Sunday, March 6, 2016

2006 SEC Rules of Procedure; appeal to SEC en banc.

COSMOS BOTTLING CORPORATION vs.COMMISSION EN BANC of the SECURITIES AND EXCHANGE COMMISSION (SEC) and JUSTINA F. CALLANGAN, in her capacity as Director of the Corporation Finance Department of the SEC, G.R. No. 199028, November 12, 2014

“x x x.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not the CA correctly treated Cosmos’s appeal before the SEC En Banc as a motion for reconsideration, and consequently, affirmed its dismissal for being a prohibited pleading under the 2006 SEC Rules of Procedure.

The Court's Ruling

The petition is meritorious.

As an administrative agency with both regulatory and adjudicatory functions,36 the SEC was given the authority to delegate some of its functions to, inter alia, its various operating departments, such as the SECCFD, the Enforcement and Investor Protection Department, and the Company Registration and Monitoring Department, pursuant to Section 4.6 of the SRC, to wit: SEC. 4. Administrative Agency.

x x x x

4.6. The Commission may, for purposes of efficiency, delegate any of its functions to any department or office of the Commission, an individual Commissioner or staff member of the Commission except its review or appellate authority and its power to adopt, alter and supplement any rule or regulation.

The Commission may review upon its own initiative or upon the petition of any interested party any action of any department or office, individual Commissioner, or staff member or the Commission. (Emphasis and underscoring supplied)

Naturally, the aforesaid provision also gives the SEC the power to review the acts performed by its operating departments in the exercise of the former’s delegated functions. This power of review is squarely addressed by Section 11-1, Rule XI of the 2006 SEC Rules of Procedure, which provides that "[a]n appeal to the Commission En Banc may be taken from a decision, order, or resolution issued by an Operating Department if there are questions of fact, of law, or mixed questions of fact and law."

In this case, the Court disagrees with the findings of both the SEC En Banc and the CA that the Revocation Order emanated from the SEC En Banc. Rather, such Order was merely issued by the SEC-CFD as one of the SEC’s operating departments, as evidenced by the following: (a) it was printed and issued on the letterhead of the SEC-CFD, and not the SEC En Banc; (b) it was docketed as a case under the SEC-CFD as an operating department of the SEC, since it bore the serial number "SEC-CFD Order No. 027, [s.] 2008;" and (c) it was signed solely by Director Callangan as director of the SEC-CFD, and not by the commissioners of the SEC En Banc. Further, both the SEC En Banc and the CA erred in holding that the Revocation Order merely reflected Resolution No. 87, s. 2008, and thus, should already be considered as the ruling of the SEC En Banc in this case. As admitted by respondents, the SEC-CFD’s referral of the case to the SEC En Banc for its consideration in its March 13, 2008 meeting, which eventually resulted in the issuance of Resolution No. 87, s.2008, was merely an internal procedure inherent in the exercise by the SEC of its administrative and regulatory functions.37 Moreover, Cosmos never knew of the existence of Resolution No. 87, s. 2008, as it was not furnished a copy thereof; nor did the Revocation Order make any specific reference to the same. Essentially, Cosmos was only apprised of the existence of Resolution No. 87, s. 2008 when it was finally cited by the SEC En Banc in its September 10, 2009 Decision.38Accordingly, when Cosmos received the Revocation Order, it had every reason to believe that it was issued by the SEC-CFD as an Operating Department ofthe SEC, and thus, appealable to the SEC En Banc. Therefore, the outright dismissal of Cosmos’s appeal by the SEC En Banc effectively denied it of its right to appeal, as provided for under the SRC and the 2006 SEC Rules of Procedure, and therefore could not be countenanced.

In sum, the Revocation Order is properly deemed as a decision issued by the SEC-CFD as one of the Operating Departments of the SEC, and accordingly, may be appealed to the SEC En Banc, as what Cosmos properly did in this case. Perforce, the SEC En Banc and the CA erred in deeming Cosmos’s appeal as a motion for reconsideration and ordering its dismissal on such ground. In view thereof, the Court deems it prudent to reinstate and remand the case to the SEC En Banc for its resolution on the merits.

X x x.”


8 Section 17.1 (a) of the SRC reads:

SEC. 17. Periodic and Other Reports of Issuers.

17.1. Every issuer satisfying the requirements in Subsection 17.2 hereof shall file with the Commission:

a) Within one hundred thirty-five (135) days, after the end of the issuer’s fiscal year, or such other time as the Commission may prescribe, an annual report which shall include, among others, a balance sheet, profit and loss statement and statement of cash flows, for such last fiscal year, certified by an independent certified public accountant, and a management discussion and analysis of results of operations; x x x

x x x x

28 Section 3-6 of the 2006 SEC Rules of Procedure reads:

SEC. 3-6. Prohibited Pleadings. – The following pleadings or any submission that is filed or made under a similar guise or title shall not be allowed:

x x x x

(c) Motion for New Trial, Reconsideration of Judgment or Order, or Reopening of Trial;

x x x x

Should one be filed, said prohibited pleadings or submissions shall be automatically expunged from the records of the case.

x x x x

36 See Calma v. CA, 362 Phil. 297, 301 (1999), citing SEC v. CA, 316 Phil. 903, 906 (1995).