G.R. Nos. 198469-70, 4 September 2013
Respondent Gabaldon filed with the SEC’s Enforcement and Prosecution Department a complaint for violation of the Revised Securities Act and the Securities Regulation Code against petitioners Citibank N.A.
The respondents met with petitioner Lim, who “induced” them into signing a subscription agreement for the purchase of USD 2,000,000.00 worth of Ceres II Finance Ltd. Income Notes. They met again with Lim for another investment proposal, this time for the purchase of USD 500,000.00 worth of Aeries Finance II Ltd. Senior Subordinated Income Notes. In a statement issued by the Citigroup, the respondents learned that their investments declined, until their account was totally wiped out. Upon verification with the SEC, they learned that the Ceres II Finance Ltd. Notes and the Aeries Finance II Ltd. Notes were not duly registered securities. They also learned that Ceres II Finance Ltd., Aeries Finance II Ltd. and the petitioners, among others, are not duly-registered security issuers, brokers, dealers or agents.
Petitioners Citibank and Citigroup claimed that they did not receive a copy of the complaint and it was only after the BSP wrote them that they were furnished a copy. They replied to the BSP disclaiming any participation by the Citibank or its officers on the transactions and products complained of.
The SEC-EPD asked from the petitioners certain documents to be submitted during a scheduled conference, to which they complied. Petitioners, however, reiterated its position that they are not submitting to the jurisdiction of the SEC. The SEC-EPD, however, terminated its investigation on the ground that the respondents’ action has already prescribed.
Later on, petitioners received the SEC En Banc Decision reinstating the complaint and ordering the immediate investigation of the case.
Whether the criminal action for the offenses punished under the SRC filed by the respondents has prescribe and the filing of the action for the petitioners administrative liability is barred by laches.
Given the absence of a prescriptive period for the enforcement of the criminal liability in violations of the SRC, Act No. 3326 now comes into play. Under Section 73 of the SRC, violation of its provisions or the rules and regulations is punishable with imprisonment of not less than seven years nor more than twenty-one years. Applying Section 1 of Act No.3326, a criminal prosecution for violations of the SRC shall, therefore, prescribe in twelve (12) years. Hand in hand with Section 1, Section 2 of Act No. 3326 states that prescription shall begin to run from the day of the commission of the violation of the law, and if the same be not known at the time, from the discovery thereof and the institution of judicial proceedings for its investigation and punishment.
The respondents alleged in their complaint that the transactions occurred between September 2000, when they purchased the Subscription Agreement for the purchase of USD 2,000,000.00 worth of Ceres II Finance Ltd. Income Notes, and July 31, 2003, when their Ceres II Finance Ltd. account was totally wiped out. Nevertheless, it was only sometime in November 2004 that the respondents discovered that the securities they purchased were actually worthless. Thereafter, the respondents filed on October 23, 2005 with the Mandaluyong City Prosecutor’s Office a complaint for violation of the RSA and SRC. In Resolution dated July 18,2007, however, the prosecutor’s office referred the complaint to the SEC. Finally, the respondents filed the complaint with the SEC on September 21,2007. Based on the foregoing antecedents, only seven (7) years lapsed since the respondents invested their funds with the petitioners, and three (3) years since the respondents’ discovery of the alleged offenses, that the complaint was correctly filed with the SEC for investigation. Hence, the respondents’ complaint was filed well within the twelve (12)-year prescriptive period provided by Section 1 of Act No. 3326.
On the issue of laches, 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 inequity, 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 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.
*Case Digest by Meriam Rika R. Wong, JD – 4, Andres Bonifacio College, SY 2019-2020