MY

CASE DIGEST
UPDATED CASES IN SRC
Atty. Gaviola
AY 2016 - 2017
by: glargo

Securities and Exchange Commission v. Universal RightIield Property Holdings, Inc.,

G.R. No. 181381, [July 20, 2015])

Violation of the reportorial requirements under Section 17.1 of the Amended Implementing Rules
and Regulations of the SRC is a ground for suspension OR revocation of registration of securities.

The SEC directed URPHI to show cause why its Registration of Securities and Certi>icate of
Permit to Sell Securities to the Public should not be suspended for failure to submit the said
requirements.

In an Order of Revocation dated December 8, 2004, the SEC revoked URPHI's Registration of
Securities and Permit to Sell Securities to the Public for its failure to submit its reportorial
requirements within the >inal extension period.

Court of Appeals Decision:

Set aside the SEC Order of Revocation after >inding that URPHI was not afforded due process.

The CA noted that the hearing to be conducted was only for the purpose of determining
whether URPHI's registration and permit to sell should be suspended and not whether said
registration should be revoked.

ISSUE:

1. WON a separate notices and hearings is necessary for suspension and revocation?

2. WON revocation of registration of securities and permit to sell them to the public is an
exercise of the SEC's quasi-judicial power?

RULING:

1. NO

The Court holds that such notice would be a superIluity since the Order dated July 27, 2004
already states that such proceeding shall ensue if URPHI would still fail to submit the reportorial
requirements after the lapse of the 60-day suspension period.

After all, "due notice" simply means the information that must be given or made to a particular
person or to the public within a legally mandated period of time so that its recipient will have the

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opportunity to respond to a situation or to allegations that affect the individual's or
public's legal rights or duties.

Violation of the reportorial requirements under Section 17.1 of the Amended Implementing
Rules and Regulations of the SRC is a ground for suspension OR revocation of registration of
securities pursuant to Sections 13.1 and 54.1 of the SRC.

Sections 13.1 and 54.1 of the SRC expressly provide that the SEC may suspend or revoke such
registration only after due notice and hearing:

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

54.1. If, after due notice and hearing, the Commission Iinds that: (a) There is a
violation of this Code, its rules, or its orders;

(i) Suspension, or revocation of any registration for the offering of securities;

2. NO, it is rather in the exercise of its regulatory power.

In Gamboa v. Finance Secretary, the Court has held that the SEC has both regulatory and
adjudicative(quasi-judicial) functions.

Although Section 13.1 of the SRC requires due notice and hearing before issuing an order of
revocation, the SEC does not perform such quasi-judicial functions and exercise discretion of a
judicial nature in the exercise of such regulatory power.

It neither settles actual controversies involving rights which are legally demandable and
enforceable, nor adjudicates private rights and obligations in cases of adversarial nature.

Rather, when the SEC exercises its incidental power to conduct administrative hearings and
make decisions, it does so in the course of the performance of its regulatory and law
enforcement function.

The revocation of URPHI's registration of securities and permit to sell them to the public cannot
be considered a penalty but a withdrawal of a privilege, which regulatory power the SEC
validly exercised after giving it due notice and opportunity to be heard.

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Securities and Exchange Commission v. Subic Bay Golf and Country Club, Inc.
G.R. No. 179047 , [March 11, 2015]

Intra-corporate controversies, previously under the Securities and Exchange Commission's

jurisdiction, are now under the jurisdiction of Regional Trial Courts designated as commercial
courts. However, the transfer of jurisdiction to the trial courts does not oust the Securities and
Exchange Commission of its jurisdiction to determine if administrative rules and regulations were
violated.

The Securities and Exchange Commission issued an Order for the Registration of 3,000 no
par value shares of Subic Bay Golf and Country Club, Inc. (SBGCCI).

SBGCCI would use the proceeds of the sale of securities to pay UIGDC for the development of the
golf course.

Complainants Filart and Villareal informed the Securities and Exchange Commission that
they had been asking UIGDC for the refund of their payment for their SBGCCI shares alleging that
they purchased the shares in 1996 based on the promise of SBGCCI and UIGDC to deliver but
were never complied with.

In January 2003, the Securities and Exchange Commission's Corporation Finance

Department conducted an ocular inspection of the project and found that SBGCCI failed to
comply substantially with their commitment to complete the project.

The Corporation Finance Department ordered the return of the purchase price of shares
pursuant to Rule 14 of the Implementing Rules and Regulations of Republic Act No. 8799 or the
Securities Regulation Code.

The Court of Appeals Decision:

The case involved an intra-corporate controversy.

The Securities and Exchange Commission acted in excess of its jurisdiction when it
ordered UIGDC and SBGCCI to refund Villareal and Filart the amount they paid for SBGCCI
shares of stock.
This power has been transferred to the Regional Trial Court.
The Securities and Exchange Commission should have limited its exercise of power to
issuing an order imposing a >ine, to amend the prospectus, and to suspend the Certi>icate of
Registration and Permit to Sell Securities to the Public.

ISSUES:

1. Between the Securities and Exchange Commission and the Regional Trial Court has
jurisdiction over this case.

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2. whether the Securities and Exchange Commission has the authority to order the return of
purchase price of securities upon >inding that there were fraudulent representations in the
prospectus.

RULING:

1. RTC has jurisdiction.

Both tests must concur to be considered intra-corporate dispute:

On Relationship Test:

This case is an intra-corporate dispute, over which the Regional Trial Court has jurisdiction. It
involves a dispute between the corporation, SBGCCI, and its shareholders, Villareal and
Filart.

On Nature of the Controversy Test:

This case also involves corporate rights and obligations. Villareal and Filart's right to a
refund of the value of their shares was based on SBGCCI and UIGDC's alleged failure to abide
by their representations in their prospectus.

It involves the determination of a shareholder's rights under the Corporation Code or other
intra-corporate rules when the corporation or association fails to ful>ill its obligations.

2. NO only limited to regulatory power.

The Securities and Exchange Commission's regulatory power does not include the authority to
order the refund of the purchase price of Villareal's and Filart's shares in the golf club. The
issue of refund is intra-corporate or civil in nature.

The provisions in the law or in the rules giving Villareal and Filart the right to be refunded the
value of their shares are not equivalent to authority for the Securities and Exchange
Commission to issue an order for the refund. Such order may not come from the Securities
and Exchange Commission.

Similar to issues such as the existence or inexistence of appraisal rights, pre-emptive rights, and
the right to inspect books and corporate records, the issue of refund is an intra-corporate
dispute that requires the court to determine and adjudicate the parties' rights based on
law or contract.

ANALYSIS:

On SEC Regulatory and Administrative Power:

However, even though the Complaint >iled before the Securities and Exchange Commission
contains allegations that are intra-corporate in nature, it does not necessarily oust the
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 Securities and Exchange Commission of its regulatory and administrative jurisdiction to
determine and act if there were administrative violations committed.

The Securities and Exchange Commission's regulatory power includes approval and rejection,
and suspension or revocation, of applications for registration of securities for, among
others, violations of the law, fraud, and misrepresentations.

The Securities and Exchange Commission's regulatory power over securities-related activities
is tied to the government's duty to protect the investing public from illegal and fraudulent
instruments.

Intra-Corporate Dispute:

For a dispute to be "intra-corporate," it must satisfy BOTH the relationship and nature of
controversy tests.

The relationship test requires that the dispute be between:

1. a corporation/partnership/association and the public;
2. a corporation/partnership/association and the state regarding the entity's franchise,
permit, or license to operate;
3. a corporation/partnership/association and its stockholders, partners, members, or
of>icers; and
4. among stockholders, partners, or associates of the entity.

The nature of the controversy test requires that the action involves the enforcement of
corporate rights and obligations.

In Medical Plaza Makati Condominium Corporation v. Cullen:

[T]he controversy must not only be rooted in the existence of an intra-corporate

relationship, but must as well pertain to the enforcement of the parties' correlative rights
and obligations under the Corporation Code and the internal and intra-corporate
regulatory rules of the corporation." In other words, jurisdiction should be determined by
considering both the relationship of the parties as well as the nature of the
question involved.

Securities and Exchange Commission v. Prosperity.com, Inc.,

G.R. No. 164197, [January 25, 2012], 680 PHIL 28-32)

(Bar Question 2016)

Prosperity.Com, Inc. (PCI) sold computer software and hosted websites without providing
internet service.

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To make a pro>it, PCI devised a scheme in which, for the price of US$234.00 (subsequently
increased to US$294), a buyer could acquire from it an internet website of a 15-Mega Byte
(MB) capacity. At the same time, by referring to PCI his own down-line buyers, a >irst-time buyer
could earn commissions, interest in real estate in the Philippines and in the United States,
and insurance coverage worth P50,000.00.

To bene>it from this scheme, a PCI buyer must enlist and sponsor at least two other buyers as
his own down-lines. These second tier of buyers could in turn build up their own down-lines.
For each pair of down-lines, the buyer-sponsor received a US$92.00 commission. But
referrals in a day by the buyer-sponsor should not exceed 16 since the commissions due from
excess referrals inure to PCI, not to the buyer-sponsor.
Apparently, PCI patterned its scheme from that of Golconda Ventures, Inc. (GVI), which
company stopped operations after the Securities and Exchange Commission (SEC) issued a
cease and desist order (CDO) against it. As it later on turned out, the same persons who ran
the affairs of GVI directed PCI's actual operations.
In 2001, disgruntled elements of GVI >iled a complaint with the SEC against PCI, alleging that the
latter had taken over GVI's operations. After hearing, the SEC, through its Compliance and
Enforcement unit, issued a CDO against PCI.
The SEC ruled that PCI's scheme constitutes an Investment contract and, following the
Securities Regulations Code, it should have >irst registered such contract or securities with the
SEC.
CA Decision:
On July 31, 2003 the CA rendered a decision, granting PCI's petition and setting aside the SEC-
issued CDO. The CA ruled that, following the Howey test, PCI's scheme did not constitute an
investment contract that needs registration pursuant to R.A. 8799, hence, this petition.|

I||
ISSUE:
whether or not PCI's scheme constitutes an investment contract that requires registration under
R.A. 8799.

RULING: NO, but they buy a product of some value to them: an Internet website of a 15-MB
capacity.

The last requisite in the Howey test is lacking in the marketing scheme that PCI has adopted.
Evidently, it is PCI that expects pro>it from the network marketing of its products. PCI is correct
in saying that the US$234 it gets from its clients is merely a consideration for the sale of the
websites that it provides.

The commission, interest in real estate, and insurance are incentives to down-line sellers to
bring in other customers. These can hardly be regarded as pro>its from investment of money
under the Howey Test.

Actually, PCI appears to be engaged in network marketing, a scheme adopted by companies for
getting people to buy their products outside the usual retail system where products are

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bought from the store's shelf. Under this scheme, adopted by most health product distributors,
the buyer can become a down-line seller. The latter earns commissions from purchases made
by new buyers whom he refers to the person who sold the product to him. The network goes
down the line where the orders to buy come.

The United States Supreme Court held in Securities and Exchange Commission v. W.J. Howey Co.
that, for an investment contract to exist, the following elements, referred to as the Howey test
must concur:
(1) a contract, transaction, or scheme;
(2) an investment of money;
(3) investment is made in a common enterprise;
(4) expectation of pro>its; and
(5) proIits arising primarily from the efforts of others.

ANALYSIS:

The Securities Regulation Code treats investment contracts as "securities" that have to be
registered with the SEC before they can be distributed and sold. An investment contract is a
contract, transaction, or scheme where a person invests his money in a common enterprise
and is led to expect proIits primarily from the efforts of others.

EXAMPLE: long-term commercial papers that large companies, like San Miguel Corporation
(SMC), offer to the public for raising funds that it needs for expansion. When an investor
buys these papers or securities, he invests his money, together with others, in SMC with an
expectation of pro>its arising from the efforts of those who manage and operate that company.
SMC has to register these commercial papers with the SEC before offering them to investors.

Philippine Veterans Bank v. Callangan

G.R. No. 191995 (Resolution), [August 3, 2011], 670 PHIL 570-576)

From these provisions, it is clear that a "public company," as contemplated by the SRC, is not limited
to a company whose shares of stock are publicly listed; even companies like the Bank, whose shares
are offered only to a speciQic group of people, are considered a public company, provided they meet
the requirements enumerated above.
SEC informed petitioner Bank, having assets exceeding P50,000,000.00 and has 395,998
shareholders, that it qualiIies as a "public company, hence, reportorial requirements set forth
in Section 17.1 of the SRC.
Petitioners Philippine Veterans Bank:
Not "public company" subject to the reportorial requirements under Section 17.1 of the SRC
because its shares can be owned only by a speciIic group of people, namely, World War II
veterans and their widows, orphans and compulsory heirs, and is not open to the investing
public in general.

ISSUE:

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WON the petitioner is a public company?

RULING: YES
Rule 3 (1) (m) of the Amended Implementing Rules and Regulations of the SRC, which de>ines a
"public company" as "any corporation with a class of equity securities listed on an Exchange OR
with assets in excess of Fifty Million Pesos (P50,000,000.00) and having two hundred (200)
or more holders, at least two hundred (200) of which are holding at least one hundred
(100) shares of a class of its equity securities.
From these provisions, it is clear that a "public company," as contemplated by the SRC, is not
limited to a company whose shares of stock are publicly listed; even companies like the Bank,
whose shares are offered only to a speci>ic group of people, are considered a public company,
provided they meet the requirements enumerated above.

ANALYSIS:
Additionally, and contrary to the Bank's claim, the Bank's obligation to provide its stockholders
with copies of its annual report is actually for the beneIit of the veterans-stockholders, as it
gives these stockholders access to information on the Bank's >inancial status and operations,
resulting in greater transparency on the part of the Bank.

SEC v. Santos, G.R. No. 195542, [March 19, 2014]

In 2007, yet another investment scam was exposed with the disappearance of its primary
perpetrator, Michael H.K. Liew (Liew), a self-styled >inancial guru and Chairman of the Board of
Directors of Performance Investment Products Corporation (PIPC-BVI), a foreign
corporation registered in the British Virgin Islands.

To do business in the Philippines, PIPC-BVI incorporated herein as Philippine International

Planning Center Corporation (PIPC Corporation).
Because the head of PIPC Corporation had gone missing and with it the monies and investment of
a signi>icant number of investors, the SEC was Ilooded with complaints from thirty-one (31)
individuals against PIPC Corporation, its directors, ofIicers, employees, agents and brokers
for alleged violation of certain provisions of the Securities Regulation Code, including Section 28
thereof.
Santos was charged in the complaints in her capacity as investment consultant of PIPC
Corporation, who supposedly induced private complainants
1. Luisa Mercedes P. Lorenzo (Lorenzo) and
2. Ricky Albino P. Sy (Sy), to invest their monies in PIPC Corporation.
31 complaints is that:
. . . [D]ue to the inducements and solicitations of the PIPC corporation's directors, of>icers and
employees/agents/brokers, the former were enticed to invest their hard-earned money, the
minimum amount of which must be US$40,000.00, with PIPC-BVI, with a promise of higher
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income potential of an interest of 12 to 18 percentum (%) per annum at relatively low-risk
investment program.

Soon thereafter, the SEC, through its Compliance and Endorsement Division, >iled a complaint-
af>idavit for violation of Sections 8, 26 and 28 of the Securities Regulation Code before the
Department of Justice. Among the respondents in the complaint-af>idavit were the principal
of>icers of PIPC:

LUISA LORENZO's afVidavit:

I heard about PIPC Corporation from my friend Derrick Santos during an
informal gathering sometime in March 2006. He said that the investments in
PIPC Corporation generated a return of 18-20% p.a. every two (2) months. He
then gave me the number of his sister,Oudine Santos who worked for PIPC
Philippines to discuss the investment further.
Oudine Santos conducted for my personal beneIit a presentation of the
characteristics of their investment product called "Performance Managed
Portfolio" (PMP).
I ultimately agreed to put in FORTY THOUSAND US DOLLARS (US$40,000.00)
in their investment product.
Soon thereafter, pursuant to the instructions Oudine Santos gave me, I remitted
US$40,000.00 to ABN-AMRO Hong Kong.
Sometime on May 2006, I added another US$60,000.00 to my then subsisting
account, thus totaling US$100,000.00.
14. Then sometime on May 2007, I planned to pull out my remaining
US$100,000.00 but Oudine Santos instead said that PIPC Philippines has a new
product I might be interested in
Enticed by these assurances and promises of large earnings, I put in FOUR
HUNDRED THOUSAND US DOLLARS (US$400,000.00) in PMP.
TOTAL is $500,000

RICKY SY's afIidavit:

Sometime in the last quarter of 2006, I was at BPI Pasong Tamo to accomplish certain routine
transactions. The bank manager introduced me to another bank client, Ms. Oudine Santos.
After exchanging pleasantries, and in the course of a brief conversation, Ms. Santos told
regarding me Performance Investment Products Corporation [PIPC].

A few days later, I met her at the business lounge of [PIPC] located at the 15th Floor of
Citibank Tower, Makati. During the meeting, Ms. Santos enticed me to invest in their
Performance Managed Portfolio which she explained was a risk controlled investment program
designed for individuals like me who are looking for higher investment returns than bank
deposits while still having the advantage of security and liquidity. She told me that they were
engaged in foreign currency trading abroad and that they only employ professional and
experienced foreign exchange traders.
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On the whole, Lorenzo and Sy charge Santos in her capacity as investment consultant of PIPC
Corporation who actively engaged in the solicitation and recruitment of investors. Private
complainants maintain that Santos, apart from being PIPC Corporation's employee, acted as PIPC
Corporation's agent and made representations regarding its investment products and that of
the supposed global corporation PIPC-BVI.
Sometime in 2006, an investigation was undertaken by the [Compliance and Enforcement
Division of the SEC] on the [account] of PIPC Corp. Per its Articles of Incorporation, PIPC Corp.
was authorized to engage [in the] dissemination of information on the current Ilow of
foreign exchange (forex) as . . . precious metals such as gold, silver, and oil, and items traded in
stock and securities/commodities exchanges around the world. To be more speci>ic, PIPC Corp.
[was] authorized to act only as a research arm of their foreign clients.

Of>icial SEC documents would show that while PIPC Corp. is indeed registered with the SEC, it
having engaged in the solicitation and sale of securities was contrary to the purpose for
which it was established which is only to act as a Iinancial research.

Respondent Santos argument:

Santos' defense consisted in:
(1) denying participation in the conspiracy and fraud perpetrated against the investor-
complainants of PIPC Corporation, speci>ically Sy and Lorenzo;
(2) claiming that she was initially and merely an employee of, and subsequently an
independent information provider for, PIPC Corporation;
(3) PIPC Corporation being a separate entity from PIPC-BVI of which Santos has never been a
part of in any capacity;
(4) her not having received any money from Sy and Lorenzo, the two having, in actuality,
directly invested their money in PIPC-BVI;
(5) Santos having dealt only with Sy and the latter, in fact, deposited money directly into
PIPC-BVI's account; and
(6) on the whole, PIPC-BVI as the other party in the investment contracts signed by Sy and
Lorenzo, thus the only corporation liable to Sy and Lorenzo and the other complainants.
As I mentioned above, I joined PIPC Corp. only in April 2005 and, by that time, the company was
already in existence for over four years. I had no participation whatsoever in its creation or
formation, as I was not even connected with PIPC Corp. at the time of its incorporation. In fact, I
have never been a stockholder, director, general manager or of>icer of PIPC Corp. Further, PIPC
Corp. was duly registered with the Securities and Exchange Commission and was organized for a
legitimate purpose, and certainly not for the purpose of perpetrating a fraud against the
public. aAcHCT

On 18 April 2008, the DOJ, issued a Resolution signed by a panel of three (3) prosecutors, ,
indicting:

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(a) Liew and Gonzalez-Tuason for violation of Sections 8 and 26 of the Securities Regulation Code;
and
(b) herein respondent Santos, along with Cristina Gonzalez-Tuason and 12 others for
violation of Section 28 of the Securities Regulation Code.

The April 2008 Resolution, the DOJ discussed at length the liability of PIPC Corporation and its
of>icers, employees, agents and all those acting on PIPC Corporation's behalf, to wit: DCATHS
Firstly, complainant SEC >iled the instant case for alleged violation by
respondents [therein, including herein respondent, Santos,] of Section 8 of
the SRC.
Sec. 8. Requirement of Registration of Securities. 8.1. Securities shall not be sold
or offered for sale or distribution within the Philippines, without a registration
statement duly Iiled with and approved by the Commission. Prior to such
sale, information on the securities, in such form and with such substance as the
Commission may prescribe, shall be made available to each prospective
purchaser.
Based on the above provision of the law, complainant SEC is now accusing all
respondents [therein, including Santos,] for violating the same when they
allegedly sold and/or offered for sale unregistered securities.
However, Section 8.5 thereof provides that "The Commission may audit the
Qinancial statements, assets and other information of a Virm applying for
registration of its securities whenever it deems the same necessary to insure full
disclosure or to protect the interest of the investors and the public in general."
It is the Iirm through its authorized of>icers that is required to register its
securities with the SEC and not the individual persons allegedly selling and/
or offering for sale said unregistered securities. To do otherwise would open the
>loodgates to numerous complaints against innocent individuals who have no
hand in the control, decision-making and operations of said investment company.
Clearly, it is only the PIPC Corp. and respondents Michael H. Liew and
Cristina Gonzalez-Tuason being the President and the General Manager
respectively, of PIPC Corp. who violated Section 8 of the SRC.
xxx xxx xxx

xxx all the parties, the undersigned panel of prosecutors has a reason to believe
that Section 28 of the SRC has been violated and that the following
respondents are probably guilty thereof and should, therefore, be held for trial:
1. Cristina Gonzalez-Tuason
2. . . . .
xxx xxx xxx
13. Oudine Santos

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As to their contention that they are not of>icers or employees of PIPC Corp., the Supreme Court
ruled that one may be an agent of a domestic corporation although he or she is not an
ofIicer thereto. . . . .

Further, they cannot raise the defense of good faith for the simple reason that the SRC is a special
law where criminal intent is not an essential element.

WHEREFORE, the foregoing considered, it is respectfully recommended that this

resolution be APPROVED and that:
xxx
3. An information for violation of Section 28 thereof be >iled against respondents
xxx, [respondent] OUDINE SANTOS AND HERLEY JESUITAS; and AHaETS
xxx

In sum, the DOJ panel based its >inding of probable cause on the collective acts of the majority
of the respondents therein, including herein respondent Santos, which consisted in their
acting as employees-agent and/or investor-agents of PIPC Corporation and/or PIPC-BVI.
Respondent Santos >iled a petition for review before the Of>ice of the Secretary of the DOJ
assailing the Resolutions dated 18 April 2008 and 2 September 2008 and claiming that she was a
mere clerical employee/information provider who never solicited nor recruited investors,
in particular complainants Sy and Lorenzo, for PIPC Corporation or PIPC-BVI.

Thereafter, the Of>ice of the Secretary of the DOJ, through its then Undersecretary Ricardo R.
Blanca>lor, issued a Resolution dated 1 October 2009 which, as previously adverted to, excluded
respondent Santos from prosecution for violation of Section 28 of the Securities
Regulation Code.

After the denial of the SEC's motion for reconsideration before the Secretary of the DOJ, the SEC
Iiled a petition for certiorari before the Court of Appeals seeking to annul the 1 October 2009
Resolution of the DOJ.

The Court of Appeals dismissed the SEC's petition for certiorari and af>irmed the 1 October
2009 Resolution of the Secretary of the DOJ:
To get to that conclusion, the Secretary of the DOJ and the appellate court ruled that no evidence
was adduced showing Santos' actual participation in the Iinal sale by PIPC Corporation
and/or PIPC-BVI of unregistered securities since the very af>idavits of complainants Lorenzo
and Sy proved that Santos had never signed, neither was she mentioned in, any of the
investment documents between Lorenzo and Sy, on one hand, and PIPC Corporation and/or
PIPC-BVI, on the other hand.
ISSUE:
WON Santos' is excluded from the Information for violation of Section 28 of the Securities
Regulation Code?

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RULING:

No, Santos is not excluded

Santos actively recruited and referred possible investors to PIPC Corporation and/or PIPC-
BVI and acted as the go-between on behalf of PIPC Corporation and/or PIPC-BVI.

No matter Santos' strenuous objections, it is apparent that she connected the probable
investors, Sy and Lorenzo, to PIPC Corporation and/or PIPC-BVI, acting as an ostensible
agent of the latter on the viability of PIPC Corporation as an investment company. At each point
of Sy's and Lorenzo's investment, Santos' participation thereon, even if not shown strictly on
paper, was prima facie established.

While Santos was not a signatory to the contracts on Sy's or Lorenzo's investments, Santos
procured the sale of these unregistered securities to the two (2) complainants by providing
information on the investment products being offered for sale by PIPC Corporation and/or
PIPC-BVI and convincing them to invest therein.

Solicitation is the act of seeking or asking for business or information; it is not a commitment
to an agreement.

Tying it all in, there is no quarrel that Santos was in the employ of PIPC Corporation and/or
PIPC-BVI, a corporation which sold or offered for sale unregistered securities in the Philippines.

The DOJ's and Court of Appeals' reasoning that Santos did not sign the investment contracts of Sy
and Lorenzo is specious. The contracts merely document the act performed by Santos.

ANALYSIS:

To determine whether the DOJ Secretary's Resolution was tainted with grave abuse of discretion,
we pass upon the elements for violation of Section 28 of the Securities Regulation Code:
(a) engaging in the business of buying or selling securities in the Philippines as a broker or
dealer; or
(b) acting as a salesman; or
(c) acting as an associated person of any broker or dealer, unless registered as such with the
SEC.

Sec. 3. DeVinition of Terms. . . . .

xxx xxx xxx
3.3. "Broker" is a person engaged in the business of buying and selling
securities for the account of others.
3.4. "Dealer" means [any] person who buys [and] sells securities for his/her
own account in the ordinary course of business.

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 3.5. "Associated person of a broker or dealer" is an employee thereof whom,
directly exercises control of supervisory authority, but does not include a
salesman, or an agent or a person whose functions are solely clerical or
ministerial.
xxx xxx xxx
3.13. "Salesman" is a natural person, employed as such [or] as an agent, by a
dealer, issuer or broker to buy and sell securities.

Section 28 of the Securities Regulation Code (SRC) reads:

SEC. [28]. Registration of Brokers, Dealers, Salesmen and Associated
Persons. 28.1. No person shall engage in the business of buying or selling
securities in the Philippines as a broker or dealer unless registered as such with
the Commission.
28.2. No registered broker or dealer shall employ any salesman or any
associated person, and no issuer shall employ any salesman, who is not
registered as such with the Commission.

Securities have been de>ined as shares, participation or interest in a

corporation or in a commercial enterprise or proIit making venture and
evidenced by a certiIicate, contract, instrument, whether written or
electronic in character. It includes among others, investment contracts,
certiIicates of interest or participation in a proIit sharing agreement,
certiIicates of deposit for a future subscription. AHCaED

Jurisprudence de>ines an "agent" as a "business representative, whose function is to bring about,

modify, affect, accept performance of, or terminate contractual obligations between principal and
third persons." . . . On the other hand, the Implementing Rules of the SRC simply provides that an
agent or a "salesman" is a person employed as such or as an agent, by the dealer, issuer or
broker to buy and sell securities

Under the SRC's Amended Implementing Rules and Regulations, speci>ically Rule 3, par. 1 subpar.
G, an investment contract has been de>ined as a contract, transaction or scheme (collectively
"contract"), whereby a person invests his money in a common enterprise and is led to
expect proIits primarily from the efforts of others. It is likewise provided in the said provision
that an investment contract is presumed to exist whenever a person seeks to use the money
or property of others on the promise of proIits and a common enterprise is deemed created
when two (2) or more investors "pool" their resources creating a common enterprise, even
if the promoter receives nothing more than a broker's commission.

Generally, at the preliminary investigation proper, the investigating prosecutor, and ultimately, the
Secretary of the DOJ, is afforded wide latitude of discretion in the exercise of its power to

14 of 26
determine probable cause to warrant criminal prosecution. The determination of probable
cause is an executive function where the prosecutor determines merely that a crime has
been committed and that the accused has committed the same. The rules do not require that
a prosecutor has moral certainty of the guilt of a person simply for preliminary investigation
purposes.
However, the authority of the prosecutor and the DOJ is not absolute; it cannot be exercised
arbitrarily or capriciously. Where the >indings of the investigating prosecutor or the Secretary
of the DOJ as to the existence of probable cause are equivalent to a gross misapprehension of
facts, certiorari will lie to correct these errors.

While it is our policy not to interfere in the conduct of preliminary investigations, we have, on
more than one occasion, adhered to some exceptions to the general rule:
1. when necessary to afford adequate protection to the constitutional rights of
the accused; ETDAaC
2. when necessary for the orderly administration of justice or to avoid
oppression or multiplicity of actions;
3. when there is a prejudicial question which is sub judice;
4. when the acts of the ofQicer are without or in excess of authority;
5. where the prosecution is under an invalid law, ordinance or regulation;
6. when double jeopardy is clearly apparent;
7. where the court has no jurisdiction over the offense;
8. where it is a case of persecution rather than prosecution;
9. where the charges are manifestly false and motivated by the lust for
vengeance; DIEcHa
10. when there is clearly no prima facie case against the accused and a motion to quash on
that ground has been denied.

Power Homes Unlimited Corp. v. SEC

G.R. No. 164182, [February 26, 2008], 570 PHIL 161-173

Petitioner Power Homes Unlimited Corp. is a domestic corporation duly registered with
public respondent SEC on October 13, 2000. Its primary purpose is:
To engage in the transaction of promoting, acquiring, managing, leasing,
obtaining options on, development, and improvement of real estate
properties for subdivision and allied purposes, and in the purchase, sale
and/or exchange of said subdivision and properties through network
marketing.

On October 27, 2000, respondent Noel Manero requested SEC to investigate petitioner's business
alleging that they are selling properties that were inexistent and without any broker's
license.
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On November 21, 2000, one Romulo E. Munsayac, Jr. inquired from public respondent SEC
whether petitioner's business involves "legitimate network marketing."
On the bases of the letters of respondent Manero and Munsayac, public respondent SEC held a
conference on December 13, 2000 that was attended by petitioner's incorporators. The
attendees were requested to submit copies of petitioner's marketing scheme and list of its
members with addresses.
The following day or on December 14, 2000, petitioner submitted to public respondent SEC
copies of its marketing course module and letters of accreditation/authority or
con>irmation from Crown Asia, Fil-Estate Network and Pioneer 29 Realty Corporation.
On January 26, 2001, public respondent SEC visited the business premises of petitioner wherein
it gathered documents such as certiIicates of accreditation to several real estate
companies, list of members with web sites, sample of member mail box, webpages of two
(2) members, and lists of Business Center Owners who are quali>ied to acquire real estate
properties and materials on computer tutorials.
On the same day, after Iinding petitioner to be engaged in the sale or offer for sale or
distribution of investment contracts, which are considered securities under Sec. 3.1 (b)
of Republic Act (R.A.) No. 8799 (The Securities Regulation Code), but failed to register them in
violation of Sec. 8.1 of the same Act, public respondent SEC issued a CDO.
On February 5, 2001, petitioner moved for the lifting of the CDO, which public respondent SEC
denied for lack of merit on February 22, 2001.
Aggrieved, petitioner went to the Court of Appeals imputing grave abuse of discretion amounting
to lack or excess of jurisdiction on public respondent SEC for issuing the order.

On June 19, 2001, petitioner >iled in the Court of Appeals a Motion for the Issuance of a Writ
of Preliminary Injunction which CA granted.

On July 31, 2003, the Court of Appeals issued its Consolidated Decision. The disposition pertinent
to petitioner reads:
WHEREFORE, . . . . the petition for certiorari and prohibition >iled by the other
petitioner Powerhomes Unlimited Corporation is hereby DENIED for lack of merit
and the questioned Cease and Desist Order issued by public respondent
against it is accordingly AFFIRMED IN TOTO.

Petitioner Power Homes Argument:

Claim that the payment of US$234 is for the seminars on leverage marketing and not for any
product.

ISSUES:

1. whether public respondent SEC followed due process in the issuance of the assailed CDO;
and

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 2. whether petitioner's business constitutes an investment contract which should be
registered with public respondent SEC before its sale or offer for sale or distribution to the
public.

RULING:

1. Yes, due process is observed

The records reveal that public respondent SEC properly examined petitioner's business
operations when it
(1) called into conference three of petitioner's incorporators,
(2) requested information from the incorporators regarding the nature of petitioner's business
operations,
(3) asked them to submit documents pertinent thereto, and
(4) visited petitioner's business premises and gathered information thereat.
All these were done before the CDO was issued by the public respondent SEC. Trite to state, a
formal trial or hearing is not necessary to comply with the requirements of due process. Its
essence is simply the opportunity to explain one's position. Public respondent SEC abundantly
allowed petitioner to prove its side.

Sec. 64 of R.A. No. 8799 provides:

Sec. 64. Cease and Desist Order. 64.1. The Commission, after proper
investigation or veriIication, motu proprio or upon veriIied 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.

2. Yes, it constitute investment contract

The CDO was proper even without a >inding of fraud. As an investment contract that is security
under R.A. No. 8799, it must be registered with public respondent SEC, otherwise the SEC
cannot protect the investing public from fraudulent securities. The strict regulation of
securities is founded on the premise that the capital markets depend on the investing public's
level of con>idence in the system.

The petitioner was engaged in the sale or distribution of an investment contract.

Interestingly, the facts of SEC v. Turner are similar to the case at bar. In Turner, the SEC brought
a suit to enjoin the violation of federal securities laws by a company offering to sell to the
public contracts characterized as self-improvement courses. On appeal from a grant of
preliminary injunction, the US Court of Appeals of the 9th Circuit held that self-improvement
contracts which primarily offered the buyer the opportunity of earning commissions on the sale
of contracts to others were "investment contracts" and thus were "securities" within the
meaning of the federal securities laws.
17 of 26
The appellate court held:
It is apparent from the record that what is sold is not of the usual "business
motivation" type of courses. Rather, the purchaser is really buying the
possibility of deriving money from the sale of the plans by Dare to individuals
whom the purchaser has brought to Dare. The promotional aspects of the plan,
such as seminars, >ilms, and records, are aimed at interesting others in the Plans.
Their value for any other purpose is, to put it mildly, minimal.
Once an individual has purchased a Plan, he turns his efforts toward
bringing others into the organization, for which he will receive a part of
what they pay. His task is to bring prospective purchasers to "Adventure
Meetings."
The business scheme of petitioner in the case at bar is essentially similar. An investor
enrolls in petitioner's program by paying US$234. This entitles him to recruit two (2) investors
who pay US$234 each and out of which amount he receives US$92. A minimum recruitment of
four (4) investors by these two (2) recruits, who then recruit at least two (2) each, entitles the
principal investor to US$184 and the pyramid goes on.

We reject petitioner's claim that the payment of US$234 is for the seminars on leverage
marketing and not for any product. Clearly, the trainings or seminars are merely designed to
enhance petitioner's business of teaching its investors the know-how of its multi-level
marketing business.

ANALYSIS:

Our R.A. No. 8799 appears to follow this Ilexible concept for it deIines an investment contract
as a contract, transaction or scheme (collectively "contract") whereby a person invests his
money in a common enterprise and is led to expect proIits not solely but primarily from the
efforts of others.
Thus, to be a security subject to regulation by the SEC, an investment contract in our jurisdiction
must be proved to be:
(1) an investment of money,
(2) in a common enterprise,
(3) with expectation of pro>its,
(4) primarily from efforts of others.

An investment contract is de>ined in the Amended Implementing Rules and Regulations of R.A.
No. 8799 as a "contract, transaction or scheme (collectively 'contract') whereby a person invests
his money in a common enterprise and is led to expect pro>its primarily from the efforts of
others."

Section 8.1 of R.A. No. 8799, viz:

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 Section 8. Requirement of Registration of Securities. 8.1. Securities shall not be
sold or offered for sale or distribution within the Philippines, without a
registration statement duly Iiled with and approved by the Commission.
Prior to such sale, information on the securities, in such form and with such
substance as the Commission may prescribe, shall be made available to each
prospective purchaser.

Our de>inition of an investment contract traces its roots from the 1946 United States (US) case
of SEC v. W.J. Howey Co. The US Supreme Court, recognizing that the term "investment contract"
was not deIined by the Act or illumined by any legislative report. It ruled that the use of the
catch-all term "investment contract" indicated a congressional intent to cover a wide range of
investment transactions. It established a test to determine whether a transaction falls within
the scope of an "investment contract."
Known as the Howey Test, it requires a transaction, contract, or scheme whereby a person
(1) makes an investment of money,
(2) in a common enterprise,
(3) with the expectation of pro>its,
(4) to be derived solely from the efforts of others. (changed from solely to primarily in later
case)
Although the proponents must establish all four elements, the US Supreme Court stressed that
the Howey Test "embodies a Ilexible rather than a static principle, one that is capable of
adaptation to meet the countless and variable schemes devised by those who seek the use of the
money of others on the promise of pro>its." Needless to state, any investment contract covered by
the Howey Test must be registered under the Securities Act, regardless of whether its issuer was
engaged in fraudulent practices.
After Howey came the 1973 US case of SEC v. Glenn W. Turner Enterprises, Inc. et al. In this
case, the 9th Circuit of the US Court of Appeals ruled that the element that proIits must come
"solely" from the efforts of others should not be given a strict interpretation. It held that a
literal reading of the requirement "solely" would lead to unrealistic results. It reasoned out that
its Ilexible reading is in accord with the statutory policy of affording broad protection to
the public.

It also described the conduct of petitioner's business as follows:

The scheme of the [petitioner] corporation requires an investor to become a
Business Center Owner (BCO) who must >ill-up and sign its application form.
The Terms and Conditions printed at the back of the application form indicate
that the BCO shall mean an independent representative of Power Homes,
who is enrolled in the company's referral program and who will ultimately
purchase real property from any accredited real estate developers and as
such he is entitled to a referral bonus/commission. Paragraph 5 of the same
indicates that there exists no employer/employee relationship between the BCO
and the Power Homes Unlimited, Corp.

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 The BCO is required to pay US$234 as his enrollment fee. His enrollment entitles him to recruit
two investors who should pay US$234 each and out of which amount he shall receive US$92. In
case the two referrals/enrollees would recruit a minimum of four (4) persons each recruiting two
(2) persons who become his/her own down lines, the BCO will receive a total amount of
US$147.20 and so on

Cemco Holdings, Inc. v. National Life Insurance Co. of the Philippines, Inc., G.R. No. 171815, [August
7, 2007], 556 PHIL 198-217

Distorted Illustration Ddue to converting this Iile from .doc to .pages

Union Cement Corporation (UCC)
Publicly-listed

Bacnotan Consolidated Atlas Cement Corp (ACC) Petitioner Cemco

Industries(BCI) 29.69% 9% On, July 5,
2004,
BCI's stocks in UCHC equivalent to 21.31% and ACC's stocks in UCHC equivalent to 29.69%
sold to CEMCO resulting in

Union Cement Corporation (UCC)
Publicly-listed

Cemco
60%
[21.31%+29.69+9+]

ership of CEMCO in UCC = 60%(UCHC) of 60%(Cemco) = 36%

rship of CEMCO in UCC 17% The PSE, in a letter to the SEC
dated 15 July 2004, inquired as
to whether the Tender Offer
Rule under Rule 19 of the
Implementing Rules of the Securities Regulation Code is not applicable to the purchase by
petitioner of the majority of shares of UCC.
Thereafter, in a subsequent letter dated 27 July 2004, Director Callangan con>irmed that the
SEC en banc had resolved that the Cemco transaction was not covered by the tender offer
rule.

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On 28 July 2004, feeling aggrieved by the transaction, respondent National Life Insurance
Company of the Philippines, Inc., a minority stockholder of UCC, sent a letter to Cemco
demanding the latter to comply with the rule on mandatory tender offer.
On 5 August 2004, a Share Purchase Agreement was executed by ACC and BCI, as sellers, and
Cemco, as buyer.
On 19 August 2004, respondent National Life Insurance Company of the Philippines, Inc.
Iiled a complaint with the SEC asking it to reverse its 27 July 2004 Resolution and to declare
the purchase agreement of Cemco void and praying that the mandatory tender offer rule be
applied to its UCC shares.
Petitioner Cemco Comment:
In their comments, they were uniform in arguing that the tender offer rule applied only to a
direct acquisition of the shares of the listed company xxx
SEC Decision:
In a Decision dated 14 February 2005, the SEC ruled in favor of the respondent by reversing
and setting aside its 27 July 2004 Resolution and directed petitioner Cemco to make a tender
offer for UCC shares to respondent and other holders of UCC shares similar to the class held by
UCHC in accordance with Section 9 (E), Rule 19 of the Securities Regulation Code.
CA Decision:
The Court of Appeals rendered a decision af>irming the ruling of the SEC. It ruled that the SEC has
jurisdiction to render the questioned decision and, in any event, Cemco was barred by
estoppel from questioning the SEC's jurisdiction. It, likewise, held that the tender offer
requirement under the Securities Regulation Code and its Implementing Rules applies to
Cemco's purchase of UCHC stocks.
Petitioner Cemco argument:
The SEC's authority is purely administrative. Having been vested with purely
administrative authority, the SEC can only impose administrative sanctions such as the
imposition of administrative >ines, the suspension or revocation of registrations with the
SEC, and the like. Since the SEC's order commanding it to make a tender offer is an
afIirmative relief Iixing the respective rights and obligations of parties, such order is
void. AHTICD
in the absence of any speci>ic grant of jurisdiction by Congress, the SEC cannot, by mere
administrative regulation, confer on itself that jurisdiction.

ISSUES:
1. Whether or not the SEC has jurisdiction over respondent's complaint and to
require Cemco to make a tender offer for respondent's UCC shares.
2. Whether or not the rule on mandatory tender offer applies to the indirect
acquisition of shares in a listed company, in this case, the indirect
acquisition by Cemco of 36% of UCC, a publicly-listed company, through its
purchase of the shares in UCHC, a non-listed company.

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 3. Whether or not the questioned ruling of the SEC can be applied retroactively to
Cemco's transaction which was consummated under the authority of the
SEC's prior resolution.

RULINGS:

1. Yes, SEC has jurisdiction

The SEC's power and authority to regulate, investigate or supervise the activities of persons
to ensure compliance with the Securities Regulation Code, more speci>ically the provision on
mandatory tender offer under Section 19

the SEC was acting pursuant to Rule 19 (13) of the Amended Implementing Rules and Regulations
of the Securities Regulation Code, to wit:
13. Violation
If there shall be violation of this Rule by pursuing a purchase of equity shares of a
public company at threshold amounts without the required tender offer, the
Commission, upon complaint, may nullify the said acquisition and direct the
holding of a tender offer. This shall be without prejudice to the imposition of
other sanctions under the Code.

SEC the general adjudicative power which is implied from the express powers of the
Commission or which is incidental to, or reasonably necessary to carry out, the performance of
the administrative duties entrusted to it. As a regulatory agency, it has the incidental power to
conduct hearings and render decisions Iixing the rights and obligations of the parties. In
fact, to deprive the SEC of this power would render the agency inutile, because it would become
powerless to regulate and implement the law.
Section 5.1 (n), viz:
[T]he Commission shall have, among others, the following powers and functions:
xxx xxx xxx
(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.

According to CA:
In interpreting the powers and functions of the SEC that the law has made the SEC primarily a
regulatory body with the incidental power to conduct administrative hearings and make
decisions. xxx

Moreover, petitioner is barred from questioning the jurisdiction of the SEC. It must be
pointed out that petitioner had participated in all the proceedings before the SEC and had
prayed for afIirmative relief. In fact, petitioner defended the jurisdiction of the SEC in its
Comment dated 15 September 2004, >iled with the SEC wherein it asserted:
22 of 26
Petitioner did not question the jurisdiction of the SEC when it rendered an opinion
favorable to it, such as the 27 July 2004 Resolution, where the SEC opined that the Cemco
transaction was not covered by the mandatory tender offer rule. It was only when the case was
before the Court of Appeals and after the SEC rendered an unfavorable judgment against it that
petitioner challenged the SEC's competence.

2. Yes, direct or indirect acquisition applies

The SEC and the Court of Appeals accurately pointed out that the coverage of the mandatory
tender offer rule covers not only direct acquisition but also indirect acquisition or "any
type of acquisition"
The SEC and the Court of Appeals ruled that the indirect acquisition by petitioner of 36% of
UCC shares through the acquisition of the non-listed UCHC shares is covered by the
mandatory tender offer rule.
The legislative intent of Section 19 of the Code is to regulate activities relating to acquisition of
control of the listed company and for the purpose of protecting the minority stockholders of a
listed corporation. Whatever may be the method by which control of a public company is
obtained, either through the direct purchase of its stocks or through an indirect means,
mandatory tender offer applies.

Under existing SEC Rules, the 15% and 30% threshold acquisition of shares under the provision
was increased to thirty-Iive percent (35%). It is further provided therein that mandatory
tender offer is still applicable even if the acquisition is less than 35% when the purchase
would result in ownership of over 51% of the total outstanding equity securities of the
public company.

Under Section 19 of Republic Act No. 8799, it is stated:

Tender Offers. 19.1. (a) Any person or group of persons acting in concert who
intends to acquire at least Iifteen percent (15%) of any class of any equity
security of a listed corporation or of any class of any equity security of a
corporation with assets of at least Fifty million pesos (P50,000,000.00) and
having two hundred (200) or more stockholders with at least one hundred (100)
shares each or who intends to acquire at least thirty percent (30%) of such
equity over a period of twelve (12) months shall make a tender offer to
stockholders by >iling with the Commission a declaration to that effect; and
furnish the issuer, a statement containing such of the information required in
Section 17 of this Code as the Commission may prescribe. Such person or group
of persons shall publish all requests or invitations for tender, or materials
making a tender offer or requesting or inviting letters of such a security. xxx

As appropriately held by the Court of Appeals:

Xxx We are constrained, however, to construe ownership acquisition to mean both direct and
indirect. What is decisive is the determination of the power of control. The legislative intent
behind the tender offer rule makes clear that the type of activity intended to be regulated is the

23 of 26
acquisition of control of the listed company through the purchase of shares. Control may [be]
effected through a direct and indirect acquisition of stock, and when this takes place,
irrespective of the means, a tender offer must occur. The bottomline of the law is to give the
shareholder of the listed company the opportunity to decide whether or not to sell in
connection with a transfer of control.

3. Yes, it can be applied retroactively

The action of the SEC on the PSE request for opinion on the Cemco transaction cannot be
construed as passing merits or giving approval to the questioned transaction. As aptly
pointed out by the respondent, the letter dated 27 July 2004 of the SEC was nothing but an
approval of the draft letter prepared by Director Callanga. There was no public hearing where
interested parties could have been heard. Hence, it was not issued upon a deIinite and
concrete controversy affecting the legal relations of parties thereby making it a judgment
conclusive on all the parties. Said letter was merely advisory.

Jurisprudence has it that an advisory opinion of an agency may be stricken down if it

deviates from the provision of the statute. Since the letter dated 27 July 2004 runs counter to
the Securities Regulation Code, the same may be disregarded as what the SEC has done in its
decision dated 14 February 2005.

Assuming arguendo that the letter dated 27 July 2004 constitutes a ruling, the same cannot be
utilized to determine the rights of the parties. What is to be applied in the present case is the
subsequent ruling of the SEC dated 14 February 2005 abandoning the opinion embodied in
the letter dated 27 July 2004. In Serrano v. National Labor Relations Commission, Said
postulation was ignored by the Court when it ruled:
While a judicial interpretation becomes a part of the law as of the date that law
was originally passed, this is subject to the quali>ication that when a doctrine of
this Court is overruled and a different view is adopted, and more so when there is
a reversal thereof, the new doctrine should be applied prospectively and should
not apply to parties who relied on the old doctrine and acted in good faith. To
hold otherwise would be to deprive the law of its quality of fairness and justice
then, if there is no recognition of what had transpired prior to such adjudication.
It is apparent that private respondent misconceived the import of the ruling. The
decision in Columbia Pictures does not mean that if a new rule is laid down
in a case, it should not be applied in that case but that said rule should
apply prospectively to cases arising afterwards. Private respondent's view of
the principle of prospective application of new judicial doctrines would turn the
judicial function into a mere academic exercise with the result that the doctrine
laid down would be no more than a dictum and would deprive the holding in the
case of any force.
xxx

ANALYSIS:

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The SEC has the authority to promulgate rules and regulations, subject to the limitation that
the same are consistent with the declared policy of the Code. Among them is the protection of the
investors and the minimization, if not total elimination, of fraudulent and manipulative devises.
Thus, Subsection 5.1 (g) of the law provides:
Prepare, approve, amend or repeal rules, regulations and orders, and issue
opinions and provide guidance on and supervise compliance with such rules,
regulations and orders.
Also, Section 72 of the Securities Regulation Code reads:
72.1. . . . To effect the provisions and purposes of this Code, the Commission
may issue, amend, and rescind such rules and regulations and orders
necessary or appropriate, . . . .
xxxSAHIaD
The power conferred upon the SEC to promulgate rules and regulations is a legislative
recognition of the complexity and the constantly-Iluctuating nature of the market and the
impossibility of foreseeing all the possible contingencies that cannot be addressed in
advance. As enunciated in Victorias Milling Co., Inc. v. Social Security Commission: 9
Rules and regulations when promulgated in pursuance of the procedure
or authority conferred upon the administrative agency by law, partake of
the nature of a statute, and compliance therewith may be enforced by a penal
sanction provided in the law. This is so because statutes are usually couched in
general terms, after expressing the policy, purposes, objectives, remedies and
sanctions intended by the legislature. The details and the manner of carrying
out the law are often times left to the administrative agency entrusted with its
enforcement. In this sense, it has been said that rules and regulations are the
product of a delegated power to create new or additional legal provisions
that have the effect of law.

in Ceroferr Realty Corporation v. Court of Appeals:

While the lack of jurisdiction of a court may be raised at any stage of an action,
nevertheless, the party raising such question may be estopped if he has
actively taken part in the very proceedings which he questions and he only
objects to the court's jurisdiction because the judgment or the order
subsequently rendered is adverse to him.

The rule in this jurisdiction is that the construction given to a statute by an administrative
agency charged with the interpretation and application of that statute is entitled to great
weight by the courts, unless such construction is clearly shown to be in sharp contrast with
the governing law or statute.

Bicameral Conference Committee on the Securities Act of 2000, on 17 July 2000.

25 of 26
 As long as it reaches 30, ayan na. Any type of acquisition just as long as it will
result in 30 . . . (p. 50) . . . reaches 30, ayan na. Any type of acquisition just as
long as it will result in 30, general tender, pro-rata.

Tender offer is a publicly announced intention by a person acting alone or in concert with
other persons to acquire equity securities of a public company. A public company is de>ined
as a corporation which is listed on an exchange, or a corporation with assets exceeding
P50,000,000.00 and with 200 or more stockholders, at least 200 of them holding not less
than 100 shares of such company. Stated differently, a tender offer is an offer by the
acquiring person to stockholders of a public company for them to tender their shares
therein on the terms speciIied in the offer. Tender offer is in place to protect minority
shareholders against any scheme that dilutes the share value of their investments. It gives
the minority shareholders the chance to exit the company under reasonable terms, giving
them the opportunity to sell their shares at the same price as those of the majority shareholders.

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