G.R. No. 138949, 6 June 2001


On April 4, 1997, petitioner, through its General Counsel and Corporate Secretary, sought the opinion of Chairman Perfecto Yasay, Jr. of respondent SEC as to the applicability and coverage of the “Full Material Disclosure Rule” on banks, contending that said rules, in effect, amend Section 5 (a) (3) of the Revised Securities Act which exempts securities issued or guaranteed by banking institutions from the registration requirement provided by Section 4 of the same Act.

Chairman Yasay, in a letter dated April 8, 1997, informed petitioner that while the requirements of registration do not apply to securities of banks which are exempt under Section 5(a) (3) of the Revised Securities Act, however, banks with a class of securities listed for trading on the Philippine Stock Exchange, Inc. are covered by certain Revised Securities Act Rules governing the filing of various reports with respondent Commission, i.e., (1) Rule 11(a)-1 requiring the filing of Annual, Quarterly, Current, Predecessor and Successor Reports; (2) Rule 34-(a)-1 requiring submission of Proxy Statements; and (3) Rule 34-(c)-1 requiring submission of Information Statements, among others.

Petitioner informed Chairman Yasay that they will refer the matter to the Philippine Stock Exchange for clarification. Respondent SEC, through its Money Market Operations Department Director, wrote petitioner, reiterating its previous position that petitioner is not exempt from the filing of certain reports. The letter further stated that the Revised Securities Act Rule 11(a) requires the submission of reports necessary for full, fair and accurate disclosure to the investing public, and not the registration of its shares.

SEC wrote petitioner, enjoining the latter to show cause why it should not be penalized for its failure to submit a Proxy/Information Statement in connection with its annual meeting held on May 23, 1997, in violation of respondent Commission’s ‘Full Material Disclosure Rule.’

Petitioner was assessed a fine of P50,000.00 plus P500.00 for every day that the report was not filed, or a total of P91, 000.00 as of July 21, 1997. Petitioner wrote respondent Commission disputing the assessment. Respondent issued the assailed Order. Petitioner filed MR. It was denied by SEC. CA also denied the appeal. Hence, this Petition.


WON petitioner is required to comply with the respondent SEC’s full disclosure rules.


We do not agree.

Because its securities are exempt from the registration requirements under Section 5(a)(3) of the Revised Securities Act, petitioner argues that it is not covered by RSA Implementing Rule 11(a)-1, which requires the filing of annual, quarterly, current predecessor and successor reports; Rule 34(a)-1, which mandates the filing of proxy statements and forms of proxy; and Rule 34(c)-1, which obligates the submission of information statements.
Section 5(a)(3) of the said Act reads:

“Sec 5. Exempt Securities. (a) Except as expressly provided, the requirement of registration under subsection (a) of Section four of this Act shall not apply to any of the following classes of securities: x x x x x x x x x

(3) Any security issued or guaranteed by any banking institution authorized to do business in the Philippines, the business of which is substantially confined to banking, or a financial institution licensed to engage in quasi-banking, and is supervised by the Central Bank.”

This provision exempts from registration the securities issued by banking or financial institutions mentioned in the law. Nowhere does it state or even imply that petitioner, as a listed corporation, is exempt from complying with the reports required by the assailed RSA Implementing Rules. Worth repeating is the CA’s disquisition on the matter, which we quote:

“However, the exemption from the registration requirement enjoyed by petitioner does not necessarily connote that it is exempted from the other reportorial requirements. Having confined the exemption enjoyed by petitioner merely to the initial requirement of registration of securities for public offering, and not to the subsequent filing of various periodic reports, respondent Commission, as the regulatory agency, is able to exercise its power of supervision and control over corporations and over the securities market as a whole. Otherwise, the objectives of the `Full Material Disclosure’ policy would be defeated since petitioner corporation and its dealings would be totally beyond the reach of respondent Commission and the investing public.”

*Case Digest by April Rose B. Tuanda, JD-IV, Andres Bonifacio Law School, S.Y 2019-2020