2014 Case Digest: Primanila Plans v. SEC

PRIMANILA PLANS, INC., herein REPRESENTED by EDUARDO S. MADRID, Petitioner,

vs.

SECURITIES AND EXCHANGE COMMISSION, Respondent.

G.R. No. 193791               August 6, 2014

PONENTE: Reyes

TOPIC: SRC, registration statement, cease and desist order

FACTS:

                On April 9, 2008, SEC issued the subject cease and desist order after an investigation conducted by the SEC’s Compliance and Enforcement Department (CED) on Primanila, a corporation operating as a pre-need company,  yielded the following factual findings: Primanila’s website (www.primanila.com) was offering a pension plan product called Primasa Plan, that no registration statement has been filed by Primanila for the approval of said Primasa Plan, and that many of its planholders mostly members of the PNP remitted the total amount of Php 2,072,149.38 to Primanila representing the aforementioned premium collections via salary deductions, among others.

ISSUES:

1. Whether or not Primanila was accorded due process notwithstanding the SEC’s immediate issuance of the cease and desist order.
2. Whether or not Primanila violated Sec. 16 of SRC which barred the sale or offer for sale to the public of a pre-need product except in accordance with SEC rules and regulations.

HELD:

FIRST ISSUE: Yes.

                The Court held that a cease and desist order may be issued by the SEC motu proprio, it being unnecessary that it results from a verified complaint from an aggrieved party. A prior hearing is also not required whenever the Commission finds it appropriate to issue a cease and desist order that aims to curtail fraud or grave or irreparable injury to investors. There is good reason for this provision, as any delay in the restraint of acts that yield such results can only generate further injury to the public that the SEC is obliged to protect.

                To equally protect individuals and corporations from baseless and improvident issuances, the authority of the SEC under this rule is nonetheless with defined limits. A cease and desist order may only be issued by the Commission after proper investigation or verification, and upon showing that the acts sought to be restrained could result in injury or fraud to the investing public. Without doubt, these requisites were duly satisfied by the SEC prior to its issuance of the subject cease and desist order.

              The SEC was not mandated to allow Primanila to participate in the investigation conducted by the Commission prior to the cease and desist order’s issuance. Given the circumstances, it was sufficient for the satisfaction of the demands of due process that the company was amply apprised of the results of the SEC investigation, and then given the reasonable opportunity to present its defense. Primanila was able to do this via its motion to reconsider and lift the cease and desist order.

SECOND ISSUE: Yes.

                The Court held that Primanila clearly violated Section 16 of the SRC which states that “no person shall sell or offer for sale to the public any pre-need plan except in accordance with rules and regulations which the Commission shall prescribe. Such rules shall regulate the sale of pre-need plans by, among other things, requiring the registration of pre-need plans, licensing persons involved in the sale of pre-need plans, requiring disclosures to prospective plan holders, prescribing advertising guidelines, providing for uniform plans, imposing capital, bonding and other financial responsibility, and establishing trust funds for the payment of benefits under such plans.”