulating the securities market. By affirming the non-appealable nature of interlocutory CDOs and emphasizing the doctrines of exhaustion of administrative remedies and primary jurisdiction, the Court has reinforced the SEC’s authority to act swiftly and decisively to prevent potential fraud and protect the investing public. This decision serves as a reminder to companies offering investment opportunities to ensure compliance with the SRC and to exhaust all available administrative remedies before seeking judicial intervention.

    FAQs

    What is a Cease and Desist Order (CDO)? A CDO is an order issued by the SEC directing a person or entity to stop a particular activity that the SEC believes violates securities laws. It is often issued to prevent ongoing or potential harm to investors.
    What does “interlocutory order” mean? An interlocutory order is a temporary decision made during a case that doesn’t resolve the entire dispute. It’s like a preliminary step that addresses a specific issue but leaves the main case unresolved.
    What is an investment contract? An investment contract is a type of security where a person invests money in a common enterprise and expects profits solely from the efforts of others. These contracts are subject to regulation under the Securities Regulation Code.
    Why did the SEC issue a CDO in this case? The SEC issued the CDO because it believed that CJHDC and CJHSC were selling unregistered investment contracts in the form of “leaseback” and “money-back” arrangements. Selling unregistered securities is a violation of the Securities Regulation Code.
    What is the doctrine of exhaustion of administrative remedies? This doctrine requires parties to first pursue all available remedies within an administrative agency before seeking relief from the courts. It ensures that agencies have the chance to correct their own errors.
    What is the doctrine of primary administrative jurisdiction? This doctrine states that courts should defer to administrative agencies on matters that fall within their regulatory competence and require specialized expertise. It prevents courts from interfering in areas where agencies have specific knowledge and experience.
    What should CJHDC and CJHSC have done after the CDO was issued? Instead of immediately appealing to the Court of Appeals, CJHDC and CJHSC should have filed a motion to lift the CDO with the SEC. This would have given them the opportunity to present evidence and arguments against the SEC’s findings.
    Can the SEC issue a CDO without a prior hearing? Yes, the SEC can issue a CDO without a prior hearing if it believes that an act or practice, unless restrained, will operate as a fraud on investors or cause grave injury to the investing public. However, the affected party must be given an opportunity to be heard after the order is issued.

    This ruling clarifies the process for challenging SEC orders and reinforces the importance of adhering to administrative procedures before seeking judicial review. Companies must ensure they comply with securities regulations and understand the proper channels for addressing regulatory concerns.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: THE SECURITIES AND EXCHANGE COMMISSION vs. CJH DEVELOPMENT CORPORATION, G.R. No. 210316, November 28, 2016

  • Cease and Desist Orders: SEC’s Authority and the Limits of Judicial Intervention

    The Supreme Court ruled that a Cease and Desist Order (CDO) issued by the Securities and Exchange Commission (SEC) is an interlocutory order and, therefore, not immediately appealable. The Court emphasized that parties must first exhaust all administrative remedies, such as filing a motion to lift the CDO with the SEC, before seeking judicial intervention. This decision reinforces the SEC’s primary jurisdiction over cases involving securities regulation and protects the investing public by ensuring swift action against potentially fraudulent activities, without premature disruption from the courts.

    John Hay Echoes: Can Condotel ‘Leasebacks’ Bypass Securities Laws?

    This case revolves around CJH Development Corporation (CJHDC) and its subsidiary, CJH Suites Corporation (CJHSC), which offered condotel units for sale in Baguio City under schemes called “leaseback” and “money-back” arrangements. The Bases Conversion and Development Authority (BCDA) raised concerns that these schemes were essentially unregistered investment contracts, prompting the SEC to investigate. After investigation, the SEC issued a Cease and Desist Order (CDO) against CJHDC and CJHSC, halting their sale of condotel units. The central legal question is whether these leaseback arrangements constitute the sale of unregistered securities, thus falling under the regulatory purview of the SEC.

    The Supreme Court emphasized the interlocutory nature of a CDO, clarifying that such an order is provisional and subject to further determination based on evidence presented by both parties. The Court highlighted the principle that appeals can only be made against final orders, not interlocutory ones, to prevent delays in the administration of justice. In this instance, the CDO was issued based on prima facie evidence, meaning the SEC’s findings could still be disproven. As such, the CDO was deemed temporary and not a final determination on the matter.

    The Court cited Section 10-8 of the SEC’s 2006 Rules of Procedure, which explicitly prohibits appeals against CDOs. This rule underscores the SEC’s authority to swiftly address potential violations of securities laws without being hampered by premature judicial intervention. Furthermore, Section 10-5 of the same rules outlines the process for making a CDO permanent, thereby reinforcing its temporary nature and providing a pathway for affected parties to present their case to the SEC.

    The decision also underscores the importance of exhausting administrative remedies before seeking judicial relief. The Court noted that CJHDC and CJHSC failed to file a motion to lift the CDO with the SEC, a remedy specifically provided under Section 64.3 of the Securities Regulation Code (SRC) and Section 10-3 of the SEC’s Rules of Procedure.

    “Any person against whom a cease and desist order was issued may, within five (5) days from receipt of the order, file a formal request for a lifting thereof. Said request shall be set for hearing by the Commission not later than fifteen (15) days from its filing and the resolution thereof shall be made not later than ten (10) days from the termination of the hearing. If the Commission fails to resolve the request within the time herein prescribed, the cease and desist order shall automatically be lifted.”

    This provision offers an avenue for parties to present evidence and arguments against the CDO before resorting to the courts.

    The doctrine of primary administrative jurisdiction further supports the Court’s decision. This doctrine dictates that courts should defer to administrative agencies when the matter requires the agency’s specialized knowledge and expertise. In this case, determining whether the condotel leaseback schemes constitute investment contracts falls squarely within the SEC’s expertise. The Court emphasized that the SEC is tasked with enforcing the SRC and its implementing rules, making it the appropriate body to initially resolve this issue.

    The Court also addressed the issue of due process, rejecting the argument that CJHDC and CJHSC were denied their right to be heard. Sections 64.1 and 64.2 of the SRC authorize the SEC to issue CDOs motu proprio (on its own initiative) and without a prior hearing, if it deems that the act or practice would operate as a fraud on investors or cause grave injury to the investing public.

    “The Commission, after proper investigation or verification, motu proprio, or upon verified complaint by any aggrieved party, may issue a cease and desist order without the necessity of a prior hearing if in its judgment the act or practice, unless restrained, will operate as a fraud on investors or is otherwise likely to cause grave or irreparable injury or prejudice to the investing public.”

    The Supreme Court referenced Primanila Plans, Inc. v. Securities and Exchange Commission, reiterating that a prior hearing is not always required for issuing a CDO. Due process is satisfied as long as the affected party is informed of the SEC’s findings and given an opportunity to present a defense, which CJHDC and CJHSC could have done through a motion to lift the CDO.

    Finally, the Court affirmed the SEC’s finding that selling unregistered securities operates as a fraud on investors. Section 8.1 of the SRC mandates the registration of securities before they are sold or offered for sale, ensuring that prospective buyers have access to essential information. By selling unregistered securities, CJHDC and CJHSC deceived the investing public into believing they had the authority to deal in such securities, thereby undermining investor protection.

    FAQs

    What was the key issue in this case? The key issue was whether a Cease and Desist Order (CDO) issued by the SEC is immediately appealable to the Court of Appeals. The Supreme Court ruled it is not, as it is an interlocutory order.
    What is a Cease and Desist Order (CDO)? A CDO is an order issued by the SEC to halt certain activities that are believed to violate securities laws. It is a temporary measure to prevent potential harm to investors while the SEC investigates further.
    Why is a CDO considered an interlocutory order? A CDO is considered interlocutory because it is provisional and does not represent a final determination on the merits of the case. It is subject to further review and potential modification after a hearing.
    What does it mean to exhaust administrative remedies? Exhausting administrative remedies means using all available procedures within an administrative agency before seeking judicial intervention. In this case, it means filing a motion to lift the CDO with the SEC before appealing to the courts.
    What is the doctrine of primary administrative jurisdiction? This doctrine states that courts should defer to administrative agencies when the issue requires the agency’s specialized knowledge and expertise. This ensures that technical matters are resolved by those with the appropriate competence.
    Does the SEC need to conduct a hearing before issuing a CDO? No, the SEC can issue a CDO without a prior hearing if it believes that the act or practice will operate as a fraud on investors or cause grave injury to the investing public. However, the affected party has the right to request a hearing to lift the CDO.
    What is an investment contract according to securities law? An investment contract is an agreement where a person invests money in a common enterprise and expects to earn profits primarily from the efforts of others. These contracts are considered securities and are subject to registration requirements.
    What happens if a company sells securities without registering them? Selling unregistered securities violates the Securities Regulation Code and can result in a Cease and Desist Order from the SEC. It also operates as a fraud on investors because it deprives them of crucial information about the securities.

    This case reinforces the SEC’s critical role in protecting the investing public and clarifies the boundaries of judicial intervention in securities regulation. By emphasizing the interlocutory nature of CDOs and the importance of exhausting administrative remedies, the Supreme Court ensures that the SEC can effectively address potential violations of securities laws. This decision also serves as a reminder to companies offering investment schemes to comply with registration requirements and avoid practices that could be construed as fraudulent.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: SEC vs CJH Development Corporation, G.R. No. 210316, November 28, 2016

  • Upholding SEC’s Oversight: Investigating Corporate Irregularities and Protecting Stakeholders

    The Supreme Court affirmed the Securities and Exchange Commission’s (SEC) authority to investigate alleged corporate irregularities, even if these involve intra-corporate disputes typically under the jurisdiction of Regional Trial Courts. The Court emphasized that the SEC retains powers to ensure compliance with the Securities Regulation Code (SRC) and to protect the interests of minority stockholders and the public. This decision clarifies the SEC’s role in overseeing corporations and taking necessary actions, such as creating a management committee, to prevent fraud and mismanagement, safeguarding corporate assets and stakeholders’ interests.

    When Can the SEC Step In? Examining Corporate Governance and Minority Rights

    This case revolves around a dispute within Capitol Hills Golf and Country Club, Inc. (Capitol). Minority shareholders filed a complaint with the SEC alleging fraud and misrepresentation by the company’s officers, particularly President Pablo B. Roman, Jr., regarding agreements with Ayala Land Inc. (ALI). The shareholders requested the SEC to investigate and establish a Management Committee (MANCOM) to oversee Capitol’s affairs. The SEC, finding merit in the complaint, created the MANCOM. Roman and Corporate Secretary Matias V. Defensor challenged the SEC’s jurisdiction, arguing that the matter was an intra-corporate controversy falling under the Regional Trial Court’s (RTC) purview.

    The central issue was whether the SEC exceeded its authority by taking cognizance of the shareholders’ complaint and creating the MANCOM. Petitioners argued that with the enactment of the Securities Regulation Code (SRC), jurisdiction over intra-corporate disputes was transferred to the Regional Trial Courts. The SEC, however, maintained that its actions were within its administrative, supervisory, and regulatory powers as outlined in the SRC and Presidential Decree No. 902-A.

    The Supreme Court sided with the SEC, referencing key provisions of the SRC. Section 5 outlines the powers and functions of the SEC, including the jurisdiction and supervision over corporations with government-issued franchises or licenses. It also empowers the SEC to regulate, investigate, or supervise activities to ensure compliance. Section 53 grants the SEC the discretion to investigate potential violations of the SRC, its rules, or any related orders. These provisions, the Court reasoned, provide ample basis for the SEC to act on complaints alleging violations of corporate governance and securities laws.

    SECTION 5. Powers and Functions of the Commission. — 5.1. The Commission shall act with transparency and shall have the powers and functions provided by this Code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses Law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions:

    (a) Have jurisdiction and supervision over all corporations, partnerships or associations who are the grantees of primary franchises and/or a license or permit issued by the Government;
    (d) Regulate, investigate or supervise the activities of persons to ensure compliance;
    (n) Exercise such other powers as may be provided by law as well as those which may be implied from, or which are necessary or incidental to the carrying out of, the express powers granted the Commission to achieve the objectives and purposes of these laws.

    Building on this principle, the Court clarified that the transfer of jurisdiction over intra-corporate disputes to the RTCs did not strip the SEC of its administrative and regulatory authority. The SEC retains the power to investigate potential violations of the SRC and related laws, even if the complaint also involves issues typically heard by the RTCs. The key distinction lies in the SEC’s focus on ensuring compliance and imposing administrative sanctions, as opposed to resolving the underlying intra-corporate dispute itself.

    The Court considered whether the SEC’s creation of the MANCOM was justified. Petitioners contended that this action constituted an intra-corporate matter falling under the RTC’s exclusive jurisdiction. The SEC argued that the MANCOM was a necessary measure to protect the interests of minority shareholders and the public, based on SEC Memorandum Circular (MC) No. 11, Series of 2003. This circular empowers the SEC to take actions, including constituting a Management Committee, to effectively implement the laws it is mandated to enforce. The Court agreed with the SEC, holding that the power to create a MANCOM is implied from the SEC’s express power of supervision over corporations.

    The creation of a management committee is seen as a way to protect the interest of the stockholders and the public. The Court noted that the creation of a MANCOM is often a response to immediate threats of loss, asset destruction, or business paralysis within a corporation. The SEC, as the regulatory body, is best positioned to provide such immediate relief. This authority is expressly recognized in SEC-MC No. 11, Series of 2003, which carries a presumption of validity unless proven otherwise.

    In essence, the Supreme Court’s decision reaffirms the SEC’s critical role in overseeing corporations and safeguarding stakeholders’ interests. While intra-corporate disputes may fall under the RTC’s jurisdiction, the SEC retains the power to investigate potential violations of securities laws and take necessary actions to prevent fraud and mismanagement. This decision underscores the importance of corporate governance and the SEC’s ability to intervene when corporate officers act in ways that harm shareholders or the public.

    FAQs

    What was the key issue in this case? The central issue was whether the SEC exceeded its authority by taking cognizance of a complaint filed by minority shareholders and creating a management committee to oversee the corporation’s affairs.
    Did the SRC transfer all jurisdiction over corporate disputes to the RTC? No, while the SRC transferred jurisdiction over intra-corporate disputes to the RTC, the SEC retained its administrative and regulatory powers to investigate violations of securities laws and ensure compliance.
    What is a Management Committee (MANCOM)? A MANCOM is a committee created by the SEC to oversee and supervise the activities of a corporation, typically when there are concerns about mismanagement or potential fraud. Its purpose is to protect the interests of shareholders and the public.
    What is the basis for the SEC’s power to create a MANCOM? The SEC’s power to create a MANCOM is derived from its supervisory and regulatory functions under the SRC and SEC Memorandum Circular No. 11, Series of 2003, which allows it to take necessary actions to implement securities laws effectively.
    What kind of actions prompted the minority shareholders to file a complaint? The shareholders alleged fraud and misrepresentation by the company’s officers, particularly regarding agreements with Ayala Land Inc., which they believed were detrimental to the corporation’s interests.
    What does Section 5 of the SRC say? Section 5 of the SRC outlines the powers and functions of the SEC, including jurisdiction over corporations with government-issued franchises, the authority to regulate and investigate activities, and the power to exercise other implied powers necessary to achieve its objectives.
    What did SEC Memorandum Circular No. 11, Series of 2003 authorize? SEC Memorandum Circular No. 11, Series of 2003 authorizes the SEC to take actions necessary to enforce securities laws, including constituting a Management Committee, appointing receivers, and issuing cease and desist orders to prevent fraud.
    What was the outcome of the case? The Supreme Court upheld the SEC’s authority to take cognizance of the complaint and create the MANCOM, reaffirming its role in overseeing corporations and safeguarding stakeholders’ interests.

    The Supreme Court’s decision in this case reinforces the SEC’s critical role in corporate governance and the protection of investors. It clarifies the scope of the SEC’s authority to investigate potential violations of securities laws and take corrective measures, even in situations involving intra-corporate disputes. This ruling provides important guidance for corporations, shareholders, and the SEC in navigating complex issues of corporate governance and regulatory oversight.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: PABLO B. ROMAN, JR., VS. SECURITIES AND EXCHANGE COMMISSION, G.R. No. 196329, June 01, 2016

  • Due Process and SEC Regulatory Powers: Revocation of Securities Registration

    In Securities and Exchange Commission v. Universal Rightfield Property Holdings, Inc., the Supreme Court ruled that the SEC substantially complied with due process requirements when it revoked Universal Rightfield Property Holdings, Inc.’s (URPHI) registration of securities and permit to sell them to the public. This decision clarifies that while the Securities Regulation Code (SRC) mandates due notice and hearing before such revocation, separate notices for suspension and revocation are not required if the initial notice clearly warns of potential revocation for continued non-compliance. The Court emphasized that the essence of due process is the opportunity to be heard and that URPHI was afforded this opportunity through notices, hearings, and chances to submit explanations and seek reconsideration.

    From Suspension to Revocation: Did the SEC Follow Due Process?

    Universal Rightfield Property Holdings, Inc. (URPHI), a company engaged in providing residential and leisure-related services, faced revocation of its securities registration and permit to sell securities due to repeated failures to comply with reportorial requirements under the Securities Regulation Code (SRC). The Securities and Exchange Commission (SEC) initially issued a suspension order with a warning that continued non-compliance would lead to revocation. When URPHI failed to meet the extended deadlines, the SEC revoked its registration. The central legal question was whether the SEC’s actions complied with the due process requirements outlined in the SRC, specifically whether separate notices and hearings were required for suspension and revocation.

    The Court began its analysis by examining Sections 13.1 and 54.1 of the SRC, which govern the rejection or revocation of security registrations. These sections stipulate that the SEC may take such actions “after due notice and hearing.” The Supreme Court interpreted this to mean that as long as the entity is given an opportunity to be heard, the requirements of due process are met. The Court emphasized that the essence of due process is the opportunity to be heard, whether through explaining one’s side or seeking reconsideration.

    The Court stated:

    13.1. The Commission may reject a registration statement and refuse registration of the security thereunder, or revoke the effectivity of a registration statement and the registration of the security thereunder after due notice and hearing by issuing an order to such effect, setting forth its findings in respect thereto, if it finds that:

    a) The issuer:

    x x x x

    (ii) Has violated any of the provisions of this Code, the rules promulgated pursuant thereto, or any order of the Commission of which the issuer has notice in connection with the offering for which a registration statement has been filed;

    The Court found that the SEC’s Order dated July 27, 2004, served as sufficient notice of the potential revocation. This order explicitly stated that the suspension would be effective for sixty days, after which the SEC would proceed with revocation if the reporting requirements were not met. Thus, the Court reasoned that a separate notice of hearing for revocation would be a mere superfluity, as the initial order already provided clear warning of the consequences of continued non-compliance. “Due notice” provides the information needed for the recipient to respond to allegations that affect their legal rights or duties.

    Moreover, the Court determined that even without a formal hearing specifically for the revocation, there was substantial compliance with due process. The SEC considered URPHI’s letters requesting extensions and explaining the reasons for non-compliance. Additionally, URPHI had the opportunity to seek reconsideration of the revocation order by filing a Notice of Appeal and a Memorandum. The SEC’s denial of this appeal further demonstrated that URPHI’s concerns were taken into account. In the case of A.Z. Arnaiz, Realty, Inc. v. Office of the President, the Court affirmed that due process does not always necessitate a trial-type proceeding and that litigants may be heard through various means, including pleadings and written explanations.

    The ruling also distinguished the present case from Globe Telecom, Inc. v. National Telecommunications Commission, where a fine imposed without notice and hearing was deemed a denial of due process. Here, the Court clarified that the SEC’s revocation of URPHI’s registration was an exercise of its regulatory power rather than its quasi-judicial power. The SEC was not settling a dispute or adjudicating private rights but rather enforcing compliance with regulatory requirements. The SEC exercises its incidental power to conduct administrative hearings and make decisions during its regulatory and law enforcement functions.

    In the context of administrative due process, the Supreme Court highlighted that a motion for reconsideration could cure defects in procedural due process if a party is given a sufficient opportunity to explain their side of the controversy. URPHI had claimed that its appeal to the SEC only addressed procedural issues, but the Court found that URPHI also raised substantive reasons for its non-compliance and argued against the inequity of the revocation. Citing the Securities and Exchange Commission v. Court of Appeals, et al. case, the Court clarified that the SEC has both regulatory and adjudicative functions, and the revocation of securities registration falls under its regulatory responsibilities.

    The Court addressed URPHI’s argument that the revocation was inequitable, considering the potential financial ruin and the impact on investors. However, the Court emphasized that URPHI had a history of non-compliance, having previously had its registration revoked for similar violations. Despite being given opportunities to rectify its non-compliance, URPHI repeatedly failed to meet its reportorial obligations. According to SEC Memorandum Circular No. 6, Series of 2005, the Consolidated Scale of Fines in effect at the time the offenses were committed, prescribed clear administrative penalties for the late filing of annual and quarterly reports.

    The Court emphasized that the SEC’s actions were in line with the state policies declared in Section 2 of the SRC, which aim to protect investors and ensure full and fair disclosure of information about securities and their issuers. These policies are crucial for maintaining market transparency and investor confidence. The continued failure to comply with reportorial requirements undermined these goals and justified the SEC’s decision to revoke URPHI’s registration.

    Thus, the Supreme Court reversed the Court of Appeals’ decision, reinstating the SEC’s Resolution and Order of Revocation. The Court held that the SEC had substantially complied with the requirements of due notice and hearing under the SRC. While URPHI was not granted a separate formal hearing for the revocation, the Court found that the opportunity to be heard was adequate in the context of the continuous notices given to URPHI regarding its violations.

    FAQs

    What was the key issue in this case? The central issue was whether the SEC violated URPHI’s right to due process by revoking its securities registration and permit to sell without providing a separate notice and hearing specifically for the revocation. The Court needed to determine if the existing notices and opportunities to be heard were sufficient under the Securities Regulation Code (SRC).
    What are reportorial requirements under the SRC? Reportorial requirements under the SRC mandate that companies regularly file financial reports, such as annual and quarterly reports, with the SEC. These reports are intended to provide investors with up-to-date information about the company’s financial condition and operations, promoting transparency and investor protection.
    Did URPHI violate any SEC rules? Yes, URPHI repeatedly failed to submit its annual reports (SEC Form 17-A) and quarterly reports (SEC Form 17-Q) in a timely manner, violating Section 17.1 of the Amended Implementing Rules and Regulations of the SRC. This non-compliance was the primary basis for the SEC’s decision to suspend and eventually revoke URPHI’s securities registration.
    What is the significance of “due notice” in this case? “Due notice” refers to the information provided to a party regarding actions or allegations that affect their legal rights or duties, allowing them an opportunity to respond. In this case, the SEC’s initial suspension order, which explicitly warned of potential revocation for continued non-compliance, was considered sufficient due notice.
    What does “opportunity to be heard” mean in administrative proceedings? The “opportunity to be heard” means that a party has been given a chance to present their side of the story, offer explanations, or seek reconsideration of an action taken against them. It does not always require a formal trial-type hearing but can be satisfied through written submissions and other forms of communication.
    How did the SEC justify its actions? The SEC justified its actions by stating that URPHI had been given ample opportunity to comply with the reportorial requirements and had failed to do so repeatedly. The SEC also argued that its actions were in line with its duty to protect investors and ensure full disclosure of information about securities.
    What was the Court’s rationale for its decision? The Court ruled that the SEC had substantially complied with due process requirements. The initial notice of suspension, which warned of potential revocation, along with URPHI’s opportunities to submit explanations and seek reconsideration, were deemed sufficient.
    Is the SEC exercising judicial or regulatory power in this case? The SEC was exercising its regulatory power. The SEC’s revocation of URPHI’s registration was not settling a dispute or adjudicating private rights but rather enforcing compliance with regulatory requirements.

    This case underscores the importance of complying with the SEC’s reportorial requirements and reinforces the SEC’s authority to enforce these regulations to protect investors and maintain market integrity. The decision also clarifies the scope of due process requirements in administrative proceedings, indicating that substantial compliance, rather than strict adherence to formal hearing procedures, may suffice.

    For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

    Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
    Source: SEC vs. Universal Rightfield Property Holdings, Inc., G.R. No. 181381, July 20, 2015