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PRIMANILA PLANS v. SECURITIES

FACTS:

Primanila Plans, Inc. (Primanila), a pre-need company registered with the Securities and Exchange Commission (SEC), was ordered to immediately cease and desist from selling and offering for sale Primasa plans, as well as from collecting payments and amortizations for Primasa plans. The SEC's decision was based on an investigation conducted by its Compliance and Enforcement Department (CED) which revealed several violations committed by Primanila. These violations include the closure of its office without public notification, offering pension plans through its website without proper licenses and registrations, failure to renew its Dealer's License, failure to deposit monthly contributions to the trust fund, and under-declaration of collections in their reports to the SEC. These violations were considered to be a flagrant violation of the Securities Regulation Code.

Primanila filed a motion for reconsideration, alleging that it was denied due process as no notice or formal charge was given prior to the issuance of the cease and desist order. Primanila also claimed that it was not selling or collecting payments for the specific plan mentioned in the order. However, the SEC denied the motion and made the cease and desist order permanent.

Unsatisfied with the SEC's decision, Primanila appealed to the Court of Appeals (CA) but the CA affirmed the SEC's issuances.

Primanila then filed a petition for review with the Supreme Court, citing various grounds including lack of due process. The Supreme Court ruled that Primanila was accorded due process and that their petition lacked merit.

ISSUES:

  1. Whether or not Primanila was accorded due process by the SEC in the issuance of the cease and desist order.

  2. Whether or not the CA erred in sustaining the rulings of the SEC.

  3. Whether the cease and desist order issued by the Securities and Exchange Commission (SEC) against Primanila Plans, Inc. is valid.

  4. Whether Primanila engaged in the sale or offer for sale of Primasa plans.

  5. Whether or not the regulations imposed on pre-need plans, such as registration requirements, licensing, disclosures, and advertising guidelines, are necessary for the protection of investors and the public.

  6. Whether or not the Pre-Need Code, which governs pre-need companies, contains similar conditions for the regulation of pre-need plans.

RULING:

  1. The petition lacks merit. Primanila was accorded due process by the SEC. The SEC has the authority to issue a cease and desist order without the necessity of a prior hearing if it finds that the act or practice, unless restrained, will operate as a fraud on investors or is likely to cause grave or irreparable injury or prejudice to the investing public. The SEC conducted proper investigation and verification before issuing the cease and desist order against Primanila. Primanila was given the opportunity to file a motion for reconsideration and present its defense. The essence of due process is simply the opportunity to explain one's position.

  2. The CA did not err in sustaining the rulings of the SEC.

  3. The cease and desist order issued by the SEC against Primanila Plans, Inc. is valid.

  4. Primanila engaged in the sale or offer for sale of Primasa plans.

  5. The petition is denied. The Court of Appeals decision and resolution affirming the regulations imposed on pre-need plans are upheld.

PRINCIPLES:

  • A cease and desist order may be issued by the SEC without a prior hearing if it finds that the act or practice will operate as a fraud on investors or is likely to cause grave or irreparable injury or prejudice to the investing public.

  • Due process in administrative proceedings does not always require a trial-type proceeding. It is satisfied when a person is notified of the charge against him and given an opportunity to explain or defend himself.

  • The minimum requirements of due process in administrative proceedings include the filing of charges and giving the person charged a reasonable opportunity to answer the accusations against him. Due process in administrative proceedings entails an opportunity to explain one's side or seek reconsideration of the action or ruling complained of.

  • The Supreme Court is not a trier of facts and can only review questions of law. Factual findings of administrative agencies, such as the SEC, are generally binding and final if supported by substantial evidence.

  • Substantial evidence refers to such relevant evidence that a reasonable mind might accept as adequate to support a conclusion. It is derived from the results of an investigation and supports the SEC's and Court of Appeals' findings.

  • When a company's website includes sections or items not sanctioned by the company, the company can be held responsible for the truthfulness of all data or information on its website, especially if supplied by persons working under its authority.

  • The sale or offer for sale of pre-need plans to the public must be in accordance with SEC rules and regulations, which may include registration requirements. Violation of these rules and regulations can lead to the issuance of a cease and desist order.

  • The regulations imposed on pre-need plans are necessary for the protection of investors and the public in general.

  • The Pre-Need Code contains similar conditions for the regulation of pre-need plans.