G.R. No. 193791, 6 August 2014
Primanila Plans, Inc. is a SEC registered pre-need company that invests funds received from its members for the latter’s retirement, monthly pension or for other foreseeable needs in the future. In 2008 however, after several investigations conducted by SEC, it was found that Primanila has been committing acts in violation of The Securities and Regulation Code when it offered to the public for sale its Primasa plans without registering the said product with SEC.
Thus, after the investigation without notice or hearing, SEC issued a cease and desist order in order to prevent further violations and in order to protect the interest of its planholders and the public. Primanila contested the issuance on the ground that they were denied due process because the order was issued without any notice or formal charge that could have allowed it to interpose defenses. SEC denied the motion, which the CA affirmed as well, hence this petition.
Whether or not SEC can issue a cease and desist order without notice and hearing.
Yes.The law is clear on the point 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 fraudor 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. But 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.
In this case, Primasa plans were not registered with the SEC and Primanila was then barred from selling and offering for sale the said plan product. A continued sale by the company would operate as fraud to its investors, and would cause grave or irreparable injury or prejudice to the investing public, grounds which could justify the issuance of a cease and desist order under Section 64 of the SRC.
*Case Digest by April Rose B. Tuanda, JD-IV, Andres Bonifacio Law School, S.Y 2019-2020