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UNION BANK OF PHILIPPINES v. SECURITIES

FACTS:

The petitioner, a banking institution listed in the stock market, sought clarification from the Securities and Exchange Commission (SEC) regarding the applicability and coverage of the Full Material Disclosure Rule on banks. The SEC informed the petitioner that while securities of banks are exempt from the registration requirement under Section 5(a)(3) of the Revised Securities Act, banks with securities listed for trading on the Philippine Stock Exchange are still required to comply with certain SEC rules, including the filing of various reports. The petitioner, unsatisfied with the response, referred the matter to the Philippine Stock Exchange for clarification. The SEC reiterated its position that the petitioner is not exempt from filing certain reports necessary for full, fair, and accurate disclosure to the investing public. The petitioner failed to respond to the SEC's communication and was subsequently assessed a fine for its failure to submit a Proxy/Information Statement in connection with its annual meeting. The petitioner disputed the assessment but was denied a reconsideration by the SEC. The petitioner appealed the SEC's decision to the Court of Appeals, which affirmed the SEC's orders.

ISSUES:

  1. Whether or not petitioner is required to comply with the respondent SEC's full disclosure rules.

  2. Whether or not the SEC's full disclosure rules are contrary to and effectively amend section 5(a)(3) of the Revised Securities Act.

  3. Whether or not Respondent Court of Appeals gravely erred in holding that petitioner violated three (3) Rules, namely: Rule 11(A)-1, Rule 34(A)-1 and Rule 34(C)-1 of the full disclosure rule.

  4. Whether or not Respondent Court of Appeals erred in affirming with modification the imposition of excessive fines in violation of the Philippine Constitution.

RULING:

  1. The Court held that petitioner is required to comply with the respondent SEC's full disclosure rules. The regulations imposed by the SEC on petitioner as a banking institution listed in the stock market are meant to assure full, fair, and accurate information for the protection of investors. This falls within the jurisdiction of the SEC, and the fact that petitioner is already subject to the supervision of the Bangko Sentral ng Pilipinas does not exempt it from reasonable disclosure regulations issued by the SEC.

  2. The SEC's full disclosure rules do not contrary to and effectively amend section 5(a)(3) of the Revised Securities Act. Rules 11(a)-1, 34(a)-1, and 34(c)-1 were issued by the SEC to implement the RSA. They do not require the registration of petitioner's securities, but rather aim to require public issuers of securities to inform the public of the true financial conditions and prospects of the corporation. The construction given by the SEC on the scope of application of the "Full Material Disclosure" policy is in line with its statutory mandate to protect the investing public.

  3. The Court found no error on the part of the Court of Appeals in holding that petitioner violated the three rules of the full disclosure rule. Petitioner failed to comply with the requirements of Rule 11(a)-1, Rule 34(a)-1, and Rule 34(c)-1, which necessitate the submission of reports for full, fair, and accurate disclosure to the investing public.

  4. The Court ruled that the imposition of fines by the SEC, as affirmed with modification by the Court of Appeals, did not violate the Philippine Constitution. The fines imposed were within the purview of the SEC's authority and were justified based on petitioner's failure to comply with the disclosure regulations.

PRINCIPLES:

  • The construction given to a statute by an administrative agency charged with its interpretation and application is entitled to great respect and should be accorded great weight by the courts, unless such construction is clearly shown to be in conflict with the governing statute or the Constitution and other laws.

  • The SEC has the power to promulgate rules and regulations for the enforcement of the Revised Securities Act and other pertinent laws.

  • The SEC's "Full Material Disclosure" policy allows for greater protection of the investing public by requiring public issuers of securities to disclose truthful and accurate information about themselves and the securities they sell.

  • Compliance with disclosure regulations issued by the SEC is necessary for banking institutions listed in the stock market to provide full, fair, and accurate information for the protection of investors.