“x x x.
Section 4 of Batas Pambansa Blg. 176, or the Revised Securities Act, generally requires the registration of securities and prohibits the sale or distribution of unregistered securities. The DOJ extensively concluded that private respondents are liable for violating such prohibition against the sale of unregistered securities:
This analysis is highly myopic and ignorant of the bigger picture. It is one thing for a corporation to issue checks to satisfy isolated individual obligations, and another for a corporation to execute an elaborate scheme where it would comport itself to the public as a pseudo-investment house and issue postdated checks instead of stocks or traditional securities to evidence the investments of its patrons. The Revised Securities Act was geared towards maintaining the stability of the national investment market against activities such as those apparently engaged in by ASBHI. As the DOJ Resolution noted, ASBHI adopted this scheme in an attempt to circumvent the Revised Securities Act, which requires a prior license to sell or deal in securities. After all, if ASBHI's activities were actually regulated by the SEC, it is hardly likely that the design it chose to employ would have been permitted at all.
But was ASBHI able to successfully evade the requirements under the Revised Securities Act? As found by the DOJ, there is ultimately a prima facie case that can at the very least sustain prosecution of private respondents under that law. The DOJ Resolution is persuasive in citing American authorities which countenance a flexible definition of securities. Moreover, it bears pointing out that the definition of "securities" set forth in Section 2 of the Revised Securities Act includes "commercial papers evidencing indebtedness of any person, financial or non-financial entity, irrespective of maturity, issued, endorsed, sold, transferred or in any manner conveyed to another." A check is a commercial paper evidencing indebtedness of any person, financial or non-financial entity. Since the checks in this case were generally rolled over to augment the creditor's existing investment with ASBHI, they
We should be clear that the question of whether the subject checks fall within the classification of securities under the Revised Securities Act may still be the subject of debate, but at the very least, the DOJ Resolution has established a prima facie case for prosecuting private respondents for such offense. The thorough determination of such issue is best left to a full-blown trial of the merits, where private respondents are free to dispute the theories set forth in the DOJ Resolution. It is clear error on the part of the Court of Appeals to dismiss such finding so perfunctorily and on such flimsy grounds that do not consider the grave consequences. After all, as the DOJ Resolution correctly pointed out: "[T]he postdated checks themselves serve as the evidences of the indebtedness. A different rule would open the floodgates for a similar scheme, whereby companies without prior license or authority from the SEC. This cannot be countenanced."
This conclusion quells the stance of the Court of Appeals that the unfortunate events befalling petitioners were ultimately benign, not malevolent, a consequence of the economic crisis that beset the Philippines during that era. That conclusion would be agreeable only if it were undisputed that the activities of ASBHI are legal in the first place, but the DOJ puts forth a legitimate theory that the entire modus operandi of ASBHI is illegal under the Revised Securities Act and if that were so, the impact of the Asian economic crisis would not obviate the criminal liability of private respondents.
X x x.”