SEC v Interport Resources Corp o As per the advice of SEC, IRC sent the press release on the morning of

G.R. No. 135808 | October 6, 2008| CHICO-NAZARIO, J. the 9​th​.

● SEC averred that it received reports that IRC failed to make timely public
Topic: Meaning and effects of a reenactment; no IRR disclosures of its negotiations with GHB and that some of its directors heavily
traded IRC shares utilizing this material insider information.
Summary: ​Interport entered into a MoA with Ganda Holdings. IRC claims that it tried to ● August 16, 1994 – SEC Chairman issued a directive requiring IRC to submit to SEC
fax the press release of the approval of the agreement to the Sec but the fax machine of a copy of its MoA with GHB and further directed all principal officers of IRC to
the SEC could not receive it and so it mailed it the following morning. SEC claims that IRC appear at a hearing before the Brokers and Exchanges Dept (BED) of SEC to
failed to make the timely public disclosures of its negotiations and that its officers heavily explain IRC’s failure to immediately disclose the information as required by the
traded IRC shares utilizing the undisclosed material information. SEC chair claims that IRS Rules on Disclosure of Material Facts.
violated the rules on disclosure. IRC claims SEC had no authority to investigate the subject o IRC complied
matter as it was the Prosecution and Enforcement Department that had the jurisdiction. ● September 19, 1994 – SEC Chairman issued an Order finding that IRC violated the
CA ruled in favor of IRC, ruling that, among others, that there were no IRR regarding Rules on Disclosure when it failed to make timely disclosure, and that some of
disclosure, insider trading, or any of the provisions of the Revised Securities Acts the officers and directors of IRC entered into transactions involving IRC shares in
which respondents allegedly violated. It also found no statutory authority for SEC to violation of Sec 30, in relation to Sec 36 of the Revised Securities Act.
initiate and file any suit for civil liability under Sec 8, 30 and 36 of the Revised Securities ● IRC filed an Omnibus Motion alleging that SEC had no authority to investigate the
Act, thus, it ruled that no civil, criminal or administrative proceedings may possibly be subject matter, since under Sec 8 of PD 902-A, as amended by PD 1758,
held against the respondents. SC ruled otherwise. jurisdiction was conferred upon the Prosecution and Enforcement Dept (PED) of
SEC
Doctrine: ● IRC also claimed that SEC violated their right to due process when it ordered that
● The mere absence of implementing rules cannot effectively invalidate the respondents appear before SEC and show cause why no
provisions of law, where a reasonable construction that will support the law administrative, civil or criminal sanctions should be imposed on them, and thus,
may be given. shifted the burden of proof to the respondents. They also filed a motion for
● When the repealing law punishes the act previously penalized under the old Continuance of proceedings
law, the act committed before the re-enactment continues to be an offense and ● January 25, 1995 – SEC issued an Omnibus Order: creating a special
pending cases are not affected. investigating panel to hear and decide the case in accordance with Rules of
Practice and Procedure before the PED, SEC; to recall the show cause
orders; and to deny the Motion for Continuance for lack of merit.
Provis: (according to syllabus) ● Respondents filed a petition before the CA questioning the Omnibus Orders and
Section 1. Title of the Code. - This Code shall be known as the "Revised Corporation Code filed a Supplemental Motion wherein, they prayed for the issuance of a writ of
of the Philipines". preliminary injunction.
o CA granted the motion and issued a writ of preliminary injunction,
Facts: which enjoined SEC from filing any criminal, civil or
● August 6, 1994 – BoD of IRC approved a Memorandum of Agreement (MoA) with administrative case against the respondents.
Ganda Holdings Berhad (GHB). ● August 20, 1998 – CA:
● August 8, 1994 – IRC alleged that a press release announcing the approval of the o (TOPIC) Determined ​that there were no IRR regarding disclosure,
agreement was sent through fax to Philippine Stock Exchange (PSE) and the SEC, insider trading, or any of the provisions of the Revised Securities
but that the fax machine of SEC could not receive it. Acts ​ which respondents allegedly violated.
 o Found ​no statutory authority for SEC to initiate and file any suit for ● The intent of the law is the protection of investors against fraud,
civil liability under Sec 8, 30 and 36 of the Revised Securities Act​, thus, committed when an insider, using secret information, takes advantage of
it ruled that no civil, criminal or administrative proceedings may possibly an uninformed investor.
be held against the respondents without violating their rights to due o In some cases, however, there may be valid corporate reasons for
process and equal protection nondisclosure of material information.
o Resolved that absent any implementing rules, the SEC cannot be ● Sec 36 – Directors, officers and principal stockholders-
o A straightforward provision that imposes upon:
allowed to quash the assailed Omnibus Orders
o 1.a beneficial owner of more than 10 percent of any class of any equity
o Decided that the Rules of Practice and Procedure before the PED did security or
not comply with the statutory requirements contained in the o 2.a director or any officer of the issuer of such security the obligation
Administrative Code of 1997. to submit a statement indicating his or her ownership of the
▪ Section 9, Rule V of the Rules of Practice and Procedure before issuer’s securities and such changes in his or her ownership
the PED affords a party the right to be present but ● Sections 30 and 36 of the RSA were enacted to promote full disclosure in the
without the right to cross-examine witnesses presented securities market and prevent unscrupulous individuals, who by their positions
against him, in violation of Sec 12(3), Chap 3, Book VII of the obtain non-public information, from taking advantage of an uninformed public.
Administrative Code. ● Sec 30 prevented the unfair use of non-public information in
securities transactions, while Sec 36 allowed the Sec to monitor the
ISSUE: (TOPIC) WON Sections 8, 30 and 36 of the Revised Securities Act requires the transactions entered into by corporate officers and directors as regards the
enactment of implementing rules to make them binding and effective – IT DOES NOT securities of their companies.
NEED AN IRR ● The lack of implementing rules cannot suspend the effectivity of these
● Sections 8, 30, and 36 of the Revised Securities Act (RSA) do not require the provisions.
enactment of implementing rules to make them binding and effective.
● The mere absence of implementing rules cannot effectively invalidate WON a criminal case still be filed against the respondents despite the repeal of Sections
provisions of law, where a reasonable construction that will support the law 8, 30, and 36 of the Revised Securities Act – YES
may be given (People v. Rosenthal). ● The Securities Regulation Code (SRC) did not repeal Sections 8, 30, and 36 of the
● With the absence of any constitutional or statutory infirmity which may concern Revised Securities Act ​since said provisions were re-enacted in the new law​.
Sec 30 and 36 of RSA, the provisions are legal and binding. ● When the repealing law punishes the act previously penalized under the old
● Every law has in its favor the presumption of validity (​Garcia v. Executive law, the act committed before the re-enactment continues to be an offense and
Secretary). Unless and until a specific provision of the law is declared invalid pending cases are not affected.
and unconstitutional, the same is valid and binding for all intents and purposes. ● Sec 8 of RSA, which previously provided for the registration of
● The Court does not discern any vagueness or ambiguity in Sec 30 and 36 of RSA securities and the information that needs to be included in the
● Sec 30 – Insider’s duty to disclose when trading: Insiders are obligated to disclose registration statements, was expanded under Sec 12 of the Securities Regulations
material information to the other party or abstain from trading the Code. Further details of the information required to be disclosed by the
shares of his corporation. This duty to disclose or abstain is based on two registrant are explained
factors: ● Sec 30 of RSA has been re-enacted as Sec 27 of SRC, still penalizing an insider’s
o 1. the existence of a relationship giving access, directly or misuse of material and non-public information about the issuer, for the purpose
indirectly, to information intended to be available only for a corporate of protecting public investors
purpose and not for the personal benefit of anyone ● Sec 23 of SRC was practically lifted from Sec 36 of RSA.
o 2. the inherent unfairness involved when a party takes ● The legislature had not intended to deprive the courts of their authority to
advantage of such information knowing it is unavailable to those with punish a person charged with violation of the old law that was repealed.
whom he is dealing.
Ruling:​ Petition granted. CA reversed. Permanent Injunction lifted.
Notes:
● Content of MoA
o IRC acquired 100% or the entire capital stock of Ganda Energy
Holdings, Inc., which would own and operate a 102-megawatt gas
turbine power-generating barge.
o GEHI would assume a five-year power purchase contract with
National Power Corp.
o IRC will issue to GHB 55% of the expanded capital stock of IRC
(amounting to 40.88 billion shares – total par value of P488.44million)
o IRC would acquire 67% of the entire capital stock of Philippine Racing
Club, Inc. (PRCI). PRCI owns 25.724 hectares of real estate property in
Makati.
▪ GHB, shall extend or arrange a loan required to pay for the
proposed acquisition by IRC of PRCI.

Separate opinions:
J. Tinga – concurring opinion:
Manipulative devices and deceptive practices, including insider trading, throw a monkey
wrench right into the heart of the securities industry – when someone trades
in the market with unfair advantage in the form of highly valuable secret inside
information, all other participants are defrauded.

J. Carpio – dissenting opinion:

Proceedings referred to in Sec 2 of Act No. 3326 are judicial proceedings and not
administrative proceedings. Contrary to the majority opinion’s claim that “a preliminary
investigation interrupts the prescriptive period,“ only the institution of judicial
proceedings can interrupt the running of the prescriptive period. The criminal charges
may proceed separately and independently of the administrative proceedings. (not
entirely sure if this is related to the main issues)