SANDRA JANE N.

SOON JD Non-Thesis 3L Special Commercial Laws

The decision of the SEC En Banc in Case No. 03-15-367 finding Ongpin liable of 174 counts of
insider trading is correct.
The relevant provisions of the law are laid in Sec. 3.8 and Sec. 27 of the Securities Regulation
Code which altogether define the duties and obligations of an insider. Sec 3.8 provides, in part,
that an insider means: (a) the issuer; (b) a director or officer (or person performing similar
functions) of, or a person controlling the issuer; (c) a person whose relationship or former
relationship to the issuer gives or gave him access to material information about the issuer or
security that is not generally available to the public xx.
Sec 27.2 dictates that information is material non-public 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.
Thus, to constitute insider trading, the concurrence of the following elements must be present:
1. There is an insider under Sec 3.8 of the SRC
2. who buys or sells a security of an issuer
3. while in possession of material non-public information
4. said information pertains to the issuer or its securities.
In this case, Ongpin, being a director of PHILEX at the time the prohibited sale complained of, is
clearly considered as an insider under the definition provided by law. As a director, he generally
had access to any information, including material non-public information, about the operations of
PHILEX and its securities.
A material issue for determination of this case depends largely on whether the information that
Ongpin had access to was considered as material non-public such that it would satisfy one
important element of insider trading. Ongpin had private negotiations made with Manny
Pangilinan which ultimately resulted to a private agreement that the latter will buy the former
shares in PHILEX for a higher price of P21/share compared to the market value of the share at
the time at P19. Because of such agreement, Ongpin bought on December 2, 2019 from the
open market more PHILEX shares that he would likewise sell to Pangilinan.
Such information, being only available to the two parties in negotiation, satisfies the essential
element to constitute material non-public information that it is not disclosed to the public and
that it was an information that the stockholders from which the shares were bought could not
have known prior to disposing of their shares. As to the question of whether or not such
information is material in a way that it would affect the market price once disclosed to the public,
such was obviously proven by the behavior of the market after the consummation of the
prohibited insider’s sale. The share’s value significantly 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. Thus,
clearly, such information was material that it affected the market price of PHILEX security after
the sale.
Ongpin had the duty to disclose to the selling stockholders from whom he bought shares from
the open market about such information he privately held because clearly, it would have a
significant effect in market price of their shares. Therefore, the acts of Ongpin constitute insider
trading.