1_Corp Finance Case Digests

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Anticipating the Code7s effectivity& the SEC earlier issued& on August *& '& the Guidelines on Intra-Corporate Cases

Pending Before the SICD and the Commission n Banc of the Securities and !change Commission!#n #cto$er %& '& the SEC en "ancissued an #rder&5:6the pertinent portions of which readF

"he Commission now holds that the Repu$lic& as the registered owner of *3 of the shares of 0BC+*.& is a real party in interest& $ecause it stands to $e $enefited or in1ured $y the 1udgment in the suit& or the

party entitled to the avails of the suit!

! ! ! "he petition failed to implead the Repu$lic and is therefore defective in form! )onetheless& thesu$stantiality $eing plainly evident& such defect in form can and must $e cured& otherwise& no finaldetermination of the case can $e had! "he impleading of the Repu$lic as party+respondent is thus in order!

And in accordance with the constitutional provisions and 1urisprudential declarations& the Repu$lic must $eaccorded due process and given its day in court!

0n view of the foregoing determination $y the Commission& there is still much left to $e done $eforethe case can reach the final disposition stage! Considering the effectivity of the new Securities RegulationCode on August 5,6& ' and the =uidelines of the Commission& and further considering that the case is notyet ripe for final ad1udication& the Commission no longer has any 1urisdiction to continue to hear the case&receive pertinent pleadings thereto nor render a final 1udgment therein!

Despite the loss of its 1urisdiction and $ecause the Commission ("$$o) re$%er " *+$"#

%e(+!+o$ $ased on the foregoing discussions on the defect of non+1oinder of an indispensa$le party,theCommission is of the opinion that i t must issue this last order& so that >the actual merits of the controversy mayspeedily $e determined!@ "o do otherwise would leave the case in lim$o& a situation which the Commission& inthe 5interest6 of 1ustice& cannot allow!

-ERE&ORE& foregoing premises considered& and under the circumstances of the present case& theRepu$lic of the 4hilippines& as represented $y 4C==& is here$y ordered impleaded as party+respondent& copyof this decision shall $e furnished the #ffice of the Solicitor =eneral as counsel for the government! "he partiesare directed to furnish the Solicitor =eneral with copies of all the pertinent pleadings they have filed in theinstant case within fifteen (*% days from their receipt hereof! "he Solicitor =eneral is here$y directed to file itsComments and Answer to the petitioner7s claims within fifteen (*% days from its receipt of said pleadings! Andthe petitioner is given a li2e period of time to file his response thereto! Any and all pleadings re?uired to $esu$mitted after this #rder is issued shall $e filed $efore the court of proper 1urisdiction as may $e designated $ythe Supreme Court!

SO ORDERED.56

Respondent appealed the SEC #rder to the Court of Appeals $y filing a 4etition for Certiorariand Mandamus

Gith Hery Irgent Application for the 0ssuance of a Grit of 4reliminary 0n1unction andor "emporary Restraining#rder!0n its Decision promulgated on May ,& '*& the Court of Appeals stated the main issue asF Did the Securities and

Exchange Commission gravely a$use its discretion in refusing to decide the instant case and instead transferring the same to theregular courtsJ

"he Court of Appeals held that SEC should decide the instant case& thusF

0t is undisputed that per order dated /uly '& '& (p! .'& rollo& petitioner7s (/alandoon case $eforethe Commission was >now su$mitted for decision@! Both parties therein& per records& duly su$mitted there?uired memorandum within fifteen (*% days from receipt of the order! Clearly& therefore& at the timepetitioner7s case was $eing heard and up to the time the same was su$mitted for decision& it was still governed$y the REVISED RULES OF PROCEDURE IN THE SECURITIES AND EXHANGE COMMISSIONadopted on

August *& *,, as amended& on April '-& *,,.!

0t must also $e pointed out that the G#ID$I%Swhich the Commission issued pursuant to par! %!'&Sec! %& of R!A! :,,& specifically Sec! ' thereof provides thusF >The COMMISSION SHALL RETAINJURISDICTION OVER PENDING INTRA-CORPORATE DISPUTES SUBMITTED FOR FINALRESOLUTIONPRIOR TO T-E E&&ECTIVIT/ O& T-E ACT6 which shall $e resolved within one (* year from/uly *,& '!@ Since petitioner7s case was su$mitted for final resolution on /uly '& ' and since R!A! :,,too2 effect only on August ,& '& petitioner7s case should have remained within the 1urisdiction of pu$licrespondent Commission and decided $y it pursuant to the August *& *,, Rules of the Commission& asamended ! ! ! !5,6

"he dispositive portion of the Decision of the Court of Appeals readsF

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ere*ore& foregoing premises considered& the petition is ereb GIVEN DE CORSE& and thechallenged order of pu$lic respondent Commission ereb REVERSED "$% SET ASIDE& and it is erebDIRECTED )o %e(+%e )e ("!eof petitioner in accordance with its August *& *,, Rules& as amended& and$ased on the evidence duly offered and admitted! )o costs!

SO ORDERED.103

SEC filed a Motion for Reconsideration of the Decision of the Court of Appeals& which was denied in a Resolution

promulgated on /uly '& '*!Both SEC and 0BC filed $efore this Court their respective petitions for review on certiorariof the Decision of the Court of

Appeals! SEC also sought a review of the Court of Appeals7 Resolution dated /uly '& '*& which denied its motion forreconsideration! Respondent /alandoon moved for the consolidation of the two petitions& which was granted $y the Court!

"he relevant issues raised $y petitioners areF*! Did the Court of Appeals err in ordering SEC to decide the case filed $y respondent

/alandoon& doc2eted as SEC+S0CD Case )o! *'+,-+%%%J'! Does SEC have 1urisdiction over respondent7s claim of ownership or interest in 0BC or is

the determination of such ownership properly lodged with the Sandigan$ayan in connection withSandigan$ayan Case )o! .8 for reversion& reconveyance& restitution& accounting and damagesfiled $y the Repu$lic4C==J

.! Assuming arguendothat SEC has 1urisdiction over this case& was the case ripe for

decision when Repu$lic Act )o! :,, too2 effect on August ,& '& which transferred 1urisdictionover intra+corporate disputes from SEC to the Regional "rial CourtsJ

8! Did SEC lose 1urisdiction over the instant case pursuant to Repu$lic Act )o! :,,J

4etitioner 0BC& represented $y the #=CC& contends that SEC has no 1urisdiction over the instant case since it involves thedetermination of the ownership of its company& which is the su$1ect of Sandigan$ayan Case )o! .8 for reversion& reconveyance&restitution& accounting and damages! 0BC asserts that issues which arise from and are incidental to said se?uestration case $eforethe Sandigan$ayan should $e raised in the Sandigan$ayan& citing Presidential Commission on Good Government v.Pe&a5**6and 'epu"lic of the Philippines v. Sandigan"a(an.5*'6

Ge do not agree!

As stated $y SEC in its #rder& the se?uestration proceedings over 0BC are over! "he Sandigan$ayan has ordered thetransfer of 0BC7s shares of stoc2 in the name of the Repu$lic of the 4hilippines! As ownership of 0BC has $een vested upon theRepu$lic& the su$1ect matter of the instant suit falls within the definition of intra+corporate controversy over which SEC had

1urisdiction at the time this case was initiated!0n a separate petition5*.6filed with us $y /alandoon against 4C==& which sought to en1oin 4C== from proceeding with

the scheduled pu$lic $idding of the assets of 0BC on Decem$er ':& *,,-& 4C== recogni;ed the 1urisdiction of SEC over theinstant case when it agreed in a /oint Motion with /alandoon to refer the resolution of /alandoon7s claim over the '3 e?uity in0BC+*. to SEC! "he /oint Motion& in part& su$mittedF

! ! !.! "hat the claim of the petitioner over the '3 e?uity in 0BC +*. shall $e litigated in the Securities )= T=/

))6E/D )/C ;7*6) ;RD/R) DT/D :*>RI 25 *D 7RC= +0, 1!!5&

66

T=/ C;>RT ;9 PP/E) /RR/D A=/* 6T R>E/D T=T T=/R/ 6) *; )TT>T;RI >T=;R6TI

A=T);/8/R 9;R P/T6T6;*/R )/C T; 6*6T6T/ *D 96E/ *I )>6T TI T; D6)C;E)/D [sic] A=/* TRD6*(3 *D +- D6R/CT;R) ;996C/R) *D

PR6*C6PE )T;CG=;ED/R)3 ;9 T=/ R/86)/D )/C>R6T6/) CTJ *D

666

T=/ C;>RT ;9 PP/E) /RR/D A=/* 6T R>E/D T=T R>E/) ;9 PRCT6C/ *D PR;)/C>T6;*E/) ;9 PR;C/D>R/ ;* D76*6)TRT68/

CT6;*)KPR;C//D6*()[25]R/ 6*8E6D ) T=/I 96E T; C;7PEI A6T= T=/ )TT>T;RI

R/H>6R/7/*T) C;*T6*/D 6* T=/ D76*6)TRT68/ C;D/ ;9 1!"&

The %etition is i%ressed with erit&

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)/C& -& Repealing Clause& L The Revised )ecurities ct

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#3 6nsider eans 13 the issuer, 23 a director or officer of, or a %erson controlling, controlled #$, or under

coon control with, the issuer, +3 a %erson whose relationshi% or forer relationshi% to the issuer gives or gave hi

access to a fact of s%ecial significance a#out the issuer or the securit$ that is not generall$ availa#le, or 43 a %erson who

learns such a fact fro an$ of the foregoing insiders as defined in this su#section, with nowledge that the %erson fro

who he learns the fact is such an insider&

c3 fact is of s%ecial significance if a3 in addition to #eing aterial it would #e liel$, on #eing ade

generall$ availa#le, to affect the aret %rice of a securit$ to a significant etent, or #3 a reasona#le %erson would consider

it es%eciall$ i%ortant under the circustances in deterining his course of action in the light of such factors as the degreeof its s%ecificit$, the etent of its difference fro inforation generall$ availa#le %reviousl$, and its nature and rel ia#ilit$&

d3 This section shall a%%l$ to an insider as defined in su#section #3 +3 hereof onl$ to the etent that he nows

of a fact of s%ecial significance #$ virtue of his #eing an insider&

The %rovision e%lains in si%le ters that the insiderMs isuse of non%u#lic and undisclosed inforation is the gravaen of illegal

conduct& The intent of the law is the %rotection of investors against fraud, coitted when an insider, using secret inforation, taes advantage

of an uninfored investor& 6nsiders are o#ligated to disclose aterial inforation to the other %art$ or a#stain fro trading the shares of his

cor%oration& This dut$ to disclose or a#stain is #ased on two factorsF first, the eistence of a relationshi% giving access, directl$ or indirectl$, to

inforation intended to #e availa#le onl$ for a cor%orate %ur%ose and not for the %ersonal #enefit of an$oneJ and second, the inherent unfairnessinvolved when a %art$ taes advantage of such inforation nowing it is unavaila#le to those with who he is dealing&[+4]

6n the >nited )tates >&)&3, the o#ligation to disclose or a#stain has #een traditionall$ i%osed on cor%orate insiders, %articularl$

officers, directors, or controlling stocholders, #ut that definition has since #een e%anded& [+5] The ter insiders now includes %ersons whose

relationshi% or forer relationshi% to the issuer gives or gave the access to a fact of s%ecial significance a#out the issuer or the securit$ that is

not generall$ availa#le, and one who learns such a fact fro an insider nowing that the %erson fro who he learns the fact is such aninsider& 6nsiders have the dut$ to disclose aterial facts which are nown to the #$ virtue of their %osition #ut which are not nown to %ersons

with who the$ deal and which, if nown, would affect their investent .udgent& 6n soe cases, however, there a$ #e valid cor%orate

reasons for the nondisclosure of aterial inforation& Ahere such reasons eist, an issuerBs decision not to ae an$ %u#lic disclosures is not

ordinaril$ considered as a violation of insider trading& t the sae tie, the undisclosed inforation should not #e i%ro%erl$ used for non'cor%orate %ur%oses, %articularl$ to disadvantage other %ersons with who an insider ight transact, and therefore the insider ust a#stain fro

entering into transactions involving such securities&[+-]

Res%ondents further aver that under )ection +0 of the Revised )ecurities ct, the )/C still needed to define the following

tersF #material fact,$ #reasonale person,$ #nature and reliailit%$ and#generall% availale.$[+] 6n deterining whether or not these tersare vague, these ters ust #e evaluated in the contet of )ection +0 of the Revised )ecurties ct& To full$ understand how the ters were used

in the aforeentioned %rovision, a discussion of what the law recognies as a fact of special significanceis re?uired, since the dut$ to disclose

such fact or to a#stain fro an$ transaction is i%osed on the insider onl$ in connection with afact of special significance&

>nder the law, what is re?uired to #e disclosed is afact of #special significance$which a$ #e a3 a aterial fact which would #e

liel$, on #eing ade generall$ availa#le, to affect the aret %rice of a securit$ to a significant etent, or #3 one which a reasona#le %erson

would consider es%eciall$ i%ortant in deterining his course of action with regard to the shares of stoc&

a3&aterial 'actLThe conce%t of a aterial fact is not a new one& s earl$ as 1!+, the Rules Re?uiring Disclosure of 7aterial9acts #$ Cor%orations Ahose )ecurities re Eisted 6n n$ )toc /change or RegisteredKEicensed >nder the )ecurities ct, issued #$ the )/C

on 2! :anuar$ 1!+, e%lained that [a] fact is aterial if it induces or tends to induce or otherwise affect the sale or %urchase of its

securities& Thus, )ection +0 of the Revised )ecurities ct %rovides that if a fact affects the sale or %urchase of securities, as well as its %rice,

then the insider would #e re?uired to disclose such inforation to the other %art$ to the transaction involving the securities& This is the first

definition given to a fact of s%ecial significance&

#&13Reasonale (ersonL The second definition given to a fact of s%ecial significance involves the .udgent of a reasona#le %erson&

Contrar$ to the allegations of the res%ondents, a reasona#le %erson is not a %ro#leatic legal conce%t that needs to #e clarified for the %ur%ose

of giving effect to a statuteJ rather, it is the standard on which ost of our legal doctrines stand& The doctrine on negligence uses the discretion of

the reasona#le an as the standard&[+"] %urchaser in good faith ust also tae into account facts which %ut a reasona#le an on his guard&[+!] 6n addition, it is the #elief of the reasona#le and %rudent an that an offense was coitted that sets the criteria for %ro#a#le cause for a

warrant of arrest&[40] This Court, in such cases, differentiated the reasona#le and %rudent an fro a %erson with training in the law such as a

%rosecutor or a .udge, and identified hi as the average an on the street, who weighs facts and circustances without resorting to the

cali#rations of our technical rules of evidence of which his nowledge is nil& Rather, he relies on the calculus of coon sense of which all

reasona#le en have in a#undance&[41]

6n the sae vein, the >&)& )u%ree Court siilarl$ deterined its standards #$ the actual significance inthe deli#erations of a reasona#le investor, when it ruled in TSC n!ustries" nc. v. #orth$ay" nc. ,!)*"that the deterination of aterialit$

re?uires delicate assessents of the inferences a Nreasona#le shareholderB would draw fro a given set of facts and the significance of those

inferences to hi&

#&23+ature and Reliailit%L The factors affecting the second definition of a fact of s%ecial significance, which is of suchi%ortance that it is e%ected to affect the .udgent of a reasona#le an, were su#stantiall$ lifted fro a test of aterialit$ %ronounced in the

casen the %atter of nvestors %anage&ent Co." nc&[4+]F

ong the factors to #e considered in deterining whether inforation is aterial under this test are the degree of its

s%ecificit$, the etent to which it differs fro inforation %reviousl$ %u#licl$ disseinated, and its relia#ilit$ in light of itsnature and source and the circustances under which it was received&

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6t can #e deduced fro the foregoing that the nature and relia#ilit$ of a significant fact in deterining the course of action a reasona#le %erson

taes regarding securities ust #e clearl$ viewed in connection with the %articular circustances of a case& To enuerate all circustances that

would render the nature and relia#ilit$ of a fact to #e of s%ecial significance is close to i%ossi#le& *evertheless, the %ro%er ad.udicative #od$would undou#tedl$ #e a#le to deterine if facts of a certain nature and relia#ilit$ can influence a reasona#le %ersonBs decision to retain, sell or

#u$ securities, and thereafter e%lain and .ustif$ its factual findings in its decision&

c3&aterialit% onceptL discussion of the aterialit$ conce%t would #e relevant to #oth a aterial fact which would affect thearet %rice of a securit$ to a significant etent andKor a fact which a reasona#le %erson would consider in deterining his or her cause of actionwith regard to the shares of stoc& )ignificantl$, what is referred to in our laws as a fact of special significanceis referred to in the >&)& as the

aterialit$ conce%t and the latter is siilarl$ not %rovided with a %recise definition& 6n'asic v. (evinson,[44]the >&)& )u%ree Court cautioned

against confining aterialit$ to a rigid forula, stating thusF

#right'line rule indeed is easier to follow than a standard that re?uires the eercise of .udgent in the light of all thecircustances&

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/ven assuing that the ter #eneficial ownershi% was vague, it would not affect res%ondentsB case, where the res%ondents are directors andKor

officers of the cor%oration, who are s%ecificall$ re?uired to co%l$ with the re%ortorial re?uireents under )ection +-a3 of the Revised

)ecurities ct& The validit$ of a statute a$ #e contested onl$ #$ one who will sustain a direct in.ur$ as a result of its enforceent&[4"]

)ections +0 and +- of the Revised )ecurities ct were enacted to %roote full disclosure in the securities aret and %reventunscru%ulous individuals, who #$ their %ositions o#tain non'%u#lic inforation, fro taing advantage of an uninfored %u#lic& *o individual

would invest in a aret which can #e ani%ulated #$ a liited nu#er of cor%orate insiders& )uch reaction would stifle, if not stunt, the growth

of the securities aret& To avert the occurrence of such an event, )ection +0 of the Revised )ecurities ct %revented the unfair use of non'%u#lic

inforation in securities transactions, while )ection +- allowed the )/C to onitor the transactions entered into #$ cor%orate officers anddirectors as regards the securities of their co%anies&

6n the casen the %atter of nvestor,s %anage&ent Co."[4!]it was cautioned that the #road language of the anti'fraud %rovisions,

which include the %rovisions on insider trading, should not #e circuscri#ed #$ fine distinctions and rigid classifications& The a#it of anti'

fraud %rovisions is necessaril$ #road so as to e#race the infinite variet$ of dece%tive conduct&[50]

6n Tata! v. Secretary of -epart&ent of Energy,[51] this Court #rushed aside a contention, siilar to that ade #$ the res%ondents in this

case, that certain words or %hrases used in a statute do not set deterinate standards, declaring thatF

Petitioners contend that the words as far as %ractica#le, declining and sta#le should have #een defined in R&&

*o& "1"0 as the$ do not set deterinate and deterina#le standards& This stu##orn su#ission deserves scantconsideration& The dictionar$ eanings of these words are well settled and cannot confuse en of reasona#le intelligence&

& The fear of %etitioners that these words will result in the eercise of eecutive discretion that will run riot is thus

groundless& To #e sure, the Court has sustained the validit$ of siilar, if not ore general standards in other cases&

ong the words or %hrases that this Court u%held as valid standards were si%licit$ and dignit$, [52]%u#lic interest,[5+]and interests of lawand order&[54]

The Revised )ecurities ct was a%%roved on 2+ 9e#ruar$ 1!"2& The fact that the 9ull Disclosure Rules were %roulgated #$ the )/C

onl$ on 24 :ul$ 1!!- does not render ineffective in the eantie )ection +- of the Revised )ecurities ct& 6t is alread$ une?uivocal that theRevised )ecurities ct re?uires full disclosure and the 9ull Disclosure Rules were issued to ae the enforceent of the law ore consistent,

efficient and effective& 6t is e?uall$ reasona#le to state that the disclosure fors later %rovided #$ the )/C, do not, in an$ wa$ i%l$ that no

co%liance was re?uired #efore the fors were %rovided& The effectivit$ of a statute which i%oses re%ortorial re?uireents cannot #e

sus%ended #$ the issuance of s%ecified fors, es%eciall$ where co%liance therewith a$ #e ade even without such fors& The fors erel$

ade ore efficient the %rocessing of re?uireents alread$ identified #$ the statute&

9or the sae reason, the Court of %%eals ade an evident istae when it ruled that no civil, criinal or adinistrative actions can

%ossi#l$ #e had against the res%ondents in connection with )ections ", +0 and +- of the Revised )ecurities ct due to the a#sence of

i%leenting rules& These %rovisions are sufficientl$ clear and co%lete #$ theselves& Their re?uireents are s%ecificall$ set out, and the actswhich are en.oined are deterina#le& 6n %articular, )ection "[55]of the Revised )ecurities ct is a straightforward enueration of the %rocedure

for the registration of securities and the %articular atters which need to #e re%orted in the registration stateent thereof& The Decision, dated 20

ugust 1!!", %rovides no valid reason to ee%t the res%ondent 6RC fro such re?uireents& The lac of i%leenting rules cannot sus%end

the effectivit$ of these %rovisions& Thus, this Court cannot find an$ cogent reason to %revent the )/C fro eercising its authorit$ to investigate

res%ondents for violation of )ection " of the Revised )ecurities ct&

II. he right to cross/eamination is not asolute and cannot e demanded during

investigative proceedings efore the (12.

6n its assailed Decision dated 20 ugust 1!!", the Court of %%eals %ronounced that the P/D Rules of Practice and Procedure wasinvalid since )ection ", Rule 8[5-]thereof failed to %rovide for the %artiesB right to cross'eaination, in violation of the dinistrative Code of

1!" %articularl$ )ection 12+3, Cha%ter +,

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including docuentar$ evidence, if an$, fro an$ %art$ or witness to co%lete, as far as %ossi#le, the facts of the

case& 9acts or inforation so elicited a$ serve as #asis for his clarification or si%lifications of the issues in the

case& dissions and sti%ulation of facts to a##reviate the %roceedings shall #e encouraged&

)ection & Dis%osition of Case& 6f the =earing ;fficer finds no necessit$ of further hearing after the %arties havesu#itted their %osition %a%ers and su%%orting docuents, he shall so infor the %arties stating the reasons therefor and

shall as the to acnowledge the fact that the$ were so infored #$ signing the inutes of the hearing and the case shall

#e deeed su#itted for resolution&

s such, the P/D Rules %rovided that the =earing ;fficer a$ re?uire the %arties to su#it their res%ective verified %osition %a%ers, togetherwith all su%%orting docuents and affidavits of witnesses& foral hearing was not andator$J it was within the discretion of the =earing

;fficer to deterine whether there was a need for a foral hearing& )ince, according to the foregoing rules, the holding of a hearing #efore the

P/D is discretionar$, then the right to cross'eaination could not have #een deanded #$ either %art$&

)econdl$, it ust #e %ointed out that Cha%ter +,

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h3 )us%ends or revoes, after %ro%er notice and hearing in accordance with these Rules, the franchise or certificate of

registration of cor%orations, %artnershi%s or associations, u%on an$ of the following groundsF

1& 9raud in %rocuring its certificate of registrationJ 2& )erious isre%resentation as to what the cor%oration can do or is doing to the great %re.udice of or daage to

the general %u#licJ

+& Refusal to co%l$ or defiance of an$ lawful order of the Coission restraining coission of acts which

would aount to a grave violation of its franchiseJ .3 6%oses charges, fines and fees, which #$ law, it is authoried to collectJ

)ection 2& Powers of the =earing ;fficer& The =earing ;fficer shall have the following %owersF

4& To cite andKor declare an$ %erson in direct or indirect conte%t in accordance with %ertinent %rovisions of the Rules ofCourt&

/ven assuing that these are ad.udicative functions, the P/D, in the instant case, eercised its investigative %owersJ thus, res%ondents

do not have the re?uisite standing to assail the validit$ of the rules on ad.udication& valid source of a statute or a rule can onl$ #e contested #$

one who will sustain a direct in.ur$ as a result of its enforceent &[5"]6n the instant case, res%ondents are onl$ #eing investigated #$ the P/D fortheir alleged failure to disclose their negotiations with (=< and the transactions entered into #$ its directors involving 6RC shares& The

res%ondents have not shown theselves to #e under an$ iinent danger of sustaining an$ %ersonal in.ur$ attri#uta#le to the eercise of

ad.udicative functions #$ the )/C& The$ are not #eing or a#out to #e su#.ected #$ the P/D to charges, fees or finesJ to citations for conte%tJ or

to the cancellation of their certificate of registration under )ection 1h3, Rule 66 of the P/D Rules of Practice and Procedure&

To re%eat, the onl$ %owers which the P/D was l iel$ to eercise over the res%ondents were investigative in nature, to witF

)ection 1& uthorit$ of the Prosecution and /nforceent De%artent L Pursuant to Presidential Decree *o& !02',

as aended #$ Presidential Decree *o& 15", the Prosecution and /nforceent De%artent is %riaril$ charged with the

followingF

#& 6nitiates %ro%er investigation of cor%orations and %artnershi%s or %ersons, their #oos, records and other %ro%erties

and assets, involving their #usiness transactions, in coordination with the o%erating de%artent involvedJ

e& 9iles and %rosecutes civil or criinal cases #efore the Coission and other courts of .ustice involving violations of

laws and decrees enforced #$ the Coission and the rules and regulations %roulgated thereunderJ

f& Prosecutes erring directors, officers and stocholders of cor%orations and %artnershi%s, coercial %a%er issuers or

%ersons in accordance with the %ertinent rules on %roceduresJ

The authorit$ granted to the P/D under )ection 1#3, e3, and f3, Rule 66 of the P/D Rules of Practice and Procedure, need notco%l$ with )ection 12, Cha%ter +, Rule 866 of the dinistrative Code, which affects onl$ the ad.udicator$ functions of adinistrative

#odies& Thus, the P/D would still #e a#le to investigate the res%ondents under its rules for their alleged failure to disclose their

negotiations with (=< and the transactions entered into #$ its directors involving 6RC shares&

This is not to sa$ that adinistrative #odies %erforing ad.udicative functions are re?uired to strictl$ co%l$ with the re?uireents ofCha%ter +, Rule 866 of the dinistrative Code, %articularl$, the right to cross'eaination& 6t should #e noted that under )ection 2&2 of

/ecutive ;rder *o& 2-, issued on ;cto#er 1!!2, a##reviated %roceedings are %rescri#ed in the dis%osition of adinistrative casesF

2& 011reviation of Procee!ings& ll adinistrative agencies are here#$ directed to ado%t and include in their res%ective

Rules of Procedure the following %rovisionsF

2&2 Rules ado%ting, unless otherwise %rovided #$ s%ecial laws and without %re.udice to )ection 12, Cha%ter +,

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0ppeals, the re%eal cannot de%rive )/C of its .urisdiction to continue investigating the caseJ or the regional trial court, to hear an$ case which

a$ later #e filed against the res%ondents&

4. he instant case has not %et prescried.

Res%ondents have taen the %osition that this case is oot and acadeic, since an$ criinal co%laint that a$ #e filed against the

resulting fro the )/CBs investigation of this case has alread$ %rescri#ed &[+] The$ %oint out that the %rescri%tion %eriod a%%lica#le to offenses

%unished under s%ecial laws, such as violations of the Revised )ecurities ct, is twelve $ears under )ection 1 of ct *o& ++2-, as aended #$ ct

*o& +5"5 and ct *o& +-+, entitled n ct to /sta#lish Periods of Prescri%tion for 8iolations Penalied #$ )%ecial cts and 7unici%al;rdinances and to Provide Ahen Prescri%tion )hall nder )ection 45 of the Revised )ecurities ct, which is entitlednvestigations" n/unctions an! Prosecution of 3ffenses,the

)ecurities /change Coission )/C3 has the authorit$ to ae such investigations as it dees necessar$ to deterine whether an$ %erson

has violated or is a#out to violate an$ %rovision of this ct OOO& fter a finding that a %erson has violated the Revised )ecurities ct, the )/C

a$ refer the case to the D;: for %reliinar$ investigation and %rosecution&

Ahile the )/C investigation serves the sae %ur%ose and entails su#stantiall$ siilar duties as the %reliinar$ investigation

conducted #$ the D;:, this %rocess cannot si%l$ #e disregarded& 6n'aviera v. Paglina$an,[]this Court enunciated that a criinal co%laint is

first filed with the )/C, which deterines the eistence of probable cause, #efore a %reliinar$ investigation can #e coenced #$ the D;:& 6nthe aforecited case, the co%laint filed directl$ with the D;: was disissed on the ground that it should have #een filed first with the

)/C& )iilarl$, the offense was a violation of the )ecurities Regulations Code, wherein the %rocedure for criinal %rosecution was re%roduced

fro )ection 45 of the Revised )ecurities ct&["] This Court affired the disissal, which it e%lained thusF

The Court of %%eals held that under the a#ove %rovision, a criinal co%laint for violation of an$ law or rule

adinistered #$ the )/C ust first #e filed with the latter& 6f the Coission finds that there is %ro#a#le cause, then it

should refer the case to the D;:& )ince %etitioner failed to co%l$ with the foregoing %rocedural re?uireent, the D;: did

not gravel$ a#use its discretion in disissing his co%laint in 6&)& *o& 2004'22!&

criinal charge for violation of the )ecurities Regulation Code is a s%ecialied dis%ute& =ence, it ust first

#e referred to an adinistrative agenc$ of s%ecial co%etence, i&e&, the )/C& >nder the doctrine of %riar$ .urisdiction,

courts will not deterine a controvers$ involving a ?uestion within the .urisdiction of the adinistrative tri#unal, where

the ?uestion deands the eercise of sound adinistrative discretion re?uiring the s%ecialied nowledge and e%ertise ofsaid adinistrative tri#unal to deterine technical and intricate atters of fact& The )ecurities Regulation Code is a s%ecial

law& 6ts enforceent is %articularl$ vested in the )/C& =ence, all co%laints for an$ violation of the Code and its

i%leenting rules and regulations should #e filed with the )/C& Ahere the co%laint is criinal in nature, the )/C shall

indorse the co%laint to the D;: for %reliinar$ investigation and %rosecution as %rovided in )ection 5+&1 earlier ?uoted&

Ae thus agree with the Court of %%eals that %etitioner coitted a fatal %rocedural la%se when he filed his

criinal co%laint directl$ with the D;:& 8eril$, no grave a#use of discretion can #e ascri#ed to the D;: in disissing

%etitionerBs co%laint&

The said case %uts in %ers%ective the nature of the investigation undertaen #$ the )/C, which is a re?uisite #efore a criinal casea$ #e referred to the D;:& The Court declared that it is i%erative that the criinal %rosecution #e initiated #efore the )/C, the adinistrative

agenc$ with the s%ecial co%etence&

6t should #e noted that the )/C started investigative %roceedings against the res%ondents as earl$ as 1!!4& This investigation

effectivel$ interru%ted the %rescri%tion %eriod& =owever, said %roceedings were disru%ted #$ a %reliinar$ in.unction issued #$ the Court of%%eals on 5 7a$ 1!!5, which effectivel$ en.oined the )/C fro filing an$ criinal, civil, or adinistrative case against the res%ondents herein&[!] Thereafter, on 20 ugust 1!!", the a%%ellate court issued the assailed Decision in C&& (&R& )P& *o& +0+- ordering that the writ of in.unction

#e ade %eranent and %rohi#iting the )/C fro taing cogniance of and initiating an$ action against herein res%ondents& The )/C was #ound

to co%l$ with the aforeentioned writ of %reliinar$ in.unction and writ of in.unction issued #$ the Court of %%eals en.oining it fro

continuing with the investigation of res%ondents for 12 $ears& n$ deviation #$ the )/C fro the in.unctive writs would #e sufficient ground forconte%t& 7oreover, an$ ste% the )/C taes in defiance of such orders will #e considered void for having #een taen against an order issued #$

a court of co%etent .urisdiction&

n investigation of the case #$ an$ other adinistrative or .udicial #od$ would liewise #e i%ossi#le %ending the in.unctive writs

issued #$ the Court of %%eals& (iven the ruling of this Court in'aviera v. Paglina$an,["0]the D;: itself could not have taen cogniance of thecase and conducted its %reliinar$ investigation without a %rior deterination of %ro#a#le cause #$ the )/C& Thus, even %resuing that the

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D;: was not en.oined #$ the Court of %%eals fro conducting a %reliinar$ investigation, an$ %reliinar$ investigation conducted #$ the D;:

would have #een a futile effort since the )/C had onl$ started with its investigation when res%ondents theselves a%%lied for and were granted

an in.unction #$ the Court of %%eals&

7oreover, the D;: could not have conducted a %reliinar$ investigation or filed a criinal case against the res%ondents during thetie that issues on the effectivit$ of )ections ", +0 and +- of the Revised )ecurities ct and the P/D Rules of Practice and Procedure were still

%ending #efore the Court of %%eals& fter the Court of %%eals declared the aforeentioned statutor$ and regulator$ %rovisions invalid and,

thus, no civil, criinal or adinistrative case a$ #e filed against the res%ondents for violations thereof, the D;: would have #een at a loss, as

there was no statutor$ %rovision which res%ondents could #e accused of violating&ccordingl$, it is onl$ after this Court corrects the erroneous ruling of the Court of %%eals in its Decision dated 20 ugust 1!!" that

either the )/C or D;: a$ %ro%erl$ conduct an$ ind of investigation against the res%ondents for violations of )ections ", +0 and +- of the

Revised )ecurities ct& >ntil then, the %rescri%tion %eriod is deeed interru%ted&

To reiterate, the )/C ust first conduct its investigations and ae a finding of %ro#a#le cause in accordance with the doctrine

%ronounced in'aviera v. Paglina$an&["1] 6n this case, the D;: was %recluded fro initiating a %reliinar$ investigation since the )/C was

halted #$ the Court of %%eals fro continuing with its investigation& )uch a situation leaves the %rosecution of the case at a standstill, and

neither the )/C nor the D;: can conduct an$ investigation against the res%ondents, who, in the first %lace, sought the in.unction to %revent their

%rosecution& ll that the )/C could do in order to #rea the i%asse was to have the Decision of the Court of %%eals overturned, as it had doneat the earliest o%%ortunit$ in this case& Therefore, the %eriod during which the )/C was %revented fro continuing with its investigation should

not #e counted against it& The law on the %rescri%tion %eriod was never intended to %ut the %rosecuting #odies in an i%ossi#le #ind in which the

%rosecution of a case would #e %laced wa$ #e$ond their controlJ for even if the$ avail theselves of the %ro%er reed$, the$ would still #e #arred

fro investigating and %rosecuting the case&

6ndu#ita#l$, the %rescri%tion %eriod is interru%ted #$ coencing the %roceedings for the %rosecution of the accused& 6n criinalcases, this is acco%lished #$ initiating the %reliinar$ investigation& The %rosecution of offenses %unisha#le under the Revised )ecurities ct

and the )ecurities Regulations Code is initiated #$ the filing of a co%laint with the )/C or #$ an investigation conducted #$ the

)/C &otu proprio& ;nl$ after a finding of %ro#a#le cause is ade #$ the )/C can the D;: instigate a %reliinar$ investigation& Thus, the

investigation that was coenced #$ the )/C in 1!!5, soon after it discovered the ?uestiona#le acts of the res%ondents, effectivel$ interru%tedthe %rescri%tion %eriod& (iven the nature and %ur%ose of the investigation conducted #$ the )/C, which is e?uivalent to the %reliinar$

investigation conducted #$ the D;: in criinal cases, such investigation would surel$ interru%t the %rescri%tion %eriod&

4I. he ourt of Appeals as 5ustified in den%ing S1s &otion for 7eave to uash

S1 9mnius 9rders dated *3 9ctoer :;;

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7R 5O- 9')' ! Apri l ;9 ! ;((T/ T=/ C/RT696CT/ ;9*;*'9;R>7 )=;PP6*( TTC=/D T; T=/ P/T6T6;* 9;R C/RT6;RR6 96E/D RT ;9 PP/E) /8/* T=;>(= T=/ CR676*E CT6;* A) 6*)T6T>T/D

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Ae e%hasie that in deterining the right of an accused to s%eed$ trial, courts are re?uired to do ore than a atheatical

co%utation of the nu#er of %ost%oneents of the scheduled hearings of the case& ere atheatical reconing of the tie involved is

clearl$ insufficient,[2"]and %articular regard ust #e given to the facts and circustances %eculiar to each case& [2!]

6n0lvi9o v. San!igan1ayan,[+0]the Court ruled that there was no violation of the right to s%eed$ trial and s%eed$ dis%osition& The Court toointo account the reasons for the dela$, i.e., the fre?uent aendents of %rocedural laws #$ %residential decrees, the structural reorganiations in

eisting %rosecutorial agencies and the creation of new ones #$ eecutive fiat, resulting in changes of %ersonnel, %reliinar$ .urisdiction, and the

functions and %owers of %rosecuting agencies& The Court also considered the failure of the accused to assert such right, and the lac of %re.udice

caused #$ the dela$ to the accused&6n-efensor;Santiago v. San!igan1ayan,[+1]the co%leit$ of the issues and the failure of the accused to invoe her right to s%eed$

dis%osition at the a%%ro%riate tie s%elled defeat for her clai to the constitutional guarantee&

6n Ca!alin v. Philippine 3verseas E&ploy&ent 0!&inistration,s 0!&inistrator,[+2]the Court, considering also the co%leit$ of the

cases and the conduct of the %artiesB law$ers, held that the right to s%eed$ dis%osition was not violated therein&

PetitionerBs o#.ection to the %rosecutionBs stand that he gave an i%lied consent to the se%arate trial of Criinal Case *o& 11!"+0 is

#elied #$ the records of the case& *o o#.ection was inter%osed #$ his defense counsel when this atter was discussed during the initial hearing&[++]PetitionerBs conforit$ thereto can #e deduced fro his non'o#.ection at the %reliinar$ hearing when the %rosecution anifested that the

evidence to #e %resented would #e onl$ for Criinal Cases *o& 11!"+1'11!"+2& =is failure to o#.ect to the %rosecutionBs anifestation that thecases #e tried se%aratel$ is fatal to his case& The acts, istaes and negligence of counsel #ind his client, ece%t onl$ when such istaes would

result in serious in.ustice&[+4] 6n fact, %etitionerBs ac?uiescence is evident fro the transcri%t of stenogra%hic notes during the initial %resentation

of the Peo%leBs evidence in the five

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d3 =e was convicted or ac?uitted or the case was disissed or otherwise terinated without the e%ress consent of the

accused&

ong the a#ove'cited eleents, we are concerned with the fourth eleent, conviction or ac?uittal, or the case was disissed or otherwiseterinated without the e%ress consent of the accused& This eleent is crucial since, as a general rule, the disissal of a criinal case resulting

in ac?uittal, ade with the e%ress consent of the accused or u%on his own otion, will not %lace the accused in dou#le .eo%ard$& [44] This rule,

however, adits of two ece%tions, nael$F insufficienc$ of evidence and denial of the right to s%eed$ trial& [45] Ahile indeed %etitioner was in

fact the one who filed the 7otion to Disiss Criinal Case *o& 11!"+0, the disissal thereof was due to an alleged violation of his right tos%eed$ trial, which would otherwise %ut hi in dou#le .eo%ard$ should the sae charges #e revived& PetitionerBs situation is different& Dou#le

.eo%ard$ has not attached, considering that the disissal of Criinal Case *o& 11!"+0 on the ground of violation of his right to s%eed$ trial was

without #asis and issued with grave a#use of discretion aounting to lac or ecess of .urisdiction& Ahere the right of the accused to s%eed$ trial

has not #een violated, there is no reason to su%%ort the initial order of disissal&

9ollowing this CourtBs ruling in0l&ario v. Court of 0ppeals,[4-]as %etitionerBs right to s%eed$ trial was not transgressed, this ece%tion tothe fourth eleent of dou#le .eo%ard$ L that the defendant was ac?uitted or convicted, or the case was disissed or otherwise terinated without

the e%ress consent of the accused L was not et& Ahere the disissal of the case was allegedl$ ca%ricious, certiorari lies fro such order of

disissal and does not involve dou#le .eo%ard$, as the %etition challenges not the correctness #ut the validit$ of the order of disissalJ such grave

a#use of discretion aounts to lac of .urisdiction, which %revents dou#le .eo%ard$ fro attaching&[4]

s this Court ruled inPeople v. Ta&pal,[4"]reiterated inPeople v. (eviste ,[4!]where we overturned an order of disissal #$ the trial court

%redicated on the right to s%eed$ trial L

6t is true that in an un#roen line of cases, we have held that disissal of cases on the ground of failure to %rosecute

is e?uivalent to an ac?uittal that would #ar further %rosecution of the accused for the sae offense& 6t ust #e stressed,

however, that these disissals were %redicated on the clear right of the accused to s%eed$ trial& These cases are nota%%lica#le to the %etition at #ench considering that the right of the %rivate res%ondents to s%eed$ trial has not #een violated

#$ the )tate& &

9ro the foregoing, it follows that %etitioner cannot clai that dou#le .eo%ard$ attached when said RTC order was reversed #$ the Court of

%%eals& Dou#le .eo%ard$ does not a%%l$ to this case, considering that there is no violation of %etitionerBs right to s%eed$ trial&

The old adage that .ustice dela$ed is .ustice denied has never #een ore valid than in our .urisdiction, where it is not a rarit$ for a case to

drag in our courts for $ears and $ears and even decades& 6t was this difficult$ that ins%ired the constitutional re?uireent that the rules of court to#e %roulgated #$ the )u%ree Court shall %rovide for a si%lified and ine%ensive %rocedure for the s%eed$ trial and dis%osition of cases&[50] 6ndeed, for .ustice to %revail, the scales ust #alance, for .ustice is not to #e dis%ensed for the accused alone& [51]

/videntl$, the tas of the %illars of the criinal .ustice s$ste is to %reserve our deocratic societ$ under the rule of law, ensuring thatall those who a%%ear #efore or are #rought to the #ar of .ustice are afforded a fair o%%ortunit$ to %resent their side& s correctl$ o#served #$ the

Court of %%eals, Criinal Case *o& 11!"+0 is .ust one of the an$ controversial cases involving the +SSE3& The assailed 22 9e#ruar$ 200- Decision and 1 :ul$ 200- Resolution issued #$ the Court of%%eals in C'(&R& )P *o& "+0-" are here#$ AFF+R>E3&

The instant case is RE>A53E3to the Regional Trial Court,

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GR No. 1>5808 O(). ?, 2008

N")re'4etit ion for review on certiorari& under Rule 8% of the Rules of Court& of a decision of the Court of

AppealsDo()r+$e!') o i m p l e m e n t i n g r u l e s w e r e n e e d e d t o r e n d e r e f f e c t i v e S ec ti on s & . & an d . - o f t he

Rev ised Secur i t ies Ac t nor was the 4EDRules o f 4rac t i ce and 4rocedure inva l id & pr io r tothe enac tmen t o f the Securities Regulations Code& for failure to provide parties with the right toc r o s s +e x a m i n e t h e w i t n e s s e s p r e s e n t e d a g a i n s t t h e m ! " h u s & t h e respondents may$einvesti gated $y the approp ria te author ity under the proper rules of procedure of the Securities RegulationsCode for violationsof Sections & .& and .- of the Revised Securities Act!&"()!'* - A u g * , , 8 KB o " r % o * D + r e ( ) o r ! o * I R C " 6 6 r o v e % " @emor"$%m o* A: reeme$) @o A = +) G" $% " -o #% +$ :! Ber"% G-B!a!Inder the MoA& 0RC ac?uired *3 or the en tire capital stoc2of =anda Energy oldings& 0nc!(=E0& wh ich wo ul d own a ndo p e r a t e a * ' m e g a w a t t g a s t u r $ i n e p o w e r +generat ing$arge!$ !A lso s t ipu la ted is that =E0 would assume a f i ve+yearpo wer pu rch ase con tra ct wit h )a t io nal 4o wer Cor p! At tha t t im e&=E07s power+generating $argewas ,:3 complete and wouldgo on+line $y mid+Sept *,,8!c ! 0 n e x c h a n g e & 0 R C w i l l i s s u e t o = B% % 3 o f t h e e x p a n d e d capital stoc2 of 0RC (amounting to 8! $illion shares K totalpar value of 48!88

milliond!#n the side& 0RC would ac?uir e -:3 of the entire capitalst oc 2o f 4h i l i p p i ne Ra c i ng C l u$ & 0 n c ! (4 RC 0 ! 4R C0 ow ns '% ! : '8 hectares of real estateproperty in Ma2ati!e ! I n d e r t h e A g r e e m e n t & = B & a m e m $ e r o f t h e G e s t m o n t =roupof Companies in Malaysia& shall extend or arrange aloan re?uired to pay for the proposed ac?uisition$y 0RC of 4RC0!' A u g * , , 8 K 0 R C a l l e g e d t h a ta p r e s s r e l e a s e a n n o u n c i n g t h e approval of the agreement was sent through fax to 4hilippineStoc2Exchange (4SE and the SEC& $ut that the fax machine of SEC couldnot receive it! Ipon the advice of SEC&0RC sent the press release onthe morning of , Aug *,,8!>SEC "verre% )") +) re(e+ve% re6or)! )") IRC *"+#e% )o m"e)+me# 6b#+( %+!(#o!re! o* +)!$e:o)+") +o$! =+) G-B "$%)") !ome o* +)! %+re()or! e"v+# )r"%e% IRC !"re! )+#++$:)+! m")er+"#+$!+%er +$*orm")+o$.8 * - A u g * , , 8 K S E C C h a i r m a n i s s u e d a d i r e c t i v e r e ? u i r i n g 0 R C t o s u $m it t o S EC acop y o f i ts afo re sai d M oA wi th =B an d f urt he r directed al l principal of ficers of 0RC to appear ata hearing$eforet h e B r o 2 e r s a n d E x c h a n g e s D e p t ( B E D o f S E C t o e x p l a i n 0 R C 7 s failure to

immediately disclose the information as re?uired $yt heRu l es on D i s c l o s u re o f Ma t e r i a l 9a c t s $y Co rp o r a t i o ns Gh os eSecurities are isted in

Any Stoc2 Exchange or RegisteredicensedInder the Securities Act% 0RC sen t a l e t te r to SEC& a t tach ingcop ies of MoA an d i ts dir ect or sappeared to explain 0RC7s al leged fai lure to immediatelydisclosematerial information as re?uired under the Rules on Disclosure of Material 9acts!- * , S e p t* , , 8 K S E C C h a i r m a n i s s u e d a n # r d e r f i n d i n gt h a t 0 R C v i o l a t e d t h e R u l e s o n D i s c l o s u r e w h e n i t f a i l e d t o m a 2 e t i m e l y d i s c l o s u r e &a n d th a t so m e o f t h e o f f i c e r s a n d d i r e ct o r s of 0 R C entered into transactions involving 0RCshares in violation of Sec .&in relation to Sec .- of the Revised Securities Act!: 0RC f i l ed an #mni$usMo ti on ( l a te r an Am ende d #m ni $us Mo ti on alleging that SEC had no authority to investigate the su$1ectmatter&since under Sec of 4D ,'+A& as amended $y 4D *:%& 1urisdictionwas conferred upon the 4rosecution andEnforcement Dept (4ED of SEC

0RC also claimed that SEC violated their right to due process when itordered that the respondents appear$efore SEC and show causewhy no administrative& civil or criminal sanctions should $e imposedon them& andthus& shi fted t he $urden of proof to the respondents! "hey filed a Motion for Continuance of 4roceedings!,)o formal hearings were conducted in connection with the Motions!*'% / an *,,% K SE C is sued an #mni $us #rde rF c reat ing a sp ec ial investigating panel to hearand decide the case in accordance withRules of 4ractice and 4rocedure $efore the 4ED& SEC torecall theshow cause orders and to deny the Motion for Continuance for lac2 of erit!* * R e s p o n d e n t s f i l e d a p e t i t i o n $ e f o r e t h e C A ? u e s t i o n i n g th e #m ni$ us #rd ers and f i l ed a Sup ple men tal Mot ion whe rei n the yprayed for the issuance of a writof preliminary in1unction!

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* ' % M a y * , , % K C A g r a n t e d t h e i r m o t i o n a n d i s s u e d aw r i t o f preliminary in1unction& which effectively en1oined SEC from fil ingany criminal& civil oradministrative case against the respondents!

* . ' A u g * , , K C A p r o m u l g a t e d a D e c i s i o n". De )e rm +$ e% ) " ) ) er e =e re $o +m 6# em e $) +$ : r #e ! "$% re:#")+o$! re:"r%+$:%+!(#o!re, +$!+%er )r"%+$:,or "$ o* )e 6rov+!+o$! o* )e Rev+!e% Se(r+)+e! A()!=+( re!6o$%e$)! "##e:e%#

v+o#")e%.$! 0 t foun d no s tatu tory auth or i t y fo r SE C to in i t iate and f i le any sui t for civi l l ia$i l ity under Sec& . and .- of theRevisedS e c u r i t i e s A c t & t h u s & i t r u l e d t h a t n o c i v i l & c r i m i n a l o r administrativeproceedings may possi$ly $e held against therespondents without violating their rights to due process ande?ualprotection!c!0t further resolved that a$sent any implementing rules& theSEC cannot $e allowed to?uash the assailed #mni$us #rdersd!9urther decided that theR#e! o* Pr"()+(e "$%Pro(e%reb e * or e ) e P ED % + % $ o ) ( o m6 # = +) ) e ! ) " ) ) o r re+reme$)! (o$)"+$e% +$)e A%m+$+!)r")+ve Co%e o* 1! S e c t i o n , & R u l e H o f t h e R u l e s o f 4 r a c t i c e a n d 4 r o c e d u r e $ e f o r e th e 4 E D a f f o r d s a p a r t y t h e r i g h t t o $ e p r e s en t $ u t w i t ho u t t h e r i g ht to cr o s s+ e x am i n ewi tnesses ' presented against him& in violation of Sec *'(.& Chap .& Boo2H00 of the Administrative Code!I!!e!'

*! Do sec t io ns & .& an d . - o f th e R evi sed Sec ur i t i es Ac t r e?u ire the enactment of implementingrules to ma2e them $inding and effectiveJ )o!'! Does the right to cross+examination $e demandedduring investi gativeproceedings $efore the 4EDJ )o!.! May a criminal case still $e filed agains t therespondents despite therepeal of Sections & .& and .- of the Revised Securities ActJ Les!8! Did SEC retainthe 1urisdiction to investigate violations of the RevisedSecurities Act& re+enacted in the SecuritiesRegulations Code& despite thea$olition of the 4EDJ Les!%! Does the instant case prescri$ed alreadyJ )o!-! 0sCA 1ustified in denying SEC7s Motion for eave to uash SEC #mni$us#rdersJ Les!R#+$:'"he petition is impressed with merit!N 0 t s h o u l d $ e n o t e d t h a t w h i l e t h e c a s e w a s p e n d i n g i n S C & R A : , , (SecuritiesRegulation Code too2 effect on August '!Section of 4D ,'+A& as amended& which created the 4ED&was already repealed as provided for in Sec :- of Securities Regulation Code!"hus& under the new law& the4ED has $een a$o lished & and the Secu rit ies Regulation Code has ta2en the place of the Revised Securities

Act!#n the meritsF

*Sections & .& and .- of the Revised Securit ies Act (RSA do notre ?u ir e th e en ac tm en t ofimp lem ent in g ru les to m a2e the m $ ind ing and effective!O " h e m e r e a $ s e n c e o f i m p l e m e n t i n g r u l e s c a n n o t e f f e c t i v e l y invalidateprovis ions of law& where a reasona$le construction that will support the law may $e given!O

A$sence o f any cons t i t u t i ona l o r s t a tu to ry i n f i rm i t y& wh ich ma yc o n c e r n S e c s . a n d .- o f R S A & t h e p r o v i s i o n s a r e l e g a l a n d $inding!OEvery law has in its favour the presumption of validity! Inlessandu n t i l a s p e c i f i c p r o v i s i o n o f t h e l a w i s d e c l a r e d i n v a l i d a n d unconstitutional& the same is valid and $inding for all intents and purposes!O"he Court does not discern any vagueness or am$iguity in Sec .and .- of RSA Sec . K 0nsider7s duty todisclose when trading 0ns iders are o$l igated to disclose mate ria l i nforma tion to the other party or a$stain fromtrading the shares of h i s c o r p o r a t i o n ! " h i s d u t y t o d i sc l o s e o r a $ s ta i n i s $ased on two factorsF

8/9/2019 1_Corp Finance Case Digests

23/23

Pb#+( Com6"$Acompanythat has held an initial pu$lic offeringand whoseshares aretradedon a stoc2 exchange or in the over+the+counter mar2et! 4u$liccompanies are su$1ect to periodic filing and other o$ligations under thefederal securities laws!

Pb#+( L+m+)e% Com6"$

A primarily British term for apu$licly+tradedcompany!"he term derivesfrom the facts that the company issuessharesthat may $e $ought andsold $y the general pu$lic and allshareholdershavelimited lia$ility!

Pb#+(#