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THE
Securities and Exchange Commission’s investigation into
the operations of the College Assurance Philippines Inc.
(CAP) has virtually jumped over a snag when the Court of
Appeals (CA) ordered the financially beleaguered preneed
firm to submit its working papers, financial records and
other documents to the SEC, which is inquiring whether
the latter violated provisions of the Securities
Regulation Code (SRC).
Before
the order, the CAP had argued the SEC subpoena for its
papers is “a veiled fishing expedition” to obtain
evidence that may be used in the criminal cases against
it.
The
company added the intended examination is a “clear
violation of its right to due process” in view of the
lack of a written notice in clarifying the basis and
purpose of the investigation.
The
petitioners also branded the investigation as “highly
irregular and arbitrary” in the absence of a complaint
filed against it and for lack of authorization from the
Regional Trial Court in Makati City, where its
rehabilitation request is pending.
The
appellate court did not give credence to the CAP
arguments, noting that Section 5 of the Securities
Regulation Code grants the commission the power to 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 necessary for the disposition of cases before
it.
It noted
that an administrative agency can investigate merely on
suspicion that the law is being violated or even just
because it wants assurance that it is not.
“To
limit the subpoena power of the SEC only to instances
when a complaint is lodged before it, as petitioner
asserts, is to undermine its ability to ensure that the
entities subject to its regulatory power are complying
with the applicable laws and requirements, and
compromise the exercise of its discretion in appropriate
cases.”
The CA
also did not give credence to the claim of CAP that the
subpoenas did not comply with the notice requirement and
that the commission violated its right to due process.
CAP told
the court the SEC subpoena on September 19, 2005, failed
to say why it was ordering the submission of the
documents, contrary to the subpoena issued on September
27 where the commission said the inquiry was to
determine possible violation of the preneed rules of the
SRC.
The firm
claimed the SEC failed to conduct a hearing into the
subject before issuing the subpoenas.
The CA
noted that failure of the SEC to cite the specific
purpose of the September 19 subpoena did not render it
invalid, and that there is no need for the SEC to
conduct a hearing prior to the issuance of the
subpoenas, considering the subpoenas merely directed the
production of certain books and documents in aid of the
investigation being conducted by the commission.
Likewise, the CA said there is no need for the SEC to
get authorization from the rehabilitation court
considering the rehabilitation proceedings is different
from the inquiry being conducted by the SEC.
“Violations of the SRC, the Corporation Code and other
existing laws, rules and regulations being implemented
by the SEC are not issues raised therein. Hence, the
mere filing of a petition for rehabilitation does not
deprive the SEC of its regulatory and investigative
powers, including the issuance of subpoenas,” the CA
added.
Earlier,
the SEC filed criminal cases against top officials of
CAP for various violations of the SRC at the Department
of Justice.
Based on
its investigation, the SEC found that CAP continued to
sell pre-need educational plans even after it was no
longer allowed to do so.
Commission records show that by June 2004, CAP had
already sold P5 billion worth of fixed-value education
plans. Because of this, the commission directed CAP to
stop selling that particular kind of education plan.
However,
three months after the company fully sold its available
plans, CAP admitted selling unregistered plans totaling
P325 million.
The firm
sought corporate rehabilitation to prevent SEC from
forming a management committee that would look into the
operations of the company. |
