Ongpin v. EIPD of SEC

Republic of the Philippines
Court of Appeals
Manila
FORMER SPECIAL THIRTEENTH DIVISION
ROBERTO V. ONGPIN, CA-G.R. SP No. 146704

Petitioner,
Members:
- versus -
GAERLAN, S.H., Acting Chairperson,
ENFORCEMENT AND QUIJANO-PADILLA, M.L.C., and
INVESTOR PROTECTION *
AZCARRAGA-JACOB, M.C., JJ.:
DEPARTMENT of the
Securities and Exchange Promulgated:
Commission,
Respondent. DECEMBER 1, 2017
------------------------------------------------------
DECISION
QUIJANO-PADILLA, J.:
This involves a petition for review 1 under Rule 43 of the Rules

of Court filed by petitioner Roberto V. Ongpin seeking the reversal
of the Decision2 dated July 8, 2016 of respondent Securities and
Exchange Commission (SEC), finding him liable for committing 174
counts of insider trading under Section 27.1 of the Securities
Regulation Code (SRC).3
As found by this Court in the earlier Resolution 4 promulgated

on September 29, 2016, the facts of the case are as follows:
Petitioner Roberto V. Ongpin was a stockholder and

member of the Board of Directors of PHILEX mining corporation
(PHILEX), holding the positions of Vice Chairman of the
corporation and Chairman of the Executive Committee.
* Vice J. N.B. Pizarro, per Raffle dated August 25, 2016.

1 Rollo, pp. 3-30.
2 Id. at pp. 32-52.
3 Republic Act No. 8799, approved on July 19, 2000.
4 Rollo, pp. 497-507.
CA-G.R. SP No. 146704 Page 2 of 29
Decision
Following the sale by PHILEX on November 28, 2008 of

778,620,792 shares, equivalent to 20.06% of its total issued shares,
in favor of Mr. Manuel V. Pangilinan's (Mr. Pangilinan) First
Pacific Company Limited (First Pacific), through the latter's
wholly-owned subsidiary Asia Link B.V. (Asia Link), First Pacific
made public its intention of increasing its board representation in
PHILEX by acquiring 40% stake in the company.
As of November 23, 2009, petitioner already owns directly,

or through his corporations Golden Media Corporation, Boerstar
Corporation, Elkhound Resources and G.A.M.E. Equities, Inc., a
total of 321,810,386 PHILEX shares, representing a 6.58% stake in
PHILEX, as reported to the Securities and Exchange Commission
(SEC).
Come November 28, 2009, First Pacific was able to get hold
of 31.5% stake in PHILEX, thus needing only 9% more of the
corporation's total issued shares to obtain its desired 40% stake.
Earlier that same week, Mr. Pangilinan approached

petitioner to negotiate for the purchase of the latter's shares in
PHILEX. Apparently, Pangilinan wanted to purchase a total of
about 550-million PHILEX shares.
On December 1, 2009, First Pacific made a tentative offer to

petitioner for the price of P21.00 per share.
In the morning of the following day, December 2, 2009,

petitioner engaged in 174 transactions at the stock market to
acquire an additional 45,964,500 PHILEX shares, priced at P19.25
to P19.50 per share.
By the evening of that same day, December 2, 2009, First

Pacific, through its subsidiary Two Rivers Pacific Holdings
Corporation (Two Rivers), as buyer and petitioner, along with the
Development Bank of the Philippines (DBP) and PHILEX Director
Walter Brown, as sellers, sealed their deal in a Share Purchase
Agreement covering a total of 452,088,160 PHILEX shares or
9.24% of the company's issued shares. The sale is broken down as
follows: (1) Petitioner and his companies sold 367,774,786 shares;
(2) DBP sold 59,339,000 shares; and (3) Walter Brown sold
24,974,374 shares at P21.00 per share. This transaction raised First
Pacific's stake in PHILEX at more or less 40.7%.
The sale and the consequent changes in the composition of

corporation's Board of Directors and officers, were disclosed by
PHILEX to the Philippine Stock Exchange (PSE) on December 3,
2009 and December 8, 2009, respectively.
Decision
To an untrained eye, the trading made by petitioner in the

morning of December 2, 2009 appears to be a regular stock market
activity. Respondent Enforcement and Investor Protection
Department of the SEC believed otherwise. Hence, acting on a
letter of endorsement from the PSE, respondent initiated an
administrative investigation against petitioner. This eventually
led to the issuance of a show cause order5 on November 12, 2014 for
petitioner to explain why no administrative sanctions should be
imposed upon him for committing 174 counts of insider trading,
in violation of Section 27.1 of the Securities and Regulation Code
(SRC) or Republic Act No. 8799.6
After due hearing, respondent issued an Order dated

March 10, 2015,7 finding petitioner liable for insider trading and
imposing upon him a P17.4-million peso fine.
On appeal, the SEC en banc affirmed the ruling of

respondent in the assailed Decision, 8 and increased the penalty as
follows:
WHEREFORE, premises considered, the Order of the

Enforcement and Investor Protection Department dated 10 March 2015 is
hereby MODIFIED. Appellant Roberto V. Ongpin is now hereby
ordered to pay the fine of ONE HUNDRED SEVENTY FOUR MILLION
PESOS (Php 174,000,000.00), pursuant to Section 54.1 (ii) of Republic Act
No. 8799, otherwise known as the Securities Regulation Code (SRC), for
the purchase in 174 transactions of PHILEX shares on 2 December 2009
as an insider while in possession of non-public material information in
violation of Section 27.1 of (sic) thereof. Further, appellant is hereby
DISQUALIFIED, pursuant to Section 54.1 (iii) of the SRC, in relation to
Section 17.2 thereof, from being an officer, member of the board of
directors, or person performing similar functions, of a public company or
a publicly listed company. Lastly, appellant is ordered to RELINQUISH
and/or RESIGN from any and all positions he is presently holding as
officer, member of the Board of Directors, or to which he is performing
any similar functions, of a public company or publicly listed company.
The imposition of the foregoing penalties is WITHOUT

PREJUDICE to further investigation and the imposition of additional
penalties by the Commission, for any additional purchases of the
unaccounted 17,982,250 PHILEX shares on the morning of 2 December
2009 by appellant.
Let a copy of this Decision be furnished to the Markets and

Securities Regulation Department for its appropriate action.
SO ORDERED.
5 Id. at pp.131-141.
6 Approved on July 19, 2000.
7 Rollo, pp. 142-166.
8 Id. at pp. 32-52.
Decision
Hence, the filing of this petition9 based on the following

grounds:10
1.
WHETHER OR NOT THE ACTION TO HOLD

ONGPIN ADMINISTRATIVELY LIABLE HAS
ALREADY PRESCRIBED;
2.
WHETHER OR NOT PETITIONER ONGPIN

COMMITTED INSIDER TRADING WHEN HE,
THROUGH GOLDENMEDIA, PURCHASED PHILEX
SHARES FROM THE OPEN MARKET AT P19.25 TO
P19.50 PER SHARE ON 2 DECEMBER 2009;
3.
WHETHER OR NOT THE SEC EN BANC'S

IMPOSITION OF A Php174 MILLION FINE IS
VALID(.)
RULING
First, we discuss the ground of prescription.
Petitioner claims that the administrative charge against him

for insider trading may no longer be maintained. Invoking the plain
meaning doctrine, he argues that Section 62 of the SRC should be
interpreted as written. The provision states:
Section 62. Limitation of Actions. – 62.1. No action shall be

maintained to enforce any liability created under Section 56 or 57
of this Code unless brought within two (2) years after the
discovery of the untrue statement or the omission, or, if the action
is to enforce a liability created under Subsection 57.1 (a), unless,
brought within two (2) years after the violation upon which it is
based. In no event shall any such action be brought to enforce a
liability created under Section 56 or Subsection 57.1 (a) more than
five (5) years after the security was bona fide offered to the public,
or under Subsection 57.1 (b) more than five (5) years after the sale.
62.2. No action shall be maintained to enforce any

liability created under any other provision of this Code unless
9 See Note 1.
10 Id. at p. 11.
Decision
brought within two (2) years after the discovery of the facts
constituting the cause of action and within five (5) years after
such cause of action accrued. (Emphasis and underscoring supplied)
Based on said law, particularly Section 62.2 thereof, petitioner

insists that the period to prosecute an administrative case for insider
trading should be made within two (2) years after the discovery of
the facts constituting the cause of action and within five (5) years
after such cause of action accrued. As can be seen from the record
of the case, it was established the material dates are:
December 2, 2009 – petitioner traded in the stock market;

December 3, 2009 – disclosure in PSE of sale in favor of MVP;
December 8, 2009 – disclosure in PSE of change in composition
of PHILEX board of directors as a result of said sale;
September 9, 2010 – PSE endorsed the matter to SEC for
review;
October 31, 2012 – Investigation Report issued by EIPD; and
November 12, 2014 – Show Cause Order from EIPD.
It is petitioner's contention that if both the 2-year and 5-year

periods in Section 62.2 are to be reckoned with, then, the ensuing
administrative case against him has already prescribed by the time
respondent issued a Show Cause Order on November 12, 2014.
Petitioner adds that to allow any argument to the contrary would
result in an unwarranted exercise of a legislative function and courts
are in no position to amend laws.
On the other hand, the Office of the Solicitor General (OSG),

representing herein respondent, remains firm that the action has not
prescribed.
The OSG stated that the SEC en banc, in the assailed Decision,
already squarely addressed the issue on prescription on petitioner's
administrative liability for insider trading. Citing the ruling in
Citibank N.A. and the Citigroup Private Bank v. Tanco-Gabaldon,11 the
OSG states that Section 62 of the SRC only pertains to prescription
of civil liabilities and is not applicable to criminal and
administrative liabilities. Since SRC did not provide for the
prescriptive period for the filing of administrative charges, the only
recourse in equity is to apply the principle of laches. However, the
11 G.R. No. 198444 and G.R. Nos. 198469-70, September 4, 2013.

Decision
OSG submits that the elements of laches12 are not present in this
case. This is mainly because there was no inordinate delay on the
part of respondent in prosecuting petitioner and that:13
32. The investigation entails a tedious process. It is not

like, after learning that one has traded on more than 45 Million
shares in 174 transactions, the PSE or the SEC right away will be
able to discern and conclude that a violation of the SRC provisions
has been violated (sic). Each of the 174 transactions would have to
be looked into. Notices to concerned brokers and people, have to
be sent; their replies have to be prepared; documents have to be
retrieved and prepared; submitted papers have to be reviewed
and analyzed; a subpoena may even be required, among other
things. Each one takes time, for each person involved in the 174
transactions.
33. As records would bear therefore, Respondent did not

delay in asserting its legal duty to regulate, investigate and
impose sanctions upon Petitioner for his blatant violation of
Section 27 of the SRC and acting in contravention of his fiduciary
duty to the minority shareholders of PHILEX.
34. The third element is likewise absent in the present case.

Petitioner's active participation in the formal investigation
conducted by Respondent and his appeal before the SEC En Banc
clearly shows that he knows that SEC, through Respondent, is
exercising its right and jurisdiction to regulate erring persons,
such as himself, suspected of committing violations of the SRC.
Petitioner cannot therefore claim that he does not know or was
not notified of the proceedings before the SEC.
35. The last and fourth element is also glaringly missing in

this case. The imposition of administrative sanctions x x x are all
x x x provided for, and allowed by, Section 54.1 of the SRC.
36. Any claim of injury or prejudice that Petitioner may

make is unavailing considering that the imposition of
administrative sanctions against him are but necessary
consequences of his underhanded schemes. Moreover, such
administrative sanctions are imperative regulatory and deterrent
measures to ensure that prospective market and exchange devices
creating distortions in the free market are curtailed and
discouraged.
37. From the foregoing, it is clear that the administrative

12 Rollo, p. 834, citing Heirs of Anacleto Nieto v. Municipality of Meycauayan, Bulacan, G.R. No.
150654, December 13, 2007.
13 Id. at pp. 836-837.
Decision
action instituted by Respondent is not barred by laches.
This Court finds that the administrative action has not yet
prescribed.
We are aware that the plain meaning rule or verba legis in

statutory construction demands that if the statute is clear, plain and
free from ambiguity, it must be given its literal meaning and applied
without interpretation. This rule, which is derived from the maxim
Index animi sermo est (speech is the index of intention), rests on the
valid presumption that the words employed by the legislature in a
statute correctly express its intention or will and preclude the court
from construing it differently. The legislature is presumed to know
the meaning of the words, to have used words advisedly, and to
have expressed its intent by use of such words as are found in the
statute. Verba legis non est recedendum, or from the words of a statute
there should be no departure.14
At first glance, one may be easily convinced to apply the plain

meaning doctrine in interpreting Section 62.2 of the SRC. In that
case, the phrase “No action shall be maintained to enforce any
liability created under any other provision of this Code x x x” may
be construed to simply mean that actions other than civil liabilities –
or those that are criminal and administrative, must be “brought
within two (2) years after the discovery of the facts constituting the
cause of action and within five (5) years after such cause of action
accrued.”
However, it is equally settled that courts in our jurisdiction are

duty bound to follow any ruling established in a decision of the
Supreme Court under the doctrine of stare decisis et non quieta movere
(to adhere to precedents and not to unsettle things which are
established).15 This doctrine is embodied in Article 8 of the Civil
Code of the Philippines which provides, thus:
ART. 8. Judicial decisions applying or interpreting the laws

or the Constitution shall form a part of the legal system of the
Philippines.
Relative to this, the Supreme Court in the Citibank case ruled
14 Republic of the Philippines v. Lacap, G.R. No. 158253, March 2, 2007.

15 Lazatin v. Desierto, G.R. No. 147097, June 5, 2009.
Decision
that the prescriptive period stated in Section 62 only pertains to civil

liabilities punishable under the SRC. It explained:16
Section 62 provides for two different prescriptive periods.
Section 62.1 specifically sets out the prescriptive period for

the liabilities created under Sections 56, 57, 57.1(a) and 57.1(b).
Section 56 refers to Civil Liabilities on Account of False
Registration Statement while Section 57 pertains to Civil
Liabilities on Arising in Connection with Prospectus,
Communications and Reports. Under these provisions,
enforcement of the civil liability must be brought within two (2)
years or five (5) years, as the case may be.
On the other hand, Section 62.2 provides for the

prescriptive period to enforce any liability created under the SRC.
It is the interpretation of the phrase “any liability” that creates the
uncertainty. Does it include both civil and criminal liability? Or
does it pertain solely to civil liability?
In order to put said phrase in its proper perspective,

reference must be made to the rule of statutory construction that
every part of the statute must be interpreted with reference to the
context, i.e., that every part of the statute must be considered
together with the other parts, and kept subservient to the general
intent of the whole enactment. Section 62.2 should not be read in
isolation of the other provision included in Section 62, particularly
Section 62.1, which provides for the prescriptive period for the
enforcement of civil liability in cases of violations of Sections 56,
57, 57.1(a) and 57.1(b).
Moreover, it should be noted that the civil liabilities

provided in the SRC are not limited to Sections 56 and 57. Section
58 provides for Civil Liability For Fraud in Connection With
Securities Transactions; Section 59 – Civil Liability For
Manipulation of Security Prices; Section 60 – Civil Liability With
Respect to Commodity Future Contracts and Pre-need Plans; and
Section 61 – Civil Liability on Account of Insider Trading. Thus,
bearing in mind that Section 62.1 merely addressed the
prescriptive period for the civil liability provided in Sections 56,
57, 57.1(a) and 57.1(b), then it reasonably follows that the other
sub-provision, Section 62.2, deals with the other civil liabilities
that were not covered by Section 62.1, namely Sections 59, 60 and
61. This conclusion is further supported by the fact that the
subsequent provision, Section 63, explicitly pertains to the amount
of damages recoverable under Sections 56, 57, 58, 59, 60 and 61,
the trial court having jurisdiction over such actions, the persons
16 See Note 11 (Emphasis maintained and underscoring supplied).

Decision
liable and the extent of their liability. Clearly, the intent is to

encompass in Section 62 the prescriptive periods only of the civil
liability in cases of violations of the SRC.
The CA, therefore, did not commit any error when it ruled
that “the phrase ‘any liability’ in subsection 62.2 can only refer to
other liabilities that are also civil in nature. The phrase could not
have suddenly intended to mean criminal liability for this would
go beyond the context of the other provisions among which it is
found.”
In view of the absence of a prescriptive period for the

enforcement of the criminal liability in violations of the SRC, the
Supreme Court in Citibank applied Act No. 3326,17 which is the law
applicable to offenses under special laws which do not provide for
their own prescriptive periods. It then held that since a violation of
the provisions of the SRC is punishable with imprisonment of not
less than seven (7) years nor more than twenty-one (21) years, a
criminal prosecution for violations of the SRC shall, therefore,
prescribe in twelve (12) years, pursuant to Section 1 of said Act No.
3326.
Petitioner nevertheless insists that the ruling in Citibank only

dealt with the issue of prescription of criminal actions under the
SRC and that respondent erroneously assumed that the same ruling
applies even to administrative liabilities under said code. Likewise,
respondent is said to have the wrong notion that an administrative
case under the SRC is imprescriptible.
Contrary to the position taken by petitioner, this Court sees

that the Citibank case involves two separate petitions, raising two
issues to be resolved: (1) whether the criminal action for offenses
punished under the SRC filed by the respondents against the
petitioners has already prescribed; and (2) whether the filing of the
action for the petitioners’ administrative liability is barred by
laches.18
Anent the criminal offenses punishable under the SRC, the

Supreme Court, as already explained above, ruled that the absence
of a specific provision on prescription of criminal offenses calls forth
17 An Act to Establish Prescription for Violations of Special Acts and Municipal Ordinances and to
Provide When Prescription Shall Begin.
cral awnad
18 See Note 11.

Decision
the application of Act No. 3326.

Now, regarding the prescriptive period for instituting
administrative charges, it held that there was also none provided
under the SRC and we quote:19
Section 54 of the SRC provides for the administrative

sanctions to be imposed against persons or entities violating the
Code, its rules or SEC orders. Just as the SRC did not provide a
prescriptive period for the filing of criminal actions, it likewise
omitted to provide for the period until when complaints for
administrative liability under the law should be initiated. On
this score, it is a well-settled principle of law that laches is a
recourse in equity, which is, applied only in the absence of
statutory law. And though laches applies even to imprescriptible
actions, its elements must be proved positively. Ultimately, the
question of laches is addressed to the sound discretion of the
court and, being an equitable doctrine, its application is controlled
by equitable considerations.
In this case, records bear that immediately after the

respondents discovered in 2004 that the securities they invested in
were actually worthless, they filed on October 23, 2005 a
complaint for violation of the RSA and SRC with the
Mandaluyong City Prosecutor's Office. It took the prosecutor
three (3) years to resolve the complaint and refer the case to the
SEC, in conformity with the Court's pronouncement in Baviera
that all complaints for any violation of the SRC and its
implementing rules and regulations should be filed with the SEC.
Clearly, the filing of the complaint with the SEC on September 21,
2007 is not barred by laches as the respondents' judicious actions
reveal otherwise.
This ruling notwithstanding, this Court does not wholly agree

with the Solicitor General's position that the administrative cases
under the SRC are imprescriptible due to the underlying public
interest involved therein. As aptly pointed out by petitioner, the
jurisprudence cited by the Solicitor General to support its theory
pertain to administrative cases against government officials as in
Concerned Taxpayer v. Doblada, Jr.20 and Ombudsman v. De Sahagun,21
or those cases involving members of the bar, like in Heck v. Santos.22
In those cases against government employees and officials, it
19 Id. (Citations omitted, emphasis and underscoring supplied).

20 A.M. No. P-99-1342, September 20, 2005.
21 G.R. No. 167982, August 13, 2008.
22 A.M. No. RTJ-01-1657, February 23, 2004.
Decision
is to be understood that they are being prosecuted pursuant to R.A.

3019,23 which was a law enacted under the principle that a public
office is a public trust.24 As for members of the bar, the
administrative cases against them are sui generis25 given that the
primary objective of said proceedings is to discipline lawyers or to
determine whether or not they are still fit to be given the privileges
peculiar to the practice of the legal profession.
Certainly, while it may be said that the SRC did not provide
for the prescriptive period for the filing of administrative charges,
the underlying public interest which is said to be the basis for the
imprescriptibility of other administrative cases, such as those
against government officials or employees and those involving
lawyers, do not obtain in the present case.
Fact is, even in administrative cases, such as in Office of the

Ombudsman v. Andutan, Jr.,26 where the fitness to serve in public
office and the preservation of inviolability of public office are
deemed issues of transcendental importance, the Supreme Court, in
no uncertain terms held that the State, in performing its task of
investigating and prosecuting offenders, must always act within the
limits set by law, particularly, the limits of jurisdiction.
Following said ruling, we shall now determine whether or not

the administrative action against petitioner is barred by laches.
Laches is defined as the failure or neglect for an unreasonable

and unexplained length of time, to do that which by exercising due
diligence, could or should have been done earlier; it is negligence or
omission to assert a right within a reasonable time, warranting a
presumption that the party entitled to assert it either has abandoned
it or declined to assert it.27
Laches is a recourse in equity. Equity is applied only in the

absence of, but never in contravention, of statutory law. 28 Here,
there is no statutory law to contend with because, as stated, there
was already a ruling made by the Supreme Court that the SRC did
23 Anti-Graft and Corrupt Practices Act, approved on August 17, 1960.

24 See Note 21.
25 See Note 22.
26 G.R. No. 164679, July 27, 2011.
27 Phil-Air Conditioning Center v. RCJ Lines, G.R. No. 193821, November 23, 2015.
28 Agra v. Philippine National Bank, G.R. No. 133317, June 29, 1999.
Decision
not provide for a prescriptive period for initiating administrative

cases.
However, since laches is principally a question of equity, there

could be no absolute rule as to what constitutes laches or staleness
of demand, such that each case is to be determined according to its
particular circumstances. In this regard, the Supreme Court held
that the question of laches is addressed to the sound discretion of
the court, since its application is controlled by equitable
considerations.29
In this case, we find that petitioner have no recourse in equity

for he was not able to establish all four requisites of laches: (1)
conduct on the part of the defendant or one under whom he claims, giving
rise to the situation of which complaint is made and for which the
complainant seeks a remedy; (2) delay in asserting the complainant's right,
the complainant having had knowledge or notice of defendant's conduct
and having been afforded an opportunity to institute a suit; (3) lack of
knowledge or notice on the part of the defendant that the complainant
would assert the right on which he bases his claim; and (4) injury or
prejudice to the defendant in the event relief accorded to the complainant,
or the suit is not held barred.30
The first element is clearly present as petitioner is being

administratively charged for insider trading in relation to the 174
stock market transactions he made on December 2, 2009. However,
he cannot claim that he had no knowledge or was not notified of the
proceedings before the SEC, which is the third element, for it is on
record that he actively participated therein.31
Now, about the second element of delay on the part of

respondent in asserting its right to institute a suit against petitioner,
we find that this element is also lacking.
In SEC v. Interport Resources Corporation,32 the SEC sought the

reversal of the Decision dated August 20, 1998, where this Court
decreed, among others, the issuance of a permanent injunction
prohibiting the SEC from taking cognizance or initiating any action,
29 Id.
30 Id., citing Catholic Bishop of Balanga v. CA, 264 SCRA 181, November 14, 1996 and other related
cases.
31 Rollo, pp. 53-82.
32 G.R. No. 135808, October 6, 2008.
Decision
be they civil, criminal, or administrative against respondents with

respect to Sections 8 (Procedure for Registration), 30 (Insiders duty to
disclose when trading) and 36 (Directors, Officers and Principal
Stockholders), in relation to Sections 46 (Administrative sanctions)
56 (Penalties) 44 (Liabilities of Controlling persons) and 45
(Investigations, injunctions and prosecution of offenses) of the Revised
Securities Act and Section 144 (Violations of the Code) of the
Corporation Code.
Claiming that the SEC's Petition for Review on Certiorari has

no merit, respondents insist that any criminal complaint that may be
filed against them resulting from the SEC's investigation is moot
and academic, since the case has already prescribed. They state that
the prescription period applicable to offenses punished under
special laws, including violations of the former Revised Securities
Act, is twelve years under Section 1 of Act No. 3326, as amended by
Act No. 3585 and Act No. 3763, entitled An Act to Establish Periods
of Prescription for Violations Penalized by Special Acts and
Municipal Ordinances and to Provide When Prescription Shall
Begin to Act. Since the offense was committed in 1994, respondents
maintain that prescription set in as early as 2006.
In ruling against respondents, the Supreme Court held that the

investigation commenced by the SEC pursuant to its authority
under Section 45 of the former Revised Securities Act is akin to a
preliminary investigation, which essentially determines whether an
offense has been committed, and whether there is probable cause for
the accused to have committed an offense.33 Citing the case of
Baviera v. Paglinawan,34 it further held that the SEC investigation
serves the same purpose and entails substantially similar duties as
the preliminary investigation conducted by the DOJ and this process
cannot simply be disregarded since it is imperative that the criminal
prosecution be initiated before the SEC, the administrative agency
with the special competence. After taking note that the SEC started
investigative proceedings against respondents as early as 1994, the
Supreme Court concluded that the investigation by the SEC
effectively interrupted the prescription period, thus:35
Indubitably, the prescription period is interrupted by

commencing the proceedings for the prosecution of the accused.
33 Id.
34 G.R. Nos. 168380 & 170602, February 8, 2007.
35 See Note. 32.
Decision
In criminal cases, this is accomplished by initiating the

preliminary investigation. The prosecution of offenses punishable
under the Revised Securities Act and the Securities Regulations
Code is initiated by the filing of a complaint with the SEC or by an
investigation conducted by the SEC motu proprio. Only after a
finding of probable cause is made by the SEC can the DOJ
instigate a preliminary investigation. Thus, the investigation that
was commenced by the SEC in 1995, soon after it discovered the
questionable acts of the respondents, effectively interrupted the
prescription period. Given the nature and purpose of the
investigation conducted by the SEC, which is equivalent to the
preliminary investigation conducted by the DOJ in criminal cases,
such investigation would surely interrupt the prescription period.
In this case, there is no prescriptive period to reckon with

since the matter involves an administrative charge for insider
trading. However, applying the foregoing ruling by analogy, this
Court rules that the investigation, pursuant to Section 53 36 of the
present SRC, which was commenced by the SEC immediately after
it received the endorsement from the PSE on September 9, 2010
proves that there was no inordinate delay on the part of respondent
in charging petitioner for insider trading.
Certainly, laches may not be appreciated in this case. The fact

alone that almost five years had lapsed from the December 2, 2009
incident before the SEC issued a show cause order on November 12,
2014 does not mean that it commenced the administrative action
against petitioner only then. There is simply no showing of any
inequity committed by respondent, such that petitioner could not be
said to have suffered prejudice or injury due to the filing of the case
36 Section 53. Investigations, Injunctions and Prosecution of Offenses. 53.1. The Commission may, in its
discretion, make such investigations as it deems necessary to determine whether any person has
violated or is about to violate any provision of this Code, any rule, regulation or order thereunder, or
any rule of an Exchange, registered securities association, clearing agency, other self-regulatory
organization, and may require or permit any person to file with it a statement in writing, under oath or
otherwise, as the Commission shall determine, as to all facts and circumstances concerning the matter
to be investigated. The Commission may publish information concerning any such violations, and to
investigate any fact, condition, practice or matter which it may deem necessary or proper to aid in the
enforcement of the provisions of this Code, in the prescribing of rules and regulations thereunder, or
in securing information to serve as a basis for recommending further legislation concerning the
matters to which this Code relates: Provided, however, That any person requested or subpoenaed to
produce documents or testify in any investigation shall simultaneously be notified in writing of the
purpose of such investigation: Provided, further, That all criminal complaints for violations of this
Code, and the implementing rules and regulations enforced or administered by the Commission shall
be referred to the Department of Justice for preliminary investigation and prosecution before the
proper court: Provided, furthermore, That in instances where the law allows independent civil or
criminal proceedings of violations arising from the same act, the Commission shall take appropriate
action to implement the same: provided, finally, That the investigation, prosecution, and trial of such
cases shall be given priority.
x x x.
Decision
against him.
Having exhaustively dealt with the grounds of prescription
and laches, this Court shall now aim to resolve on the main issue of
insider trading.
The prohibition on insider trading is found under Section 27.1

of the SRC, which reads:
Section 27. Insider’s Duty to Disclose When Trading – 27.1.

It shall be unlawful for an insider to sell or buy a security of the
issuer, while in possession of material information with respect
to the issuer or the security that is not generally available to the
public, unless: (a) The insider proves that the information was
not gained from such relationship; or (b) If the other party selling
to or buying from the insider (or his agent) is identified, the
insider proves: (I) that he disclosed the information to the other
party, or (ii) that he had reason to believe that the other party
otherwise is also in possession of the information. A purchase or
sale of a security of the issuer made by an insider defined in
Subsection 3.8, or such insider’s spouse or relatives by affinity or
consanguinity within the second degree, legitimate or common-
law, shall be presumed to have been effected while in
possession of material nonpublic information if transacted after
such information came into existence but prior to dissemination
of such information to the public and the lapse of a reasonable
time for market to absorb such information: Provided, however,
That this presumption shall be rebutted upon a showing by the
purchaser or seller that he was aware of the material nonpublic
information at the time of the purchase or sale.
27.2. For purposes of this Section, information is "material

nonpublic" if: (a) It has not been generally disclosed to the public
and would likely affect the market price of the security after being
disseminated to the public and the lapse of a reasonable time for
the market to absorb the information; or (b) would be considered
by a reasonable person important under the circumstances in
determining his course of action whether to buy, sell or hold a
security.
x x x. (Emphasis and underscoring supplied)
Petitioner was charged of committing insider trading in

relation to the 174 stock market transactions he made on December
2, 2009 involving PHILEX shares. While admittedly an insider, 37
37 Section 3.8 of the SRC.

3.8. "Insider" means (a) the issuer; (b) a director or officer (or any person performing similar
functions) of, or a person controlling the issuer; (c) a person whose relationship or former relationship
Decision
being then a director of PHILEX, petitioner strongly denied that he

withheld a material, nonpublic information on the day he
purchased the additional 45,964,500 PHILEX shares.
As stated in Section 27.2 of the Code, material information is

that information that any reasonable investor would consider
relevant in deciding whether to buy or sell or hold on to the shares
on a specific trading day. This information necessarily pertains to
the issuer, PHILEX in this case, or such information that would
affect the market price of the securities after being disseminated to
the public and upon the lapse of a reasonable time for the market to
absorb said information.
In his Memorandum,38 petitioner maintains that in that

morning of December 2, 2009, the only information known to him is
that Mr. Pangilinan is willing to buy his shares at P21.00 per share.
According to petitioner, this piece of information does not pertain to
the issuer, PHILEX, nor does it pertain to the market price of the
shares of stock issued by said corporation.
He clarifies that the agreement between him and the MVP

group has yet to be finalized when he bought PHILEX shares in the
stock market in the morning of December 2, 2009. The agreement,
he stresses, was finalized and signed only in the evening of
December 2, 2009, after trading was closed and after a long and
difficult negotiation.
As to the price of P21.00 per share, petitioner argued that the

same was only tentatively and verbally agreed upon such that any
of the parties to the intended block sale may opt to proceed or back
out depending on the market price of PHILEX shares on that day.
To illustrate, if the market price of PHILEX shares dipped, the MVP
group could have backed out of the intended sale given the
tentative price of P21.00 per share. On the other hand, had the
prevailing market price of PHILEX shares on December 2, 2009
increased beyond the tentative price of P21.00 per share, then
petitioner could have also backed out and demanded instead for a
to the issuer gives or gave him access to material information about the issuer or the security that is
not generally available to the public; (d) a government employee, director, or officer of an exchange,
clearing agency and/or self-regulatory organization who has access to material information about an
issuer or a security that is not generally available to the public; or (e) a person who learns such
information by a communication from any forgoing insiders.
38 Rollo, pp. 739-769.
Decision
higher price.
Moreover, petitioner states that aside from the tentative price

of P21.00 per share, there are still other matters that must be agreed
upon for the sale to push through, such as the number of shares to
be sold, the manner of payment and the manner of delivery of the
shares. In fact, it can be gleaned from the affidavit of Mr. Pangilinan
that even the list of parties to the intended block sale has yet to be
finalized in that morning of December 2, 2009, thus, it is petitioner's
contention that mere negotiations on the sale of his PHILEX shares
need not be disclosed as this would be premature for the reasons:39
5.25. Indeed, the premature disclosure of the planned Block

Sale would have fostered false optimism in the market, and
investors who actually relied on such premature disclosure could
have argued that it was a form of market manipulation. Thus, if
petitioner has publicly disclosed the Php21.00 price for the
planned Block Sale before the evening of 2 December 2009, he
would have exposed himself to criminal liability under the SRC (if
the Block Sale eventually did not push through).
x x x
5.27. In relation thereto, (under) SRC Rule 18.1, “any person

who directly or indirectly acquires beneficial ownership of more
than five percent (5%) or such lesser per centum as the
Commission may prescribe, of any class of equity securities” of a
public company (which includes a listed company) must disclose
the acquisition “within five (5) days [actually ten (10) days] after
such acquisition.”
5.28. Similarly, SRC Rule 23 requires “(e)very person who

is directly or indirectly the beneficial owner of ten percent (10%)
or more of any class of any security of a listed company to
disclose any change of his beneficial ownership “within ten (10)
days after the close of each calendar month.”
In the same manner, it is petitioner's stand that neither the

tentative price nor the projected date of signing of the block sale
agreement can be considered material, nonpublic information under
Section 27 of the SRC. In addition, he points out that under the
same section, the law states that there could be no insider trading if
the insider is able to prove that the information was not gained from
his relationship with the issuer. This denotes that for petitioner to
39 Id. at p. 756.
Decision
be held liable for insider trading, the tentative price and the
projected signing date must have been obtained by him due to his
relationship with PHILEX as one of its directors or officers. In this
regard, petitioner submits that the tentative purchase price of P21.00
per share and the projected signing date are not within the
corporate powers of the board of PHILEX, such that the latter is in
no position to change the price nor decide to abandon the signing
date given that it involves a private agreement among the parties to
the sale. Precisely, PHILEX does not own the shares to be sold and
the intended sale does not pertain to the business operations,
dealings and transactions of said corporation and that:40
5.41. The same can be said of petitioner's roles as corporate

officer of PHILEX. At that time, petitioner was Vice Chairman of
PHILEX. The components of the alleged material non-public
information are all similarly not within the duties and
responsibilities of a Vice Chairman of PHILEX. A Vice Chairman
is simply tasked with presiding over meetings of the Board of
Directors in the absence of the Chairman.
5.42. It bears stressing that First Pacific did not approach

petitioner because he was a director or officer of PHILEX. Rather,
petitioner was approached because he held a 6.5% stake (but not a
controlling stake) in the company. Stated otherwise, petitioner
would not have been approached even if he was a director, if he
had an insignificant number of PHILEX shares. x x x
Citing the case of Interport, where it was held that the duty to
disclose or abstain from trading is based on two factors: first, is the
existence of a relationship giving access, directly or indirectly, to
information projected to be available only for a corporate purpose;
and second, is the inherent unfairness involved wherein a party takes
advantage of such information knowing it is unavailable to those
with whom he is dealing, petitioner adds that he did not violate any
fiduciary duty since the information about the price and the
intended sale was not a “corporate information” that emanated
from PHILEX and that:41
5.48. Respondent insists that the projected signing date is

material information because of the resultant change on PHILEX's
management as a result of the Block Sale. Apart from not
40 Id. at p. 759.
41 Id. at p. 761.
Decision
emanating from PHILEX, control over PHILEX did not change on

02 December 2009. Before and after the Block Sale, MVP and First
Pacific have been in full control of the management of PHILEX.
There was no change in management control; MVP merely
consolidated his control.
With regard to the issue on fiduciary duty, petitioner clarifies

that the ruling in Cua, Jr. v. Court of Appeals 42 relied upon by
respondent does not apply to him for he is merely a director and
officer of PHILEX on December 2, 2009 and not a “majority
director.” Likewise, he has no fiduciary obligation to disclose to a
shareholder his knowledge affecting the value of the shares as
enunciated in Strong v. Repide.43 In the same manner, he has no duty
to share to the public the benefits from his own financial analysis of
the value of PHILEX shares, or the fruits of his successful
negotiation of the intended Block Sale as held in SEC v. Texas Gulf
Sulfur Co.,44 thus:
Nor is an insider obligated to confer upon outside investors

the benefit of his superior financial or other expert analysis by
disclosing his educated guesses or predictions. xxx. The only
regulatory objective is that access to material information be
enjoyed equally, but this objective requires nothing more than
the disclosure of basic facts so that outsiders may draw upon
their own evaluative expertise in reaching their own investment
decisions with knowledge equal to that of the insiders. (Emphasis
supplied)
Relative to this, petitioner states that the investing public

could already make their own evaluation before making investment
decisions as they were already fully apprised of the following basic
facts:45
(a) The total number of outstanding PHILEX shares;

(b) The First Pacific group was bent on acquiring a 40%
stake in PHILEX;
(c) MVP had publicly announced that the First Pacific
group was in search of large blocks of PHILEX shares to complete
its 40% stake in the company;
(d) The First Pacific group historically acquired its PHILEX
shares through block purchases and at premium prices, and the
42 G.R. Nos. 181455-56 & 182008, December 4, 2009.

43 213 U.S. 419, May 3, 1909.
44 401 F.2d 833 (2d Cir. 1968), cert. denied, 394 U.S. 976 (1969).
45 Rollo, p. 764 (Citation omitted).
Decision
sale of block shares is universally acknowledged to carry

premiums as blocks can carry voting or control benefits; and
(e) The closing price of PHILEX shares had been growing
daily at roughly Php0.55 per day, from Php14.00 per share on 17
November 2009, to Php19.00 per share on 1 December 2009.
As to respondent's theory that his being Vice Chairman and
CEO of PHILEX gave him controlling influence over the
management or policies, he claims that this is simply overreaching.
This allegation has no factual and legal basis because prior to
December 2, 2009, he only has 6.5% stake in PHILEX and this does
not result to any control over the company. The position he held
cannot also be equated with control since he can easily be outvoted
by the votes of other directors. Petitioner thus concludes:46
5.65. Even then, there is no law imposing upon petitioner

any fiduciary duty to disclose the negotiations on the share
purchase agreement. In fact, respondent did not, as it could not,
cite the applicable legal provision to support its theory. As
previously discussed, there was no share purchase agreement to
speak of when petitioner bought the PHILEX shares; the alleged
material non-public information was not corporate information;
and the alleged material non-public information was not obtained
by petitioner by reason of his relationship with PHILEX as its
director.
5.66. To reiterate, none of the rules of the SEC and the PSE
requires that block sales or share purchase agreements, which are
privately negotiated and agreed upon prior to their execution
through the facilities of the PSE, be disclosed to the investing
public before the parties finally conclude the transaction. In fact,
the opposite is true: a disclosure cannot be made while
negotiations are ongoing and only after the deal has been
finalized and signed will the parties be required to disclose.
“Insider trading” is a term that most investors have heard and

usually associate with illegal conduct. But the term actually
includes both legal and illegal conduct. The legal version is when
corporate insiders – officers, directors, and employees – buy and sell
stock in their own companies. On the other hand, illegal insider
trading generally refers to buying or selling a security, in breach of
fiduciary duty or other relationship of trust and confidence, while in
possession of material, non-public information about the security. 47
It is the trading that takes place when those privileged with
46 Id. at p. 765.
47 https://www.sec.gov>answersinsiderhtm.
Decision
confidential information about important events use the special

advantage of that knowledge to reap profits or avoid losses on the
stock market, to the detriment of the source of the information and
to the typical investors who buy or sell their stock without the
advantage of “inside” information.48
As in most states, the insider trading prohibition in our

jurisdiction is premised on a violation of a corporate officer’s
fiduciary duty. This is especially obtaining in cases where a director
buys shares, for in that case he is trading with someone who is
already a shareholder of the corporation, and as such, someone to
whom the director has fiduciary obligations.49
To recall, petitioner, in this case, then a director and officer of

PHILEX, is being administratively charged of insider trading for his
act of purchasing 45,964,500 PHILEX shares, accumulated through
174 transactions at the stock market in the morning of December 2,
2009 at a price of P19.25 to P19.50 per share. He was allegedly
engaged in insider trading because he bought these shares in the
open market despite having previous knowledge of the selling price
at P21.00 per share in relation to the intended block sale in favor of
First Pacific, which was set to take place in the evening of the same
day, December 2, 2009.
It is undisputed that the desire of First Pacific or the group of

Mr. Pangilinan to increase its board representation to 40% stake was
well publicized. Nevertheless, respondent asserts that petitioner is
still liable for insider trading because both the price of P21.00 per
share and the actual date of the block sale are material information
which he failed to disclose when he traded and bought stocks in the
morning of December 2, 2009.
We disagree.
In his concurring opinion in SEC v. Interport Resources

Corporation,50 Justice Tinga acknowledged that said case is the
farthest yet the Supreme Court has explored the matter on insider
trading. Although the petition did not dwell on the guilt or
48 Id., citing Speech by SEC Staff: Insider Trading – a U.S. Perspective, Melissa A. Robertson, Senior
Counsel, Division of Enforcement, U.S. Securities & Exchange Commission, 16 th International
Symposium on Economic Crime, Jesus College, Cambridge, England, September 19, 1998.
49 Securities Law Insider Trading, Stephen M. Bainbridge, Second Edition, 2007, Chapter 2, p. 10.
50 See Note 32.
Decision
innocence of petitioners who were charged, as it essentially assails

the validity of our laws against insider trading, the majority took
pains in discussing the elements of insider trading, in recognition
that said offense is an assault to the integrity of our securities
market.
In Interport, it was held that insiders have the duty to disclose

material facts which are known to them by virtue of their position
but which are not known to persons with whom they deal and
which, if known, would affect their investment judgment. In some
cases, however, there may be valid corporate reasons for the
nondisclosure of material information. Where such reasons exist,
an issuer's decision not to make any public disclosures is not
ordinarily considered as a violation of insider trading. At the same
time, the undisclosed information should not be improperly used
for non-corporate purposes, particularly to disadvantage other
persons with whom an insider might transact, and therefore the
insider must abstain from entering into transactions involving such
securities.51
The Supreme Court further held that said duty to disclose or

abstain is based on two factors: first, the existence of a relationship
giving access, directly or indirectly, to information intended to be
available only for a corporate purpose and not for the personal
benefit of anyone; and second, the inherent unfairness involved
when a party takes advantage of such information knowing it is
unavailable to those with whom he is dealing.52
With regard to materiality of the information, in relation to an

insider's duty to disclose or abstain from trading, the Supreme
Court, in Interport, categorically zeroed in on “corporate
information,” or those inside information typically coming from
internal corporate sources and involves events or developments
affecting the issuer's assets or earnings.53 This is in contrast to
“market information” or those information about events or
developments that affect the market for a company's securities, but
not the company's assets or earnings. 54 The ruling in Interport
strongly suggests that the concept of materiality may only be
51 Id., citing In the Matter of Investors Management Co., Inc., 44 SEC 633, July 29, 1971 and Securities
and Exchange Commission v. Texas Gulf Sulfur Co., 401 F. 2d 833, 13 August 1968.
52 In the Matter of Cady, Roberts & Co., 40 S.E.C. 907 (1961).
53 See Note 49, Bainbridge, pp. 47-48.
54 Id.
Decision
appreciated in reference to corporate information and not to market

information.
That the materiality of the information must only be made in

reference to corporate information, and not to market information,
is readily apparent from settled jurisprudence.
For one, the leading case of Interport, as mentioned, involves

an investigation for insider trading commenced by the SEC against
said corporation and its board of directors on account of the latter's
alleged failure to make timely public disclosures of its negotiations
with Ganda Holdings Berhad (GHB) and that some of its directors,
respondents therein, heavily traded Interport shares utilizing this
material insider information. The negotiations pertain to a
Memorandum of Agreement between Interport and GHB where the
former acquired 100% or the entire capital stock of Ganda Energy
Holdings, Inc. (GEHI), which would own and operate a 102-
megawatt gas turbine power-generating barge. The agreement also
stipulates that GEHI would assume a five-year power purchase
contract with National Power Corporation. At that time, GEHI's
power-generating barge was 97% complete and would go on-line by
mid-September of 1994. In exchange, Interport will issue to GHB
55% of its expanded capital stock amounting to 40.88 billion shares
which had a total par value of P488.44 million. It should be noted
that both the acquisition of GEHI and the issuance of Interport
shares in favor of GHB are matters which are undoubtedly
corporate in nature.
This Court finds that even the insider trading cases cited by
respondent boost petitioner's position that material information is
restricted only to corporate information.
In the case of In re: Cady, Roberts & Co.,55 an administrative

ruling by the U.S. SEC, which was also cited by our own Supreme
Court in Interport, Curtiss-Wright Corporations’s board of directors
decided to reduce the company’s quarterly dividend. It so
happened that during a recess in the board meeting, one of the
company directors, Cowdin, who was also a partner in Cady,
Roberts & Co., a stock brokerage firm, informed one of his partners
therein, Gintel, about an impending dividend cut. Acting on said
information, Gintel immediately sold thousands of Curtiss-Wright
55 40 S.E.C. 907 (1961).

Decision
shares to protect their clients. When the dividend cut was made
public, the stock price went down and yet Gintel’s clients were able
to avoid substantial losses. For this reason, the SEC held that Gintel,
identified as a tippee, violated the prohibition on insider trading.
In Cady, We see that the dividend cut was clearly a corporate
information because it was a measure adopted by the corporation’s
board and knowledge of which was acquired by Cowdin while
acting as member of said board.
Another case cited by respondent is the SEC v. Texas Gulf

Sulfur Co. (TGS).56 In November 1963, TGS began an exploratory
drilling of mineral site. Upon learning that the location has
extremely ore content, TGS decided to keep mum about the result
and even issued a misleading press release so that it may acquire
additional land for the company drilling site. Prior to its
announcement to the public, however, several insiders of TGS
bought the corporation’s stock such that after the public
announcement, these insiders were able to sell the stocks they
bought and earn substantial profit on account of the insider
information. Again, the material information pertaining to the
mineral site is undoubtedly corporate in nature.
In arguing against petitioner’s position, the Solicitor General

tried to convince this Court that Cady cannot be applied in our
jurisdiction because of the specific provision in the SRC, subsection
27.2, which defines what are to be considered material nonpublic
information. Also, there is allegedly no indication that the
legislature intended to confine the meaning of material nonpublic
information to those matters originating from the company
boardroom or to proprietary information concerning the
corporation. The Solicitor General adds that the defense under
subsection 27.1, that one did not gain a material information from
such a relationship with the issuer may not be invoked by a director,
like herein petitioner, under any circumstance, since the latter’s duty
to either disclose or abstain is inherent in his fiduciary duty.
This interpretation is plainly erroneous.
In enacting the SRC, the Congress did not only change the
phrase “fact of special significance” in the former Revised Securities
Act to the present “material nonpublic information.” The new law
56 See Note 44.
Decision
also added a more precise definition of the term “material

nonpublic” in subsection 27.2 thereof. However, prior to said 27.2,
the preceding subsection, 27.1, which describes the offense of
insider trading, clearly states the exceptions to said unlawful act,
and again, we quote:
Section 27. Insider’s Duty to Disclose When Trading – 27.1. It

shall be unlawful for an insider to sell or buy a security of the
issuer, while in possession of material information with respect
to the issuer or the security that is not generally available to the
public, unless: (a) The insider proves that the information was
not gained from such relationship; or (b) If the other party selling
to or buying from the insider (or his agent) is identified, the
insider proves: (I) that he disclosed the information to the other
party, or (ii) that he had reason to believe that the other party
otherwise is also in possession of the information. x x x.
27.2. For purposes of this Section, information is "material

nonpublic" if: (a) It has not been generally disclosed to the public
and would likely affect the market price of the security after being
disseminated to the public and the lapse of a reasonable time for
the market to absorb the information; or (b) would be considered
by a reasonable person important under the circumstances in
determining his course of action whether to buy, sell or hold a
security.
x x x. (Emphasis and underscoring supplied)
Certainly, the exception: “unless xxx the insider proves that

the information was not gained from such relationship” is peculiar
to our own securities law and this exception cannot be found in
other jurisdictions.
Moreover, the exception provided under the SRC did not

make any distinction as to what kind of insider is involved.
Contrary to the OSG's position, this signifies that any person who is
considered an insider may not be held liable for insider trading if he
or she is able to prove that the information on hand was not gained
from such relationship.
Dissecting the aforementioned changes incorporated in the

present SRC, corporation law practitioner and author, Atty. Lucila
M. Decasa, explained:57
57 Securities Regulation Code Annotated with Implementing Rules and Regulations, Atty. Lucila M.
Decasa, 2013, pp. 101-102.
Decision
The provision revamps the insider trading provision under

the old law in a number of major respects. In subsection 27.1,
insiders are held to violate the provision if they simply trade on
any material information that has not been publicly disclosed.
The value of the securities purchased or sold is irrelevant to
insider trading. Subsection 27.2 defines materiality to encompass
the type of information that would be important to a reasonable
investor or potential investor in making a decision to buy, sell, or
hold a security in the light of such factors as the degree of
specificity, the extent of its difference from information generally
available previously, and its nature and reliability. One situation
also to be considered is whether or not the information is a market
moving event that would likely move stock price if disclosure is
made.
Under subsection 27.1, an insider can avoid

accountability only if he can show that he did not secure the
information from his insider status or where it is shown that the
contra party to the transaction is reasonably believed by the
insider also to possess the information. The exception is
designed to exclude from the Section(,) trading on the basis of
so-called material “market information” – that is, information
which analysts and others gather about the issuer through
investigation, but which may not be entirely available to the
public at large. x x x.
Similarly, we find no merit in the OSG's contention that the

price of P21.00 per share and the date of the intended block sale are
material since the price of PHILEX shares went down from P19.00
on December 2, 2009 to P17.75 or about 20.5% within two (2) days
after the sale in favor of First Pacific. While it was alleged that the
drop in the price of PHILEX shares after the information was made
public was seen as an “unusual occurrence” or a “red flag,” thereby
suggesting that any reasonable investor would have considered the
subject information material, the OSG however failed to specifically
identify what is “unusual,” as opposed to a usual or regular
fluctuation in stock market prices. 58 In fact, when pressed further,
the OSG admitted that the reason why the price of PHILEX shares
went up in the first place was because of the ongoing bid war
between Mr. Pangilinan's First Pacific and Mr. Ang's San Miguel
prior to the sale.59 Based on the premise that it was the active
speculation of the investing public which triggered the steady
58 TSN dated September 1, 2016, pp. 16-17.

59 Id. at p. 22.
Decision
increase in the price of PHILEX shares, We reckon that the public

disclosure of the December 2, 2009 sale in favor of First Pacific
simply ended all aggressive speculation, and this inevitably lead to
the drop in the market price of PHILEX shares. Yet, all these
incidents cannot be taken as clear and direct indication that there
was indeed insider trading.
That the material information covered by illegal insider

transactions pertain to corporate information is therefore clear from
both law and jurisprudence.
The reason for this is actually simple. Apart from insuring

honest securities markets to be able to promote investor confidence,
the other underlying rationale for insider trading prohibitions is that
“information” or corporate information to be exact, is treated as or
acknowledged as property of the corporation. A company's
confidential information qualifies as property to which the company
has a right of exclusive use. The undisclosed misappropriation of
such information in violation of a fiduciary duty constitutes fraud
akin to embezzlement or the fraudulent appropriation to one's own
use of the money or goods entrusted to one's care by another.60
Guided by the foregoing, the alleged material nonpublic

information which are the price of P21.00 per share and the date of
intended block sale are indeed not “properties” of PHILEX as these
were all part of the negotiations which are, admittedly, privately
done between petitioner and Mr. Pangilinan. Hence, it is apparent
that such information was not attributable to PHILEX and it could
not be considered to have been acquired by petitioner from his
insider relationship with PHILEX. There being no material
information involved, petitioner can be said to be trading only upon
his own intentions.
As to the fine imposed upon petitioner, we still see it

necessary to point out that indeed Section 54.1 (iv) 61 of the SRC
applies only to a violation of Section 34 62 of the same Code. And
60 See Notes 47 and 48, citing United States v. O'Hagan 117 S. Ct. 2199 (1997).
61 Section 54. Administrative Sanctions. – x x x.
x x x
(iv) In the case of a violation of Section 34, a fine of no more than three (3) times the profit gained or
loss avoided as result of the purchase, sale or communication proscribed by such Section, and
62 Section 34. Segregation and Limitation of functions of Members, Broker and Dealers. - 34.1. It shall
be unlawful for any member-broker of an Exchange to effect any transaction on such Exchange for its
own account, the account of an associated person, or an account with respect to which it or an
Decision
that for insider trading violations under Section 27, Section 54.1 (ii)
of the SRC only provides for the imposition of a “fine of no less than
Ten thousand pesos (P10,000.00) nor more than One million pesos
(P1,000,000.00) plus not more than Two thousand pesos (P2,000.00) for
each day of continuing violation”. For insider trading violations, the
SRC itself clearly provided for the minimum amount of fine which
is P10,000.00 and the maximum amount which is P1,000,000.00, and
the penalty to be imposed could not exceed that stated in the law.
In fact, the circumstances of this case do not even warrant the
application of the additional penalty of P2,000.00 for every day of
continuing violation given that the alleged 174 transactions of
insider trading were all done in a single day, that is December 2,
2009. Thus, there is no legal basis for respondent’s imposition of a
P174 million peso-fine against petitioner considering that said
penalty went beyond the confines of the law.
WHEREFORE, in view of all the foregoing, the Decision dated

July 8, 2016 of respondent, finding petitioner liable for committing
174 counts of insider trading under Section 27.1 of the Securities and
Regulation Code is hereby REVERSED and SET ASIDE.
The administrative charge against petitioner is accordingly

DISMISSED.
SO ORDERED.
ORIGINAL SIGNED
MA. LUISA C. QUIJANO-PADILLA
Associate Justice
associated person thereof exercises the investment discretion: Provided, however, That this Section
shall not make unlawful-
(a) Any transaction by a member-broker acting in the capacity of a market maker;
(b) Any transaction reasonably necessary to carry on an odd-lot transactions;
(c) Any transaction to offset a transaction made in error; and
(d) Any other transaction of a similar nature as may be defined by the Commission.
34.2. In all instances where the member-broker effects a transaction on an Exchange for its own
account or the account of an associated person or an account with respect to which it exercises
investment discretion, it shall disclose to such customer at or before the completion of the transaction
it is acting for its own account: Provided, further, That this fact shall be reflected in the order ticket
and the confirmation slip.
34.3. Any member-broker who violates the provisions of this Section shall be subject to the
administrative sanctions provided in Section 54 of this Code.
Decision
WE CONCUR:
ORIGINAL SIGNED ORIGINAL SIGNED

SAMUEL H. GAERLAN MARIE CHRISTINE AZCARRAGA-JACOB
Associate Justice Associate Justice
CERTIFICATION
Pursuant to Article VIII, Section 13 of the Constitution, it is

hereby certified that the conclusions in the above decision were
reached in consultation before the case was assigned to the writer of
the opinion of the Court.
ORIGINAL SIGNED
SAMUEL H. GAERLAN
Acting Chairperson
Former Special Thirteenth Division

Ongpin v. EIPD of SEC

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Ongpin v. EIPD of SEC

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Republic of the Philippines

FORMER SPECIAL THIRTEENTH DIVISION

ROBERTO V. ONGPIN, CA-G.R. SP No. 146704

This involves a petition for review 1 under Rule 43 of the Rules

As found by this Court in the earlier Resolution 4 promulgated

Petitioner Roberto V. Ongpin was a stockholder and

* Vice J. N.B. Pizarro, per Raffle dated August 25, 2016.

Following the sale by PHILEX on November 28, 2008 of

As of November 23, 2009, petitioner already owns directly,

Earlier that same week, Mr. Pangilinan approached

On December 1, 2009, First Pacific made a tentative offer to

In the morning of the following day, December 2, 2009,

By the evening of that same day, December 2, 2009, First

The sale and the consequent changes in the composition of

To an untrained eye, the trading made by petitioner in the

After due hearing, respondent issued an Order dated

On appeal, the SEC en banc affirmed the ruling of

WHEREFORE, premises considered, the Order of the

The imposition of the foregoing penalties is WITHOUT

Let a copy of this Decision be furnished to the Markets and

Hence, the filing of this petition9 based on the following

WHETHER OR NOT THE ACTION TO HOLD

WHETHER OR NOT PETITIONER ONGPIN

WHETHER OR NOT THE SEC EN BANC'S

First, we discuss the ground of prescription.

Petitioner claims that the administrative charge against him

Section 62. Limitation of Actions. – 62.1. No action shall be

62.2. No action shall be maintained to enforce any

Based on said law, particularly Section 62.2 thereof, petitioner

December 2, 2009 – petitioner traded in the stock market;

It is petitioner's contention that if both the 2-year and 5-year

On the other hand, the Office of the Solicitor General (OSG),

11 G.R. No. 198444 and G.R. Nos. 198469-70, September 4, 2013.

32. The investigation entails a tedious process. It is not

33. As records would bear therefore, Respondent did not

34. The third element is likewise absent in the present case.

35. The last and fourth element is also glaringly missing in

36. Any claim of injury or prejudice that Petitioner may

37. From the foregoing, it is clear that the administrative

action instituted by Respondent is not barred by laches.

We are aware that the plain meaning rule or verba legis in

At first glance, one may be easily convinced to apply the plain

However, it is equally settled that courts in our jurisdiction are

ART. 8. Judicial decisions applying or interpreting the laws

Relative to this, the Supreme Court in the Citibank case ruled

14 Republic of the Philippines v. Lacap, G.R. No. 158253, March 2, 2007.

that the prescriptive period stated in Section 62 only pertains to civil

Section 62 provides for two different prescriptive periods.

Section 62.1 specifically sets out the prescriptive period for

On the other hand, Section 62.2 provides for the

In order to put said phrase in its proper perspective,

Moreover, it should be noted that the civil liabilities

16 See Note 11 (Emphasis maintained and underscoring supplied).

liable and the extent of their liability. Clearly, the intent is to

In view of the absence of a prescriptive period for the

Petitioner nevertheless insists that the ruling in Citibank only

Contrary to the position taken by petitioner, this Court sees

Anent the criminal offenses punishable under the SRC, the

18 See Note 11.

the application of Act No. 3326.

Section 54 of the SRC provides for the administrative

In this case, records bear that immediately after the

This ruling notwithstanding, this Court does not wholly agree