The Securities and Exchange Commission (SEC), the government agency which exercises supervision and jurisdiction over all corporations and persons acting on their behalf, was reorganized in 1976 through Presidential Decree No. 902-A. Section 5 of PD 902-A reads:
Sec. 5. In addition to the regulatory and adjudicative functions of the Securities and Exchange Commission over corporations, partnerships and other forms of associations registered with it as expressly granted under existing laws and decrees, it shall have original and exclusive jurisdiction to hear and decide cases involving.
- (a) Devices or schemes employed by or any acts, of the board of directors, business associates, its officers or partnership, amounting to fraud and misrepresentation which may be detrimental to the interest of the public and/or of the stockholder, partners, members of associations or organizations registered with the Commission;
- (b) Controversies arising out of intra-corporate or partnership relations, between and among stockholders, members, or associates; between any or all of them and the corporation, partnership or association of which they are stockholders, members or associates, respectively; and between such corporation, partnership or association and the state insofar as it concerns their individual franchise or right to exist as such entity; and
- (c) Controversies in the election or appointments of directors, trustees, officers or managers of such corporations, partnerships or associations.
SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the following powers:
- (a) To issue preliminary or permanent injunctions, whether prohibitory or mandatory, in all cases in which it has jurisdiction, and in which cases the pertinent provisions of the Rules of Court shall apply;
- (b) To punish for contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of, and penalties prescribed by, the Rules of Court;
- (c) To compel the officers of any corporation or association registered by it to call meetings of stockholders or members thereof under its supervision;
- (d) To pass upon the validity of the issuance and use of proxies and voting trust agreements for absent stockholders or members;
- (e) To issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases order search and seizure or cause the search and seizure of all documents, papers, files and records as well as books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it;
- (f) To impose fines and/or penalties for violation of this Decree or any other laws being implemented by the Commission, the pertinent rules and regulations, its orders, decisions and/or rulings;
- (g) To authorize the establishment and operation of stock exchanges, commodity exchanges and such other similar organization and to supervise and regulate the same; including the authority to determine their number, size and location, in the light of national or regional requirements for such activities with the view to promote, conserve or rationalize investment;
- (h) To pass upon, refuse or deny, after consultation with the Board of Investments, Department of Industry, National Economic and Development Authority or any other appropriate government agency, the application for registration of any corporation, partnership or association or any form of organization falling within its jurisdiction, if their establishment, organization or operation will not be consistent with the declared national economic policies.
- (i) To suspend, or revoke, after proper notice and hearing, the franchise or certificate of registration of corporations, partnerships or associations, upon any of the grounds provided by law, including the following: (1) Fraud in procuring its certificate of registration; (2) Serious misrepresentation as to what the corporation can do or is doing to the great prejudice of or damage to the general public; (3) Refusal to comply or defiance of any lawful order of the Commission restraining commission of acts which would amount to a grave violation of its franchise; (4) Continuous inoperation for a period of at least five (5) years; (5) Failure to file by-laws within the required period; and (6) Failure to file required reports in appropriate forms as determined by the Commission within the prescribed period;
- (j) To exercise such other powers as implied, necessary or incidental to the carrying out the express powers granted to the Commission or to achieve the objectives and purposes of this Decree.
In the exercise of the foregoing authority and jurisdiction of the Commission, hearings shall be conducted by the Commission or by a Commissioner or by such other bodies, boards, committees and/or any officer as may be created or designated by the Commission for the purpose. The decision, ruling or order of any such Commissioner, bodies, boards, committees and/or officer may be appealed to the Commission sitting en banc within thirty (30) days after receipt by the appellant of notice of such decision, ruling or order. The Commission shall promulgate rules of procedures to govern the proceedings, hearings and appeals of cases falling within its jurisdiction.
The aggrieved party may appeal the order, decision or ruling of the Commission sitting en banc to the Supreme Court by petition for petition for review in accordance with the pertinent provisions of the Rules of Court.
SECURITIES REGULATION ACT
The SEC’s jurisdiction over all cases enumerated under Section 5 of PD 902-A has been transferred to courts of general jurisdiction or the appropriate Regional Trial Court, pursuant to Section 5.2 of the Securities Regulation Code (Republic Act No. 8799). The Supreme Court in the exercise of its authority may designate the Regional Trial Court branches that shall exercise jurisdiction over the cases. The SEC, however, shall retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution which should be resolved within one (1) year from the enactment of this Code. The Commission shall retain jurisdiction over pending suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed. [See also Corporate dissolution and liquidation; Rules on intra-corporate controversies]
Section 5. Powers and Functions of the Commission.– 5.1. The commission shall act with transparency and shall have the powers and functions provided by this code, Presidential Decree No. 902-A, the Corporation Code, the Investment Houses law, the Financing Company Act and other existing laws. Pursuant thereto the Commission shall have, among others, the following powers and functions:
- (a) Have jurisdiction and supervision over all corporations, partnership or associations who are the grantees of primary franchises and/or a license or a permit issued by the Government;
- (b) Formulate policies and recommendations on issues concerning the securities market, advise Congress and other government agencies on all aspect of the securities market and propose legislation and amendments thereto;
- (c) Approve, reject, suspend, revoke or require amendments to registration statements, and registration and licensing applications;
- (d) Regulate, investigate or supervise the activities of persons to ensure compliance;
- (e) Supervise, monitor, suspend or take over the activities of exchanges, clearing agencies and other SROs;
- (f) Impose sanctions for the violation of laws and rules, regulations and orders, and issued pursuant thereto;
- (g) Prepare, approve, amend or repeal rules, regulations and orders, and issue opinions and provide guidance on and supervise compliance with such rules, regulation and orders;
- (h) Enlist the aid and support of and/or deputized any and all enforcement agencies of the Government, civil or military as well as any private institution, corporation, firm, association or person in the implementation of its powers and function under its Code;
- (i) Issue cease and desist orders to prevent fraud or injury to the investing public;
- (j) Punish for the contempt of the Commission, both direct and indirect, in accordance with the pertinent provisions of and penalties prescribed by the Rules of Court;
- (k) Compel the officers of any registered corporation or association to call meetings of stockholders or members thereof under its supervision;
- (l) Issue subpoena duces tecum and summon witnesses to appear in any proceedings of the Commission and in appropriate cases, order the examination, search and seizure of all documents, papers, files and records, tax returns and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases before it, subject to the provisions of existing laws;
- (m) Suspend, or revoke, after proper notice and hearing the franchise or certificate of registration of corporations, partnership or associations, upon any of the grounds provided by law; and
- (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.
THE SRC does not expressly repeal Section 6 of PD 902-A, but simply states that: “All other laws, orders, rules and regulations, or parts thereof, inconsistent with any provision of this Code are hereby repealed or modified accordingly” (Sec. 76). In other words, Section 6 of PD 902-A is retained, subject to the qualification that any provision inconsistent with the SRC is repealed or modified accordingly.
REVISED CORPORATION CODE
- (a) Exercise supervision and jurisdiction over all corporations and persons acting on their behalf, except as otherwise provided under this Code;
- (b) Pursuant to Presidential Decree No. 902-A, retain jurisdiction over pending cases involving intra-corporate disputes submitted for final resolution. The Commission shall retain jurisdiction over pending suspension of payment/rehabilitation cases filed as of 30 June 2000 until finally disposed;
- (c) Impose sanctions for the violation of this Code, its implementing rules and orders of the Commission;
- (d) Promote corporate governance and the protection of minority investors, through, among others, the issuance of rules and regulations consistent with international best practices;
- (e) Issue opinions to clarify the application of laws, rules, and regulations;
- (f) Issue cease and desist orders ex parte to prevent imminent fraud or injury to the public;
- (g) Hold corporations in direct and indirect contempt;
- (h) Issue subpoena duces tecum and summon witnesses to appear in proceedings before the Commission;
- (i) In appropriate cases, order the examination, search and seizure of documents, papers, files and records, and books of accounts of any entity or person under investigation as may be necessary for the proper disposition of the cases, subject to the provisions of existing laws;
- (j) Suspend or revoke the certificate of incorporation after proper notice and hearing;
- (k) Dissolve or impose sanctions on corporations, upon final court order, for committing, aiding in the commission of, or in any manner furthering securities violations, smuggling, tax evasion, money laundering, graft and corrupt practices, or other fraudulent or illegal acts;
- (l) Issue writs of execution and attachment to enforce payment of fees, administrative fines, and other dues collectible under this Code;
- (m) Prescribe the number of independent directors and the minimum criteria in determining the independence of a director;
- (n) Impose or recommend new modes by which a stockholder, member, director, or trustee may attend meetings or cast their votes, as technology may allow, taking into account the company’s scale, number of shareholders or members, structure, and other factors consistent with the basic right of corporate suffrage;
- (o) Formulate and enforce standards, guidelines, policies, rules and regulations to carry out the provisions of this Code; and
- (p) Exercise such other powers provided by law or those which may be necessary or incidental to carrying out the powers expressly granted to the Commission.
In imposing penalties and additional monitoring and supervision requirements, the Commission shall take into consideration the size, nature of the business, and capacity of the corporation.
No court below the Court of Appeals shall have jurisdiction to issue a restraining order, preliminary injunction, or preliminary mandatory injunction in any case, dispute, or controversy that directly or indirectly interferes with the exercise of the powers, duties and responsibilities of the Commission that falls exclusively within its jurisdiction.
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